Strategic investment planning in regional deployment of telecommunication services: a real options approach

Abstract

In this paper we perform an empirical study to create an optimal investment strategy for the regional deployment of IMT-2000, a next-generation telecommunication service in Korea. We develop a multiple real option model using a binomial lattice, to evaluate managerial flexibility. Managerial flexibility is evaluated specifically in terms of its decision-making ability, when considering two deferral options and a sequential compound option for investment. Using the model, we evaluate the IMT-2000 project and find the optimal investment strategy for the three regions of Korea, depending on the annual market situation. JEL Classification