Telecommunications Policy 26 (2002) 595–606

Comparing the operational efficiency of the main European

telecommunications organizations: A quantitative analysis
G.C. Pentzaropoulos*, D.I. Giokas
Department of Economics, University of Athens, 8 Pesmazoglou Street, 105 59 Athens, Greece

Abstract

There are today many operators competing within the European telecommunications market. For these
operators, efficiency should be considered as a key element for achieving greater revenue and enhancing
market position. In this paper, comparison is made of the main European public telecommunications
organizations (PTOs) in terms of their operational efficiency using data envelopment analysis, a well-known
quantitative technique from operational research. The analysis is based on data provided in the edition
(Communications Outlook, 1999, OECD Publication Service, Paris). The main conclusion is that full
operational efficiency can equally be achieved by PTOs with large revenues as well as by others with
medium and smaller revenues. Also notable is the presence of certain PTOs with full efficiency ratings
which are considered here as models or benchmarks for the less efficient organizations. Finally, some
implications of the findings for telecommunications management are examined at the end of this paper.
r 2002 Elsevier Science Ltd. All rights reserved.

Keywords: European PTOs; Performance measures; Comparative analysis; Operational efficiency evaluation;
Telecommunications management

1. Introduction

The successful implementation of telematic services over today’s global networks relies on
telecommunication infrastructures capable of relaying integrated information amongst a great
number of hosts and their users. Many public telecommunications organizations (PTOs) in the
OECD domain have already taken important steps towards the modernization of their networks
and the introduction of value-added services. Modern communication technologies have been
instrumental in reshaping the world’s telecommunications market; however, it must be
acknowledged that the new developments evident today could not have materialized without

*Corresponding author. Tel.: +30-1-32-23-758; fax: +30-1-32-28-538.

E-mail address: gpentzar@cc.uoa.gr (G.C. Pentzaropoulos).

0308-5961/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved.
PII: S 0 3 0 8 - 5 9 6 1 ( 0 2 ) 0 0 0 5 9 - 9
596 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

significant regulatory reform. The latter is especially true in the European domain, where nearly
all countries have liberalized their telecommunication markets (OECD, 1999).
The management of PTOs, especially those operating within a very competitive environment,
such as the European one, need to re-consider their policies so as to increase their efficiency. This,
in turn, will bring higher revenues and open more prospects for future initiatives. The notion of
operational efficiency is important in the present study. Later, a more precise meaning in
quantitative terms is given to this notion.
The paper focuses on telecommunications developments in Europe with special emphasis on the
performance evaluation of the European PTOs. It makes use of techniques from the field of
Operational Research. One such technique, which has been found suitable in the present study, is
data envelopment analysis (DEA). DEA is an extension of classic mathematical programming
techniques with a wide and diverse range of applications. For a comprehensive account of
methodologies and applications related to DEA, the interested reader is referred to Cooper,
Seiford, and Tone (2000). There are also several studies in telecommunications and telematics in
which DEA methodologies were applied to solve practical problems. Amongst these studies the
reader could consult for example Majumdar (1995), Banker, Chang, and Majumdar (1996),
Cooper, Yu, and Park (2001), Tavares and Antunes (1998), Sueyoshi (1994, 1996, 1997, 1998),
Athanassopoulos and Giokas (1998), and Giokas and Pentzaropoulos (1995, 2000a, 2000b).
The overall objective of the present study is the comparative evaluation of the main European
PTOs in terms of their operational efficiency. For the purpose of obtaining numerical results, use
has been made of data provided by the edition Communications Outlook (OECD, 1999). Four
specific objectives have been formulated according to the following steps:
(i) Find all the best-practice telecommunications organizations within the data set available.
These will be used subsequently as benchmarks for the less efficient PTOs.
(ii) Identify and rank the inefficient PTOs according to their operational efficiency. Then, find
the reference sets for those PTOs.
(iii) Estimate the deviations between actual (measured) revenue and target (desired) revenue for
all inefficient PTOs.
(iv) Analyse the extent to which the benchmark PTOs (i.e. the fully efficient ones) contribute to
the determination of the above target values.
The contents of this paper are organized as follows. Section 1 represents the introduction to the
subject studied here. Section 2 contains a description of the OECD data set used in the evaluation
(OECD, 1999) as well as the rationale for the choice of model variables. This is followed, in
Section 3, by a detailed outline of the proposed modelling approach (DEA). Section 4 is reserved
for the presentation of efficiency estimates and for discussion in a managerial context. Finally, in
Section 5, the results obtained are summarized and some prospects for future work in this area
outlined.

2. Performance variables concerning the main European PTOs

The starting point for the comparative evaluation performed in the course of this study is the
edition Communications Outlook (OECD, 1999), which lists all main OECD-related PTOs, i.e.
 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606 597

those with revenues greater than US $ 1 billion. However, in the above list, several operators have
provided incomplete information to the OECD. Here, interest is shown in all European PTOs
with combined terrestrial and mobile networks for which there exist data sufficient for our
analysis. The total number of such PTOs is presently 19.
The main performance indicator according to which the above PTOs are ranked by the OECD
is their total revenue. The same indicator is also used in our evaluation as an output variable. In
order to form input variables associated with revenue, we accept that revenue is mainly influenced
by the following three factors: (1) the physical network infrastructure including terrestrial lines
and switching exchanges; (2) the population using mobile telecommunications equipment and
teleservices; and (3) the PTO’s manpower, i.e. its employees in all categories. Based on the above
rationale, the present analysis specifies the following input variables (see also OECD, 1999): access
lines ðx1 Þ; mobile subscribers ðx2 Þ; and number of employees ðx3 Þ: Naturally, the output variable is
the PTO’s total revenue ðyÞ: The values associated with these input–output variables are listed in
Table 1.
Before embarking on the evaluation procedure itself (i.e. DEA), a standard statistical analysis
of the variables appearing in Table 1 was conducted. The relevant results are shown in Table 2. As
can easily be seen, there are large variations in all variables which are reflected in the large values
of the standard deviations; these are all above their means. The values of the median are all well
below their means. There are also great differences between the values of the lower and the upper
quartiles. Finally, the coefficient of variation, shows values that are all above 100%. All of these
results point to a non-homogeneous set of input–output variables.

Table 1
Input–output variables and their values for the main European PTOs (OECD, 1999)
No. Name of PTO (Country) Revenue ðyÞ Access lines ðx1 Þ Mobile subscribers ðx2 Þ Employees ðx3 Þ
T01 Deutsche Telekom (Germany) 38957 45200 3752 196943
T02 Telecom Italia & TIM (Italy) 30721 25698 9278 133201
T03 France Telecom (France) 26851 33700 3000 156620
T04 British Telecom (UK) 25597 27651 3077 124700
T05 Telefonica (Spain) 16141 16737 3269 64109
T06 Cable and Wireless (UK) 13588 1110 1015 46550
T07 KPN Telecom (Netherlands) 7931 8860 1185 32708
T08 Swisscom (Switzerland) 6775 4690 1044 22145
T09 Telia (Sweden) 6083 6010 1935 32549
T10 Tele Danmark (Denmark) 4624 3339 871 17268
T11 Belgacom (Belgium) 4244 4769 691 25385
T12 PTA (Austria) 3734 3969 940 16900
T13 Telenor (Norway) 3608 2734 1259 20848
T14 Portugal Telecom (Portugal) 3136 4002 762 21524
T15 TPSA (Poland) 2594 7500 300 73000
T16 Telecom Eireann (Ireland) 2053 1500 415 10995
T17 Finnet Group (Finland) 1537 2061 562 9714
T18 Sonera Telecom (Finland) 1489 789 1586 7922
T19 Matav (Hungary) 1361 2404 363 18187
Total: 19 PTOs. Values of revenue are in US$ billions. Mobile subscribers are in thousands.
598 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

Table 2
Statistical properties of the model variables used in DEA
Measure/variable y x1 x2 x3
Mean value 10580 10670 1858 54277
Median 4624 4690 1044 25385
Standard deviation 11536 12912 2088 56566
Minimum 1361 789 300 7922
Maximum 38957 45200 9278 196943
Lower quartile 2594 2404 691 17268
Upper quartile 16141 16737 3000 73000
Coefficient of variation (%) 109.0 121.0 112.4 104.2
Revenue: y; access lines: x1 ; mobile subscribers: x2 ; employees: x3 :

From the same data set, the following can also be noted:
(i) The six most profitable European PTOs (see top of Table 1), namely Deutsche Telekom,
Telecom Italia, France Telecom, British Telecom, Telefonica and Cable and Wireless, have
revenues which are all above the respective mean. All of these PTOs except Cable and
Wireless also have their input variables above their respective means.
(ii) Deutsche Telekom is the most profitable of the PTOs and has by far the largest terrestrial
network (access lines), while maintaining the largest number of employees.
(iii) The combined forces of Telecom Italia and TIM (mobile) represent by far the largest
population of mobile subscribers.
(iv) The least profitable PTO (Matav) has the second smallest number of mobile subscribers,
while maintaining a large number of employees for its size.
(v) The smallest network infrastructure belongs to Sonera Telecom, which has the smallest
number of employees and the second smallest revenue after Matav.
The above-noted discrepancies hint to some first observations about the possible efficiency
levels of the organizations selected for the analysis. First, the fact that a company such as Cable
and Wireless is amongst the most profitable PTOs, while operating a smaller network with fewer
mobile subscribers and significantly lower manpower than its top competitors, points to a well-
managed organization which should be expected to be very efficient. Secondly, the fact that some
companies maintain a large population of employees (who should ideally contribute to a better
productivity and hence revenue), while having rather small revenues, is not a good sign for
efficiency. Third, one would expect to see some other PTOs placed on the efficiency frontier as
long as their outputs (revenues) are justified by their respective inputs. These first-sight
observations are largely confirmed by the results of the analysis (DEA), as will be shown later.

3. Selected modelling approach

The evaluation methodology used in the present study is based on a multicriteria technique
known as DEA, as briefly mentioned in Section 1. In the rest of this section a concise overview of
 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606 599

DEA and its applications is presented and then a specific DEA model found suitable for the
present study is formulated.

3.1. Evaluation methodology (DEA)

DEA is a well-known quantitative technique from the field of Operational Research originally
proposed by Charnes, Cooper, and Rhodes (1978). The concept of DEA has been influenced by
earlier work on efficiency done by Farrell (1957). The technique can estimate the relative efficiency
of units within a data set by constructing efficiency frontiers. Then, the units on any of the
frontiers are considered to be efficient, while the units positioned inside the frontier are
characterized as inefficient.
The units referred to above can take several forms depending on the nature of the problem
examined in each case. In the present study, the units being evaluated correspond to the PTOs
listed in Table 1. DEA uses a table containing multiple inputs and outputs which are used for the
evaluation of each unit’s efficiency. Here, the inputs and the output used are those defined in
Section 2 under the notation ðx1 ; x2 ; x3 and yÞ; their values are shown under the respective
columns of Table 1.
The efficient units are also known as best-practice units or benchmarks, a term which is used
subsequently. As will be seen in Section 4, the benchmark units are influential in shaping the
efficiency ratings of the inefficient units and they can even provide efficiency targets for the latter
units. For each unit being evaluated, DEA specifies its efficiency rating, which is denoted by hnk
(see also the model notation below). Then, the units (PTOs) for which hnk ¼ 1 are characterized as
efficient and so they determine the efficiency frontier mentioned above. Conversely, the units
(PTOs) for which hnk o1 are characterized as relatively inefficient when compared with the
previous ones.
In the present study, the frequency fk by which the benchmarks appear in their
respective reference sets is counted. In some cases, as will be seen later, there are
benchmarks which do not actually appear in any of the reference sets, i.e. for those
benchmarks fk ¼ 0: This phenomenon has been observed by a number of researchers when
applying DEA in real-life problems and it has been attributed to an unusual mixture of
input–output variables (see for example Thanassoulis, 1995). Unusually, we understand
that the above mixture is not really representative of the one a true benchmark contains. Hence,
it was found appropriate to extend the standard DEA terminology as follows. A PTO for
which hnk ¼ 1 and fk > 0 is termed fully efficient, one for which hnk ¼ 1 and fk ¼ 0 is known as
partially efficient, and another one for which hnk o1 is characterized as inefficient by some
particular degree.
The usefulness and versatility of DEA has been demonstrated in many real situations.
These include education and training, medical care, banking and finance, and many public
utilities such as telecommunications, electricity, gas, railways, and the airline industry.
Applications in telecommunications that have come under scrutiny have been cited in Section
1. For all other applications, the reader might find it helpful to consult Seiford (1996) and/or
Berger, Brockett, Cooper, and Pastor (1997) which together provide a collection of more than
1000 references to DEA-related applications. More recent examples can be found in the
management literature.
600 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

3.2. Model formulation

The original mathematical model of DEA by Charnes et al. (1978), known as the CCR model,
has been updated by many authors: the interested reader is referred to Cooper, Thompson, and
Thrall (1996) for a comprehensive survey. For the present study, the following (output-oriented)
DEA model (BCC) with production function allowing variable returns to scale has been
formulated; see also Banker, Charnes, and Cooper (1984):
Maximize
( )
Xm
zk þ e si þ s ðk ¼ 1; 2; 3; y; nÞ; ð1Þ
i¼1

subject to
Xn
lj xij þ si ¼ xik ði ¼ 1; 2; 3; y; m; k ¼ 1; 2; 3; y; nÞ; ð2Þ
j¼1

X
n
zk yk  lj yj þ s ¼ 0 ðk ¼ 1; 2; 3; y; nÞ; ð3Þ
j¼1

X
n
lj ¼ 1; ð4Þ
j¼1

with
lj ; si ; sX0 ði ¼ 1; 2; 3; y; m; j ¼ 1; 2; 3; y; nÞ ð5Þ

0oeooo1: ð6Þ
Where in the above formulation:
* m is the number of inputs and n is the number of units used in the evaluation;
* zk is the proportional increase in output that is possible for the kth unit;
* lj is the intensity weight defining the convex combination of the best-practice units that are
compared with the kth unit: the non-zero lj in the optimal solution indicate the kth unit’s
efficiency reference set;
* xij is the amount of the ith input used by the jth unit;
* yj is the amount of the output produced by the jth unit;
* e is a small positive number to ensure that the inputs and the output have at least some
weighting in the efficiency measure; and,
* si ; s are, respectively, the input and output slack variables.
The original model (CCR) uses constant returns to scale. This is avoided in the present type
(BCC) by the introduction of constraint (4) above, which permits the incorporation of general (i.e.
non-linear) forms of the production function.
The overall problem is solved by solving sequentially n linear programming (LP) problems
which cover all units (PTOs) available. Let us denote by ðznk ; lnj Þ the optimal values of the
corresponding values of ðzk ; lj Þ: Then, the efficiency rating of the kth PTO is given by the index
 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606 601

hnk ¼ 1=znk ; and the optimal value of the kth PTO’s output (target revenue) is given by
Xn
n
Yk ¼ lnj yj ¼ znk yj ðk ¼ 1; 2; 3; y; nÞ: ð7Þ
j¼1

Let it be noted that, in the above relationship, Ykn is the level of the output (revenue) that would
make the kth PTO efficient without affecting the levels of its inputs. The proportional increase in
output that is possible for the kth PTO is accomplished when the output slack s ¼ 0: Finally, the
contribution Ck (%) of the kth PTO characterized as efficient to the output (target revenue) of the
jth PTO characterized as inefficient is calculated as follows:
( , !)
Xn
Ck ¼ ðlnjk yk Þ lnjk yk * 100 ðk ¼ 1; 2; 3; y; nÞ; ð8Þ
j¼1

where yk is the output of the kth PTO and lnjk is the optimal lambda value of the kth efficient PTO
when assessing the efficiency level of the jth PTO.

4. Efficiency estimates and discussion

The application of the evaluation process formulated in Section 3 has given the following
outcome for the main 19 European telecommunications organizations of Table 1: six fully
efficient, three partially efficient, and the remaining 10, inefficient to varying degrees. The details
concerning this outcome are given in Table 3. For better reading of the results we have replaced
the fractions produced by DEA with percentages. Therefore, the efficiency rating of any PTO with
hnk ¼ 1 is denoted by 100%, and the one for some PTO with e.g. hnk ¼ 0:8394 is denoted by 83.94%.

4.1. Fully efficient and inefficient PTOs

Table 3 lists the efficiency ratings of all telecommunications organizations evaluated here. From
these results the following can be noted:
(i) Three of the top six profitable PTOs, namely Deutsche Telekom, Telecom Italia (TIM), and
Cable and Wireless, have also been found to be fully efficient (100%).
(ii) The next three of the top six PTOs, namely British Telecom, Telefonica, and France
Telecom, are ranked highly in terms of operational efficiency, but they cannot be considered
as being fully efficient.
(iii) Swisscom, a company that is in the upper middle part of Table 1, showing a modest revenue,
is fully efficient.
(iv) Two operators that are near the bottom of Table 1, namely Telecom Eireann and Sonera
Telecom, are also fully efficient.
(v) Three PTOs, namely TPSA, Finnet Group, and Matav, fall in the category of partially
efficient operators, according to the terminology described in Section 3.1. It is easy to verify
that none of these PTOs appears in any of the reference sets of Table 3.
(vi) The remaining ten PTOs characterized as inefficient are listed by their efficiency ratings. In
the column next to those ratings are their corresponding reference sets.
602 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

Table 3
Efficiency ratings and performance profiles of the main European PTOs
No. Name of PTO (Country) Efficiency Reference set Frequency
rating (%) of occurrence
T06 Cable and Wireless (UK) 100 — 8
T08 Swisscom (Switzerland) 100 — 7
T16 Telecom Eireann (Ireland) 100 — 4
T01 Deutsche Telekom (Germany) 100 — 2
T02 Telecom Italia & TIM (Italy) 100 — 2
T18 Sonera Telecom (Finland) 100 — 3
T15 TPSA (Poland) 100 (*) — 0
T17 Finnet Group (Finland) 100 (*) — 0
T19 Matav (Hungary) 100 (*) — 0
T10 Tele Danmark (Denmark) 97.03 (T08, T16, T18) —
T04 British Telecom (UK) 94.76 (T01, T02, T06) —
T05 Telefonica (Spain) 94.61 (T02, T06) —
T03 France Telecom (France) 83.94 (T01, T06) —
T07 KPN Telecom (Netherlands) 81.56 (T06, T08) —
T12 PTA (Austria) 80.15 (T08, T16, T18) —
T09 Telia (Sweden) 62.84 (T06, T08) —
T11 Belgacom (Belgium) 62.37 (T06, T08, T16) —
T13 Telenor (Norway) 60.73 (T06, T08, T18) —
T14 Portugal Telecom (Portugal) 53.21 (T06, T08, T16) —
Total: 19 PTOs. ( * ) TPSA, Finnet Group and Matav are considered as partially efficient; see text for definition.

The above findings lead to a basic conclusion of this study, which could be stated as follows: High
profitability implies operational efficiency (full or high), but the opposite statement is not always
true, as demonstrated by the operators mentioned in (iii) and (iv) above.

4.2. Setting management priorities

Table 3 also shows the frequencies with which the fully efficient organizations appear in the
reference sets of the other main European PTOs. We note that Cable and Wireless as well as
Swisscom are the most frequent contributors to the formation of the above reference sets, with
eight and seven appearances, respectively. This gives a sum of 15 in a total of 26 appearances.
Hence, we may conclude that the above two companies could be considered as the principal
benchmarks, or model organizations, within the current set of PTOs. The other 11 appearances
come from the remaining four fully efficient operators.
Table 3 also lists the reference sets for all inefficient PTOs. These sets are important as they
form the parts of the efficiency frontier that are thought to be ‘‘closest’’ to the corresponding
inefficient PTOs. For example, the reference set for PTA (Austria), which has an efficiency level
equal to 80.15%, consists of three fully efficient PTOs: Swisscom (T08), Telecom Eireann (T16),
and Sonera Telecom (T18). From this finding, we may conclude that PTA’s management should
seek to identify similarities with the operations of its three benchmarks and then try to adopt
policies that would bring its current efficiency rating to a higher one and ultimately to 100%.
 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606 603

The above process of benchmark identification and policy change should ideally be adopted by
the management of all inefficient PTOs. For each such PTO, the level of change required in order
to achieve full efficiency will be inversely proportional to the efficiency rating shown in Table 3.
Thus, an operator such as British Telecom (94.76%) will need only a little effort in order to
achieve full efficiency. The management of an operator such as Telia (62.84%) will need to try
harder towards achieving its optimal target. For this operator, as well as for the next three
belonging to the lower part of Table 3, the level of change required will be significant, and so
attaining full efficiency may not be a realistic objective. In such cases, the management of the
organizations concerned may opt for less than full efficiency.
The above level of change is reflected by the difference between the actual revenue of any of the
inefficient operators and its estimated target revenue, i.e. the level of revenue that would (if
achieved) make the operator concerned fully efficient. Below, we comment more fully on this
matter using the calculated differences between actual and target revenues for the ten
organizations found inefficient.

4.3. Level of change required and benchmark contribution

The evaluation process in this study offers some opportunities for the management of the
inefficient PTOs to modify their objectives. When the efficiency rating of an inefficient PTO has
been calculated and its reference set has been identified, it may be advantageous for its
management to look more closely at how the target for its output variable (i.e. its revenue) is
formed by its associated benchmark PTOs. For the purpose of providing the management of all
inefficient PTOs with detailed information, we have estimated for each inefficient PTO its target
revenue as well as the contribution of its benchmarks to forming this target.
The final outcome of this estimation is shown in Table 4. For example, in the case of a high
efficiency (94.61%) but still inefficient operator such as Telefonica, the level of change required in

Table 4
Revenue change required for attaining full efficiency and benchmark contribution
No. Name of PTO (Country) Revenue change Benchmark contribution
to target formation ()
Actual Target (%)
T10 Tele Danmark (Denmark) 4624 4766 (3.1) jT08(83.0) T16(14.6) T18 (2.4)
T04 British Telecom (UK) 25597 27012 (5.5) jT01(66.9) T02(10.9) T06 (22.1)
T05 Telefonica (Spain) 16141 17060 (5.7) jT02(36.5) T06(63.5)
T03 France Telecom (France) 26851 31987 (19.1) jT01(88.3) T06(11.7)
T07 KPN Telecom (Netherlands) 7931 9724 (22.6) jT06(60.5) T08(39.5)
T12 PTA (Austria) 3734 4659 (24.8) jT08(82.7) T16(12.7) T18(4.6)
T09 Telia (Sweden) 6083 9679 (59.1) jT06(59.8) T08(40.2)
T11 Belgacom (Belgium) 4244 6805 (60.3) jT06(76.1) T08(7.5) T16(16.4)
T13 Telenor (Norway) 3608 5941 (64.7) jT06(35.7) T08(55.4) T18(9.0)
T14 Portugal Telecom (Portugal) 3136 5893 (87.9) jT06(40.6) T08(44.1) T16(15.3)
Total: 10 PTOs considered as inefficient by varying degrees. Cable and Wireless (T06), Swisscom (T08), and Deutsche
Telekom (T01) are the dominant benchmarks.
604 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

order to achieve full efficiency is a small one (5.7%). Telefonica’s benchmarks are Telecom Italia
&TIM (T02) and Cable and Wireless (T06). The first benchmark contributes to the formation of
Telefonica’s target revenue by 36.5%, while the second benchmark is more influential
contributing to the above target by 63.5%. Thus, Telefonica’s management should principally
seek to identify similarities with Cable and Wireless and, perhaps, adopt some operational policies
from that company.
Similar observations could be made in the case of a low-efficiency operator such as Telenor.
Here, the level of change required towards full efficiency is quite significant (64.7%). Hence,
Telenor’s management has the task to find the means for increasing its output (i.e. revenue) by the
above amount, if such means are possible. Since Telenor’s main benchmark is Swisscom (T08), it
follows that Swisscom is the main operational model for Telenor. The contribution from Cable
and Wireless (T06) is also significant; therefore, operational similarities with that PTO should also
be examined by Telenor. Finally, the contribution to Telenor’s target revenue coming from
Sonera Telecom (T18) is less significant.
Table 4 also reveals that in four cases concerning the inefficient PTOs, dominant benchmarks are
present. By dominant benchmark we mean one whose influence is quite significant, and this is
reflected by a high percentage value (typically above 75%). Therefore, we may note that Deutsche
Telekom (T01) is the dominant benchmark for France Telecom. Similarly, the following
companies are dominant benchmarks: Swisscom (T08) for Tele Danmark, Cable and Wireless
(T06) for Belgacom, and Swisscom again for PTA Austria. It is reminded that both Cable and
Wireless and Swisscom were identified as principal benchmarks within the current set of
companies as having the highest frequency of occurrence in the reference sets. Now, it may be
added that these two companies are also amongst the dominant benchmarks of the less efficient
operators.

5. Concluding remarks

The main objective of the study presented in this paper was the comparative evaluation
of the main European telecommunications organizations in terms of their operational efficiency.
This evaluation was realized via DEA, a successful multicriteria method form the field of
Operational Research. Numerical analysis concerning input–output data was based on
information provided by the OECD (1999). This study has led to some interesting results
concerning the relative efficiency of the PTOs examined here. These results are summarized
below:
(a) The characteristics of the 19 European PTOs examined present great variability. This is true
for all model variables considered here, i.e. revenue, access lines, mobile subscribers, and
number of employees.
(b) It has been verified that full operational efficiency can equally be achieved by companies with
large revenues as well as by others with medium and small revenues. Thus, it may be stated
that high profitability should not always be considered as a prerequisite for achieving full
efficiency.
 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606 605

(c) There exist significant differences in efficiency, as demonstrated by the ratings calculated for
all inefficient operators. The level of change required towards full efficiency is lower for the
more efficient operators and higher for the less efficient ones. For some of them, attaining full
operational efficiency may not be a realistic objective.
(d) The difference between actual and target revenue is a useful measure of the effort required to
achieve full efficiency. The management of the organizations concerned should seek to
identify similarities with their benchmarks and then try to adopt some of their operational
policies.
(e) Benchmarks can be especially helpful for identifying key operational characteristics of fully
efficient PTOs that could (if achieved) make any inefficient PTO fully efficient. If this is not
possible, the effort should be aimed at achieving a higher degree of efficiency.
(f) Notable is the strong presence in terms of operational efficiency of two PTOs, namely Cable
and Wireless and Swisscom, which were previously characterized as principle benchmarks.
These two and other four fully efficient operators, namely Deutsche Telekom, Telecom Italia
& TIM, Telecom Eireann, and Sonera Telecom have been used as benchmarks for the ten
inefficient PTOs.
(g) Three of the fully efficient operators, namely Cable and Wireless, Swisscom, and Deutsche
Telekom, exhibit stronger influence than others in forming the revenue targets of the
inefficient PTOs. These have been identified as dominant benchmarks. These three operators
also have a good to very good market presence in terms of revenue.

Let it be noted that these results, and especially the ranking (%) of the relevant organizations, are
concerned with the relative efficiency of these organizations. In this context, a PTO with high
efficiency (but below the 100 mark), for example France Telecom (83.94%), should not be
considered inefficient in absolute terms, but rather less efficient than its benchmark PTOs.
Further, comparisons are made with regard to a specific set of input–output data. If some other
set is specified for the analysis (provided that such a suitable set exists), then DEA is likely to
produce a different ranking, although not entirely different from the present one. Therefore, the
results of this analysis should be seen in the context of the data set used here (which we have found
suitable from the most recent OECD data available to us). Another question that is likely to arise
may concern the relevance of these results when considering an organization’s status either in the
past or in the future. It should be made clear that the results should be interpreted in connection
only with the current status of the organizations studied here. Past analyses and comparisons may
be useful provided that stable sets of data exist over long periods of time. Furthermore, DEA
cannot predict what will happen in the future, when the operational status of many organizations
might be quite different from what they are now.
The scope and framework of the present study can be expanded along two possible routes. One
direction could be to implement the proposed methodology in a more general context which might
include European PTOs as well as organizations from other continents. The data for such an
endeavour already exist; however, special care should be taken when interpreting differences in
efficiency amongst PTOs operating in a much less homogeneous environment than the European
one. Another direction could be towards the comparative evaluation of mobile PTOs exclusively
either in Europe or internationally. Some of the data needed for the latter evaluation are now
becoming available.
606 G.C. Pentzaropoulos, D.I. Giokas / Telecommunications Policy 26 (2002) 595–606

Acknowledgements

This work has been supported financially by Grant No. 70/4/4733 awarded by the Research
Committee of the University of Athens, Greece. The authors wish to express their thanks to the
members of the above committee for their support.

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