Real options Valuation of Uncertain Investments Decision-making between 4G LTE and 4G WiMAX Mobile Network in Telecommunications Industry

Abstract

In recent years, the world’s mobile market is transformed by E-3G UMTS and 4G mobile networks. Typically, infrastructure costs and revenue are two critical factors of any decision-making in regard to investment in 4G mobile network industry. The objectives of the study are categorized as follows: (1) to introduce real option theory and to discuss its applicability as a decision support tool, (2) to apply the real option approach into the selected two case studies so as to compare and show the advantage of option pricing model applied in 4G mobile networks in order to cope with investment uncertainty between LTE and WiMAX. Consequently, real option analysis is capable of providing managers a strategic tool to enhance the valuation of investment opportunities.