Real options analysis for valuing strategic investments and decisions of the Mobile Virtual Network Operator's investment in E-UMTS

In this paper we propose a pricing model for Mobile Virtual Network Operator's investment in Enhanced-Universal Mobile Telecommunication System (E-UMTS) networks. We conceptualize the relationship among MNO, MVNO, and other related variables in the proposed pricing model. Next, we study financial options design for MVNO's investment in Enhanced-Universal Mobile Telecommunication System (E-UMTS) networks. We also present the relationship between MNO and MVNO and investigate the total costs, total revenues, and net profit. Finally, we propose a real options analysis as a tool for valuing strategic investments and decisions of the MVNO in enhanced UMTS network market. The aim is to investigate the weighted average cost of capital (WACC) of the MVNO and net present value (NPV). The cases are examined and analyzed both qualitatively and quantitatively, using realistic assumption and parameters. The analysis of the results obtained from the model focuses on of capital expenditure (CapEx) and operational expenditure (OpEx) to provide recommendations which may be utilized and made a greater contribution in the MVNO's investment decision making process.