A real options model for the transferability value of telecommunications licenses

Abstract

Licenses for telecommunications services are awarded with a number of side obligations and commitments for the licensee. Under such obligations the licensee is typically not allowed to transfer its license to another operator. Such prohibition may cause heavy inconveniences for customers, so that its removal is strongly advocated and already a reality in many cases. Its removal adds value to the original license and may then constitute a valuable option (the transferability option). A method is here proposed to assess such value, by using the framework of real options. The method is applied in a variety of settings and shows that the value of the option depends superlinearly on the reselling price and the market volatility, and linearly or sub-linearly on the expiry time of the option.

Spectrum reservation options for Mobile Virtual Network Operators

“…The correspondence between financial and real options is complete if we consider the investment needed for the project as the equivalent of the exercise price, and the time at which the investment decision will have to be taken as the expiry time of the option. Real options have been considered for investments in mobile networks infrastructures [20], [21], [22], [23] and licenses [24]. The real options framework has been considered for spectrum trading in [16] and [6].…”

“…However, estimates vary significantly according to the particular phase of the economic cycle. A brief review is contained in [24]. The value we have considered here can be deemed as conservative on the low side.…”

Options and overbooking strategy in the management of wireless spectrum

“…In [24] the relaxation of transferability limitations on a semipermanent basis has been shown to amount to add a real option to the set of rights and obligations associated to the license, so to allow to evaluate its economical benefits for the auctioneer (i.e., the government). Though the removal of transferability limitations has so far been dealt with on a semi-permanent basis, nothing forbids to think of a secondary market acting on smaller timescales and with a strictly limited duration.…”

“…The transfer may be semi-permanent or temporary. An assessment of the value of semi-permanent transfers has been conducted in [24], where the tool of real options has been used to show that introducing flexibility in the license assignment process adds value to the license itself. In this paper we focus instead on temporary transfers.…”

Un modelo de relación entre los programas de innovación abierta y la creación de valor

“…Como forma de gestionar la incertidumbre, también se han realizado estudios utilizando teoría de juegos en el sector de las telecomunicaciones para el despliegue de las redes de tercera generación de un participante dominante y otro seguidor en el mercado (Katsianis et al 2007). Mediante las opciones reales se ha elaborado un marco de referencia para evaluar la problemática de inversión en licencias de telecomunicaciones por las características del sector (Mastroeni & Naldi 2009).…”