An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil.
We analyze the contributions of the real option method to the decision making process in the telecommunications industry. We study the case of a public auction purchase of the license to operate a 3G mobile phone system in Brazil. The results indicate that the embedded flexibilities increase the va...
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Brazilian Society of Finance
2010-10-01
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doaj-a2c2126b5f76464e92b7cea59bb9d8042020-11-24T23:22:58ZengBrazilian Society of FinanceRevista Brasileira de Finanças1679-07311984-51462010-10-0183329349An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil.Rafael StilleCelso F. LemmeLuiz Eduardo T. BrandãoWe analyze the contributions of the real option method to the decision making process in the telecommunications industry. We study the case of a public auction purchase of the license to operate a 3G mobile phone system in Brazil. The results indicate that the embedded flexibilities increase the value of the project by 64% in relative to the discounted cash flow method, which could justify the high premiums paid by the winning firms, which are incompatible with the value obtained from traditional methods of analysis. This suggests that the real options approach used, which can be easily replicated and is fairly intuitive, can be a useful tool to support the decision making process of these firms.http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/2675Real OptionsProject ValuationTelcommunications3G mobile phone systems |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Rafael Stille Celso F. Lemme Luiz Eduardo T. Brandão |
spellingShingle |
Rafael Stille Celso F. Lemme Luiz Eduardo T. Brandão An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. Revista Brasileira de Finanças Real Options Project Valuation Telcommunications 3G mobile phone systems |
author_facet |
Rafael Stille Celso F. Lemme Luiz Eduardo T. Brandão |
author_sort |
Rafael Stille |
title |
An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. |
title_short |
An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. |
title_full |
An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. |
title_fullStr |
An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. |
title_full_unstemmed |
An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil. |
title_sort |
application of the real options method to the valuation of a license to operate 3g mobile phone service in brazil. |
publisher |
Brazilian Society of Finance |
series |
Revista Brasileira de Finanças |
issn |
1679-0731 1984-5146 |
publishDate |
2010-10-01 |
description |
We analyze the contributions of the real option method to the decision making process in the telecommunications industry. We study the case of a public auction purchase of the license to operate a 3G mobile phone system in Brazil. The results indicate that the embedded flexibilities increase the value of the project by 64% in relative to the discounted cash flow method, which could justify the high premiums paid by the winning firms, which are incompatible with the value obtained from traditional methods of analysis. This suggests that the real options approach used, which can be easily replicated and is fairly intuitive, can be a useful tool to support the decision making process of these firms. |
topic |
Real Options Project Valuation Telcommunications 3G mobile phone systems |
url |
http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/2675 |
work_keys_str_mv |
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