OPTIMAL CAPITAL STRUCTURE IN THE TELECOMS INDUSTRY: MYTH OR REALITY?

Abstract

This paper investigates the issue of optimal capital structure in the Telecoms industry through the birth and subsequent demise of the telecoms bubble. This period has been chosen because there was a substantial amount of debt issuance with a major impact on firms' capital structures. The focus is on the European telecoms industry, specifically BT Group, Deutsche Telekom, and France Telecom. The results show that an optimal capital structure does in fact exist within the telecoms sector and so firm value can be maximized with selective issuance of debt.