Analysis of the role of international network effects on the
diffusion of 3G mobile communication networks
Maria del Pilar Baquero Foreroa , Toshifumi Kurodab,∗a Graduate School of Economics, Kyoto University. Yoshida-honmachi Sakyo-ku Kyoto, 606-8501, JAPANb Faculty of Economics, Tokyo Keizai University. 1-7-34 Minamicho Kokubunjishi Tokyo, 185-8502, JAPAN

Abstract
Previous studies have found evidence of important network effects in mobile telecommunications at the national level. However, there is a lack of empirical research concerning network effects at the international level. In this paper, we provide empiricalevidence that mobile phones diffusion is positively influenced not only by national
network effects, but also by international network effects. International network effects
were defined as the installed base of mobile phone subscribers of handset export partnercountries weighted by their geographical proximity to the home country. Based on ourfindings, we conclude that the policies most conducive to increase mobile penetration
rates concern international standardization and technological choice, rather than priceregulation. Moreover, competitive and innovative markets of complementary productsthat generate indirect network effects -such as mobile handsets and mobile Internet
applications- are key factors for the diffusion of new generations of wireless communications. We used a quarterly database of 105 countries from 2007 Q1 to 2010 Q1. Our
specification of mobile service demand follows the multinomial logit model with inverted market shares and includes instrumental variables. The model was estimated by
the Arellano-Bond dynamic panel-data estimator that uses one-step difference GMM.
JEL codes: L96. Industry studies: Telecommunications. F10. Int. economics: Trade
Keywords: Mobile phones, Network effects, Global standards,∗ Corresponding author: kuroda@tku.ac.jp. Tel 042-328-7886.

1. Introduction
Network effects are defined as a situation in which the consumer’s utility of adopting or using a product depends on the number of other consumers using the same product. The successful diffusion of new technologies or services in many industries suchas telecommunications, video games, music, software or transportation, among others,
depend greatly on network effects. According, to previous research by Doganoglu andGrzybowski (2007), network effects had a larger impact than price reductions on the
diffusion of 2G mobile phones in Germany.
In this paper, we focus on the network effects in the 2G and 3G mobile communications market. Our objective is to measure the international network effects usinga wide sample of countries. The study of international network effects is important inorder to understand the interconnection between the diffusion patterns of new technologies in different countries, as well as to confirm the existence of an increased feedback
between installed base and quality of service in a context of growing interdependence
between countries. In particular, this topic has important implications on international
standardization and compatibility between technologies in different countries.
We define the international direct network effects in mobile telecommunications
for each country as the total subscribers of mobile phones in the destination countries
of mobile handset exports, weighted by the geographical distance between the homecountry and the partner countries. Although the novelty of our research is on studying
the international network effects, we also analyze the network effects at the national
level. In this context, we take into account the direct network effect of the national
installed base of mobile subscribers.
Previous works focused only on the national level network effects of few selected
countries (Doganoglu and Grzybowski, 2007; Grajek , 2010; Birke and Swann, 2006).
However, to the best of our knowledge, no empirical study concerning network effects
in telecommunications, between countries with strong commercial ties and geographical proximity, has been done yet.
We use a multinomial logit model, as explained in Train (2009), in order to specify
the utility function of subscription to different mobile phones technologies for con-2

sumers in each country. We follow the model proposed by Berry (1994), which allows
us to calculate the mean utility using inverted market shares.
In addition, we overcome some of the endogeneity problems that, according toBirke (2009), have hampered early empirical work. Specifically, to account for theendogeneity of mobile service prices, we used the lagged values of price and per capita
income as instrumental variables. To control for the endogeneity of mobile phone
subscribers, we used as instrumental variables the lagged values of mobile phone subscribers, population, and the total of mobile phones and fixed lines subscribers.
The estimation of the multinomial logit model with instrumental variables was performed using the state-of-the-art Arellano-Bond dynamic panel-data estimator using
one-step difference GMM. This estimator is appropriate for situations with few time
periods and many individuals, as well as for models with dependent and independent
variables that are dynamic and depend on their own past realizations. The data set isan unbalanced panel that covers 105 countries from the first quarter of 2007 to the firstquarter of 2010.
2. Relevant Literature
Network effects can be classified into direct and indirect. Direct network effects
consist in the dependency between consumer value and the installed base of productusers. In mobile communications, subscribers can communicate with more people thelarger the installed base of subscribers. Therefore, the more subscribers the more utility
for the individual consumer.
Direct network effects in national mobile phone markets have been found in theliterature. Using aggregated market data Doganoglu and Grzybowski (2007) and Grajek (2010) analyzed the direct network effects in mobile phones in the German andPolish mobile telephone market respectively. Both studies found strong and significant network effects which constitute essential factors determining mobile phones diffusion, even more important than price reduction. Employing detailed market data,
Birke (2009) show that members of the same household coordinate choice of mobile
phone operator; and Birke and Swann (2006) (2005) show that correlation of operator choice in different countries is due to tariff-mediated network effects as opposed to3other causes.
The mentioned studies have focused on the role of national network effects on mobile telephony adoption. However, these studies do not analyze the role of international
network effects, which are increasingly important as transportation and telecommunications services improve and countries get more interconnected.
Among the few studies on international network effects, Suarez (2005) investigate
2G technology choice patterns between countries in North, South and Central America (95 operators) from the third quarter of 1992 to the second quarter of 2001. The
author found that technology choice was interrelated in a selected subset of countries
with which they have strong ties than to the worldwide situation. Nevertheless, as
Birke (2009) pointed out, the used methodology does not allow to effectively distinguish between network effects and other effects leading to choice correlation, and thedistinction between strong ties (the three closest countries) and weak ties (all othercountries) is somewhat arbitrary and connections between countries are not directly
taken into account, but only as an aggregate.
Indirect network effects, on the other hand, are generated if the utility of adopting
a good is influenced by complementary relations between goods. In mobile telecommunications networks, indirect network effects consist of the dependence of consumer
utility of mobile phone subscription and complementary goods or services, such as
smart phones with multiple functions (digital camera, or games) as well as numerous
mobile Internet applications.
Empirical evidence of indirect network effects has been found in various markets
such as hardware and software (Gandal (1994)) , CD players and CD titles (Gandal etal. 2000), video games consoles and video games (Clements and Ohashi, 2005), Video
Cassette Recorders and video content (Ohashi , 2003), and banks and ATM network(Saloner and Shepard (1995)). However, due to the lack of detailed data on handset
variety, there are no studies that offer empirical evidence of the indirect network effects
in mobile phone markets.
In this study, we analyze both national and international direct network effects inwireless telecommunications markets. We measure the international direct network effects in a country by taking into account the total subscribers of mobile phones in the4destination countries of mobile handset exports, weighted by the geographical proximity. We also take into account the national installed base of mobile subscribers tomeasure the national direct network effect, as well as the mobile service charge to findout the price effect.
3. Econometric method, model specification and panel data
3.1. Multinomial logit model with inverted market shares and Arellano-Bond dynamic
panel estimator
Our analysis uses a multinomial logit model to measure the international and national network effects, as well as the price effect, on countries mobile phone subscribers. The logit model is the most widely used discrete choice model, since theformula for the choice probabilities takes a closed form and is straightforward to interpret. In addition, the logit formula is derived from assumptions about the characteristics of choice probabilities, namely the independence from irrelevant alternatives(IIA) property, explained below, which implies that the model is consistent with utility
maximization (Train , 2009).
We obtained the estimates of the demand parameters of the multinomial logit modelby inverting the market share function, following the method developed by Berry(1994). This procedure does not need assumptions on either the parametric distribution of unobservables or on the actual process that generates prices. The approachby Berry (1994) has been used in empirical studies on network effects, where, additionally to traditional ways of differentiation, products can be differentiated according
to their network size (Birke , 2009). In this section we give a brief explanation of themultinomial logit model with inverted market shares.
In the logit model, the utility Un jt that the consumer obtains from product j is composed by an observed part (Vn jt ) known by the researcher based on some parameters,
and an unknown part (n jt ) treated as random. The logit model is obtained by assumingthat each n jt is independently and identically distributed (i.i.d) extreme value (Train ,2009). An important assumption of the logit model is that errors are independent. This
assumption implies that the error for one alternative provides no information about the5error for another alternative. In other words, Vn jt is correctly specified and the remaining, unobserved part of utility is white noise (Train , 2009).
Utility is usually specified to be linear in parameters: Vn jt = β0 xn jt , where xn jt
is a vector of observed characteristics of product j . With this specification, the logit
probabilities become1

 β xnit
Pnit = P β0 x .
n jt
j
0

(1)

The ratio of the logit probabilities for any two alternatives i and k, is0

 β xnit
P β0 xn jtjPnit= β0 xnktPnkt
P β0 xj β xnit00= β0 x =  β xnit −β xnkt
 nkt
0

(2)

n jt

Since the ratio is independent from alternatives other than i and k, it is said to be
independent from irrelevant alternatives or IIA. While the IIA property is realistic insome choice situations, it is inappropriate whenever the ratio of probabilities for twoalternatives changes with the introduction or change of another alternative.2
In our model, we observe J products in I countries at different points in time.
The J products are the mobile phone technologies: analog, cdmaOne, GSM, PDC,
IDEN, TDMA, cdma2000 (family) and WCDMA (family). The utility of consumers
in country i for technology j depends on the characteristics of the product:U(x jit , pi jt , ξi jt , θd ),(3)

where xi jt are observed characteristics of the product, in our case international andnational network effects, pi jt is the mobile phone service price by technology, ξi jt areunobserved product characteristics, such as quality, and θd are demand parameters.
More specifically, the utility function can be written as:
Ui jt = β0 xit − αpi jt + ξi jt + i jt ,(4)

1 For a more detailed explanation on how to obtain the logit probabilities see Train (2009)
2 We tried to estimate a more flexible nested logit model, that is not constraint by the IIA property. However, the estimated results indicated that for some parts of the data the model was not consistent with theutility maximization assumption. In particular, the parameter measuring the degree of independence in unobserved utility among the alternatives in a given nest exceeded 1.

6where i jt is assumed to be iid extreme value [exp(− exp(−i jt ))] across products andconsumers, in other words it is an idiosyncratic taste variable (Berry , 1994).
The market share of product j in market i at time t is given by the logit formulaexpδi jt
si jt (δ) = PN.
( k=0 expδikt )(5)With the mean utility of the outside good (no mobile phone subscription) normalized
to zero,ln si jt − ln si0t = δi jt = β0 xi jt − αpi jt + ξi jt ,(6)which means that δi jt , or the mean utility level, is uniquely identified directly froman algebraic calculation using observed market shares.
To account for the endogeneity of prices, it is necessary to use instrumental variables correlated with the endogenous variables but uncorrelated with the unobservabledemand shocks. Instrumental variables used in the literature include proxies for cost
factors, such as telecommunications equipment. In contrast, in this study, the instrumental variables used for mobile service prices are the lagged values of mobile service
charge and per capita GDP. For total mobile phone subscribers, we used as instruments
the lagged values of mobile phone subscribers, population and mobile and fixed lines
subscribers.
The above multinomial logit model with inverted market shares and including instrumental variables was fitted using the Arellano-Bond dynamic panel-data estimatorwith one-step difference GMM. We used the Arellano-Bond (1991) dynamic panel estimator because of three reasons. First, The estimator is designed for situations withsmall T, large N panels, meaning few time periods (13 quarters from 2007 Q1 to 2010
Q1) and many individuals (105 countries in Model 1 and 184 in Model 2). Second, it issuitable for linear functional relationships with a single left-hand-side variable that isdynamic, depending on its own past realizations, in this case mobile phone subscribers.
Third, it is appropriate when there are few independent variables that are not strictly
exogenous, meaning correlated with past and possibly current realizations of the error,
such as mobile service price and mobile phone subscribers of other countries.
The employed estimator is called difference GMM since the Arellano-Bond esti-

7mation starts by transforming all regressors by differencing and uses the Generalized
Method of Moments (Hansen 1982). The Arellano-Bond dynamic panel-data estimation with one-step difference GMM was performed using the Xtabond2 command of
Stata 11.
3.2. Model specification
The specification of the main model (Model 1) is the following:ln si jt − ln si0t = β0Nat Nationalit + β0Int Internationalit − αpricei jt + ξi jt(7)

were si jt is the country i mobile phone subscribers of technology j in time t, si0t
is the population without mobile subscription in country i and in time t, Nationalit
are the national network effects in country i and time t (installed base of country i),
Internationalit indicate the installed base of handset export partner countries weighted
Pby distance or k subsk jt/ distance between i and k, where k ∈ mobile handset exportP
partner of country i, and priceit is i (effective price per minute of Operator l in market
i*Operator’s share in market i) / per capita GDP of country i.
For comparison we also estimated a model that includes a different measure of international network effects without the weight by mobile handset exports and distances
between countries. In this model (Model 2), the international network effects Worldit
are defined as the world mobile phone subscribers - the mobile phone subscribers incountry i.
ln si jt − ln si0t = β0Nat Nationalit + β0World Worldit − αpricei jt + ξi jt(8)

In both models the instrumental variables used for prices are the lagged values of mobile phone service price and and per capita GDP, and the instruments for total mobile
subscribers are the lagged values of mobile phone subscribers, population and mobileand fixed lines subscribers
3.3. Panel data
In this study, we employed an unbalanced panel data set of 224 countries and territories with quarterly data from the first quarter of 2007 to the first quarter of 2010.

8

The main estimation model (Model 1) analyzes the data of 105 countries. A second
model is estimated for comparison purposes using data of 183 countries. A list of thecountries included in model 1 (countries not indicated by an asterisk) and in model two(all the countries) is displayed in Table 1.
-Table 1 hereThe details and sources of the employed data are presented in Table 2. Mobile
phones subscribers by technology, country and quarter were obtained from the WirelessIntelligence Database and were used to calculate the independent variable of the model.
In addition, based on the total mobile phone subscribers per country, we calculate thenational and international network effects of the mobile phone market. The national
network effects are defined as the total mobile phone subscribers in each country. Theinternational network effects are defined as the total mobile phone subscribers of thedestination countries of mobile handset exports , weighted by the distance to suchcountries. The data on destination countries of mobile handset exports were takenfrom the UN Comtrade Database and the distance between countries were obtained
from the CEPII Distances Database.
Mobile phone service price per country was calculated from the effective price perminute (eppm) charged by each operator in dollars, weighted by the market share of thesame operator. Operators effective price per minute and market shares were taken fromthe Wireless Intelligence Database. For international comparison, the mobile phoneservice price was divided by the GDP per capita in dollars of the Penn World Table.
-Table 2 here3.4. Summary statistics
The summary statistics of mobile service price, international network effects measure, GDP per capita, total mobile phone subscribers and GSM subscribers, for thecountries with available data on the 4th quarter of 2009, are displayed in Table 3.
-Table 3 hereThe top 16 countries with the highest measurement of international network effects in the last quarter of 2009 are in Europe, except for South Korea. This reflects
three basic facts which are likely to influence each countries decision to adopt mobile

9phone technologies: high volumes of telecommunications equipment trade, abundantmobile phone subscribers in the partner countries and short distances between them.
It may also reflect the fact that the European countries adopted the same GSM-based
technological standard for 2G and 3G and therefore, this common standardization increases both telecommunications equipment trade and mobile phones subscription. On
the other hand, low income countries have the lowest measurement of international
network effects.
Similarly, the top 16 countries with the highest measurement of national network
effects at the end of 2009 are in Europe, except for Singapore. In other words, thecountries with the highest number of mobile phone subscribers, and therefore market
size, are located in Europe.
Low-income countries have, in general, lower mobile service charge than highincome countries. Among developing nations, Latin American countries, such as Chile,
Ecuador, Argentina and Peru, have the highest service charge in 2009. In contrary,
within high-income countries, the US, Ireland and South Korea have the lowest service
charges. On the other hand Japan, Netherlands, Swiss and Spain are the countries withthe highest charges for mobile phone services among developed countries.
4. Estimation results: international and national network effects
The estimation results of Models 1 and 2 are presented in Table 4. The coefficientsin Model 1 are statistically significant and have the expected signs. The results show
evidence of significant positive national and international network effects, as well as
negative price effects. In Model 2, when international network effects are defined asworld subscribers without the subscribers of country i, the national network effects are
positive and significant, but the international network effects are not significant. The
price variable is negative as expected but it is also not statistically significant.
-Table 4 hereThe mean elasticity of the estimated parameters, shown in Table 5, was calculated
in order to interpret and compare the coefficients of Models 1 and 2. Based on the calculated elasticities, the results show that international network effects are an importantdriver of mobile phones diffusion. According to our results an additional 1% increase10

in the mobile phone subscribers in the destination countries of mobile handset exports
raises the mobile phone subscribers of a given country by 18%. This finding suggest
the existence of a feedback circle between increased mobile subscribers and increased
mobile handset availability.
-Table 5 hereIn addition, we show that a 1% increase in the total mobile phones subscribers ina country increases the number of subscribers using a given mobile phone technology
by 30%. As expected, mobile service price affects negatively the diffusion of mobile
phones. However, the contribution of price reduction to increasing the difussion ofmobile phones cannot be compared to the national and international network effects.
Specifically, a 1% decrease in mobile phones service charge increases national mobile
phones subscription only by 2.8%.
These results imply that the policies most conducive to increase mobile penetration
rates concern strategies that promote international direct and indirect network effects
such as international standardization and technological choice, rather than price regulation. Competitive and innovative markets of complementary products that generate
indirect network effects, such as mobile handset and mobile Internet applications are
key factors for the diffusion of new generations of wireless communications.
5. Conclusions
In this paper, we measured the direct national and international network effects inmobile communications diffusion, for a wide sample of countries. Previous literature
has stressed the importance of direct network effects in the difussion of mobile telecommunications at the national level (Birke and Swann (2006), Birke and Swann (2005),
Doganoglu, T., & Grzybowski, L. (2007), (Grajek, M. (2010). Furthermore, Suarez(2005) found the existence of network effects in the technology choice among different
countries in North, Central and South America. However, to the best of our knowledge,
a study on international direct network effects in the mobile communications market
has not been done yet.
Our evidence shows that both national and international direct network effects are
more important factors than price reduction in the diffusion of wireless telecommuni11

cations. In particular, our results indicate that, for a sample of 105 countries from thefirst quarter of 2007 to the first quarter of 2010, the national direct network effects onmobile phones diffusion are almost double than the international direct network effects.
The statistically significant and positive coefficient of international direct network effects suggests the existence of a feedback circle between increased mobile subscribers
and increased mobile handset export. In addition, our estimation results indicate thatprice reduction is not the main driver of mobile phones diffusion.
We conclude that the policies most conducive to increase mobile penetration rates
concern strategies related to international direct and indirect network effects such as
standardization and technological choice, rather than price regulation. Previous empirical research indicates that markets with strong network effects have a tendency to
be highly concentrated and the theoretical literature has often found a de facto standardization in network markets (Birke , 2009). Gruber and Verboven (2001) showed
evidence that setting a single technological standard accelerates the diffusion of analogue mobile phone technologies considerably; and the same author expected similar
beneficial effects for digital technologies. However, international coordination on mobile technological standards is still necessary because despite the presence of strong
national and international network effects, nowadays there are multiple mobile phone
technology standards in use.
The main characteristic of 3G mobile phone technologies is that it offers new multimedia services including data transfer and mobile Internet applications. Therefore,
compared to older mobile phone technologies, the relationship between traditional mobile communications and such complementary services becomes stronger. Therefore,
competitive and innovative markets of complementary products that generate indirect
network effects, such as mobile handset and mobile Internet applications are key factors
for the diffusion of new generations of wireless communications.
In this study, we focused on direct network effects in mobile telecommunication
markets, both national and international. Due to the increasing importance of compatible products and services such as mobile Internet applications and handset functionality, it is necessary to understand the interaction between number of mobile phone
subscribers and the quantity of new service release in different countries. Further re12

search using detailed data on mobile handset variety or number of complementary services in the market in various countries will definitely contribute to better understandthe national and international indirect network effects in the “next generation” mobile
communication market.
References
Berry.S. T., “Estimating Discrete-Choice Models of Product Differentiation,” RAND
Journal of EconomicsThe RAND Corporation, vol 25(2) (1994) 242–262.
Berry, S., Levinsohn, J. and Pakes, A.,“Automobile Prices in Market Equilibrium,”
EconometricaEconometric Society, vol 63(4) (1995) 841–890.
Birke, D., “The Economics Of Networks: A Survey Of The Empirical Literature,”
Journal of Economic Surveys Wiley Blackwell, vol 23(4) (2009) 762–793
Birke, D. and Swann, G., “Network effects and the choice of mobile phone operator,”
Journal of Evolutionary EconomicsSpringer, vol 16(1) (2006) 65–84
Clements, M.T., Ohashi, H., “Indirect network effects and the product cycle: video
games in the U.S., 1994-2002,” Journal of Industrial Economics, Wiley Blackwell,
vol 53(4) (2005) 515– 542
Doganoglu, T., Grzybowski, L., “Estimating Network Effects in Mobile Telephony inGermany,” Information Economics and Policy, vol 19(1) (2007) 65–79.
Grajek, M., ., “Estimating Network Effects and Compatibility: Evidence from the Polish Mobile Market,” Information Economics and Policy, vol 22(2) (2010) 130–143.
Gruber, H., 3G Mobile Telecommunications Licenses in Europe: A Critical Review.
Info, vol 9 no.6,(2007), 35–44.
Gruber, H. and Verboven, F. “The evolution of markets under entry and standards
regulation–the case of global mobile telecommunications,” International Journal ofIndustrial Organization vol 19(7) (2001): 1189–1212.

13

Nevo, A., ., “A Practitioner’s Guide to Estimation of Random-Coefficients Logit Models of Demand,” Journal of Economics and Management Strategy,Wiley Blackwell,
vol 9(4) (2000) 513–548.
Ohashi, H.,“The Role of Network Effects in the US VCR Market, 1978-1986,” Journalof Economics and Management Strategy, Wiley Blackwell, vol 12(4) (2003) 447–
494
Roodman, D., ., “How to Do xtabond2,” North American Stata Users’ Group Meetings,
Stata Users Group, vol 8 (2006).
Stata Press. Stata Base Reference Manual, release 11. Texas, United States of America.
2009.
Suarez, F., ., “Network effects revisited: the role of strong ties in technology selection,”
Academy of Management Journal vol 48(4) (2005) 710–720.
Train, K., 2009. “Discrete Choice Methods with Simulation”. Cambridge, England:
Cambridge University Press.

14

Table 1: List of countries for the network effects analysis

Afghanistan *3
Albania
Algeria
Angola *Antigua and Barbuda *Argentina
Armenia
Australia
Austria
Azerbaijan
BahamasBahrain
Bangladesh *Barbados *Belarus *Belgium
Belize *Benin *
Bermuda *Bhutan *Bolivia *BosniaBotswana *BrazilBrunei Darussalam *Bulgaria
Burkina Faso *Burundi *Cambodia *Cameroon *CanadaCape Verde *Cayman Islands *Central African Rep. *Chad *Chile
China

Colombia
Comoros *Congo *
Costa Rica
Cote d’ Ivoire
Croatia
Cuba *
CyprusCzech Rep.
Denmark
Dominica *Dominican Rep.
EcuadorEgypt
El Salvador
Equat. Guinea *Eritrea *Estonia
Ethiopia
Fiji
FinlandFranceGabon *
Gambia *Georgia *Ghana *
GreeceGrenada *GuatemalaGuinea *Guinea Bissau *GuyanaHaiti *
HondurasHong Kong
Hungary
Iceland

India
Indonesia *Iran *
Iraq *
IrelandIsrael *Italy
JamaicaJapan
JordanKazakhstan
Kenya
Kiribati *Korea
Kuwait *Kyrgyzstan
Lao *LatviaLebanonLesotho *Libya *
Lithuania
Luxembourg
Macao
Macedonia
Madagascar
MalawiMalaysia
Maldives *
Mali
Malta
Marshall Isl. *Mauritania *Mauritius
MexicoMicronesia *Moldova

Mongolia
Morocco *Mozambique *Namibia
Nepal *
Netherlands
New Zealand
Nicaragua
Niger
Nigeria *NorwayOman
Pakistan
Palau *
PanamaPapua New Guinea *Paraguay
Peru
Philippines *PolandPortugal
Puerto Rico *Qatar
Romania
RussiaRwanda *Saint Kitts and Nevis *Saint Lucia *Samoa *
Sao Tome & Principe *Saudi Arabia
Senegal
Seychelles *Sierra Leone *Singapore
Slovakia
Slovenia

3 Model 1 uses data of the countries that are not indicated by an asterisk.
Model 2 uses data of all the countries.

15

Solomon Islands *Somalia *South Africa
Spain
Sri Lanka
St. Vincent & Gren.
Sudan *
Suriname *SwedenSwitzerland
Syria *
Taiwan *Tajikistan *Tanzania
Thailand
Togo *
Tonga *
Trinidad and Tobago
Tunisia
TurkeyTurkmenistan *UgandaUkraine *United Arab Emirates
United Kingdom
United States
Uruguay
Uzbekistan *Vanuatu *Venezuela *Vietnam
Western Samoa *Yemen
ZambiaZimbabwe

Table 2: Data sources of international network effects models from the 1 st quarter of 2007 to the 1 st quarterof 2010

Data sources
Variable
Mobile phone subscribers by technology
Mobile handset exports
Classification HS2007 Code 851712
Distances between countries
Effective price per minute(eppm) per operator
Operators market share
Per capita GDP (US$ Dollars)
Variables definition
National Network Effects
International Network Effects

World Network Effects
Mobile service Price

16

SourceWireless Intelligence Database
UN Comtrade Database
CEPII Distances Database
Wireless Intelligence Database
Wireless Intelligence Database
Penn World Table
Total mobile subscribers in each country
ratio of“mobile subscribers in partner countries” and“distance partner country and country i”
World mobile subscribers mobile subscribers country iratio of “eppm * Operators market share” and“per capita GDP”

Table 3: Summary statistics of main variables in network effects analysis 4th quarter 2009

Country
Albania
Argentina
Australia
Austria
BelgiumBrazilBulgaria
CanadaChile
China
Colombia
Croatia
Czech Republic
Denmark
Ecuador
Egypt
FinlandFranceGreeceHungary
India
IrelandIsraelItaliaJapan
Korea
LatviaLithuania
Macedonia
Malaysia
MexicoNetherlands
NorwayPakistan
Peru
PolandPortugal
Romania
RussiaSingapore
Slovakia
Slovenia
South Africa
Spain
Sri Lanka
SwedenSwitzerland
ThailandTunisia
TurkeyUnited Kingdom
United States
Uruguay

Summary Statistics 2009 (4th quarter)
Mobile Service
International
GDP
Total mobile phonePrice
network effects per capita
subscribers
0.096
180618.277
7212.715
4024993
0.081
173174.747
13612.5648396360
0.151
229910.556
47565.8425084131
0.148
1157978.663
41062.52
11428882
0.192
1465530.07
38579.58
12383715
0.121
221867.022
10521.17
176643778
0.102
657597.211
12565
10937649
0.123
515346.977
40022.88
22613055
0.110216064.983
13689.23
17623034
0.024
519664.452
8113.773
722552000
0.016
91627.614
8534.705
40315246
0.187
662061.281
17019.95
6059858
0.167
1144799.041
25552.71
13531054
0.113
1017104.328
37376.7775359420.104139300.274
6800.16713527700
0.047
23251.736
5231.524
54416232
0.1171060773.55
34764.99
7965595
0.171
1151905.098
34385.48
58539614
0.118
482834.594
30201.43
20783474
0.098
1219632.545
18001.29
11333000
0.009
767083.4768
3588.021
525474133
0.077
668992.872
35877.96
5406604
0.099
693110.309
28452.49
96886790.222
879596.648
30894.59
87990415
0.367
596605.594
35011.48
110617300
0.090
1147897.417
26674.9648363400
0.006
622821.996
14128.27
23277660.056
643108.844
15466.05
46137130.043
281325.970
8664.121
2108347
0.084
669262.035
12778.4
30566000
0.058
310688.413
12887.42831601070.318
1516939.82
44583.42
19697001
0.200
611525.25156498.84
51844650.009
199773.863
2439.5597579940
0.079
160463.389
8258.313
20149113
0.081
883562.265
18366.35
44527214
0.193
429089.598
22338.55
16412525
0.043
939834.700
11705.06
30088000
0.028
198315.791
15703.98
207856424
0.033
804870.945
51230.71
7379534
0.096
898700.549
21414.07
5819901
0.064
426908.727
28131.422105793
0.177
179442.867
8647.157
50529000
0.253
719990.623
30907.55
53833599
0.001
8482.460
4411.003
14805087
0.139971856.902
39295
12138257
0.256
954731.746
44374.58
9075001
0.019
719195.636
8688.686
66309297
0.037
137878.071
6897.657
10081934
0.067458096.374
10886.32
63225000
0.181
1090048.428
37000.91
79623996
0.061
405872.8602
45613.88
285564885
0.037
384479.094
12403.12
3888697

17

GSM
Subscribers
4024993
47366261
25084131
11428882
12383715
165303869
10937649
8292735
17196998
666462000
40315246
6059858
13411034
752774213164981
54416232
796559558539614
20783474
11333000
421656506
5406604
7010000
87990415
75051600
26191561
228877246137132108347
30566000
76567501
19697001
5151395
97578867
19138946
44312214
16412525
29645920
207309250
7379534
5819901
210579350529000
53833599
14805087
12115257
9075001
64862862
10081934
63225000
79623996
119157903
3888697

Table 4: Results of dynamic panel-data estimation, one-step difference GMM

βInternational
βWorldβNational
αPriceNumber of observations
Number of groups
Observations per groupminimum
averagemaximum

Model 1Model 2
Handset export partner
World
subscribers
subscribers
Coefficients
0.00002*4—–(0.000001)5—–0.00003(0.00003)
0.0031***0.0033***(0.0007)(0.0007)-44042.64*-1190.25(20567.01)(3347.27)
637
1056
123
184
0
5.18
9

0
5.74
9

4 *** Indicates that the parameter is statistically significant at 1% level, ** at 5% level and * at 10% level.
5 Values within parenthesis are robust standard errors

Table 5: Elasticities of dynamic panel-data estimation, one-step difference GMM

Mean elasticities of estimated coefficients
Model 1Model 2βInternational
0.178—–
βWorld
—–0.173
βNational
0.309
0.361
αPrice-0.029-0.02818