Valuation of 3G spectrum license in India: A real option approach

India is about to enter a new technological phase as far as mobile technology is concerned. After almost a decade of existence, Third Generation (3G) mobile technology will be rolled out in India. The licenses for the same were auctioned in April – May 2010 and 3G licenses were allocated to the winners in September 2010. Nine private telecom operators entered the bidding for the license and eventually seven won the licenses. The bidding was intense and eventually the aggregate fees of the license as received by the government were almost twice the expected amount. In the backdrop of experience of 3G auction winners in UK and Germany who paid huge sums to acquire the 3G licenses and later lost their market capitalization as the markets perceived that the price paid for the license was more than the actual value of the license, analysts in India were concerned if the operators had paid too much for the licenses. In this report aggregate value of the 3G licenses is calculated using both traditional discounted cash flow approach and real options approach. We find that the rollout of 3G services gives an internal rate of return of 14.2%over the life of the license. If we assume an internal rate of return of 15% for the telecom operators then the aggregate license value comes out to be INR 594 Billion which is 12% lower than what the operators have paid to acquire the license. We also found out that the value of the license as calculated from the real options methodology is INR 798 Billion which is 17.8% higher than the aggregate value paid by the operators. Hence we see that DCF valuation suggests that the licenses were overvalued while Real Options methodology suggests that the licenses were undervalued. The report discusses the reasons for differences between real option valuation and DCF valuation of the license, the possible challenges that the 3Goperators might face in the short to long term and what are the key enablers for the growth of3G services if they want to extract the maximum mileage out of the 3G technology. The report recommends that in future while allocating telecom licenses or licenses in sectors where high and irreversible investment is required and there is a scope for the licensees to invest in phases or in modules, the government should consider real options methodology for setting the price of the license., or the base price of the licenses in case the government decides to follow an auction methodology3G spectrum, mobile technology, valuation, real options, DCF

Functional properties of throughput in tandem lines with unreliable servers and finite buffers

optimization;queueing theory;production

MODELLING OPERATIONAL RISK MEASUREMENT IN ISLAMIC BANKING: A THEORETICAL AND EMPIRICAL INVESTIGATION

With the emergence and development of Islamic banking industry, the need to cater operational risks issues has attracted the attention of academics in recent years. Such studies commonly agree that operational risk is relatively higher and serious than credit risk and market risk for Islamic banks. However, there is not any single research in the context of Islamic banking which thoroughly tackles the issue of operational risks by tackling it in three main aspects: theoretical, methodological, and empirical. This may be due to the fact that operational risk is relatively new area, which requires further research to understand the complexities it carries. This is the sources of motivation for the research, which aims to fill this observed gap in the literature by responding to the mentioned three aspects. This research, hence, aims to develop a new measurement model of operational risk exposures in Islamic banking with the objective of theoretically determining the underlying features of operational risk exposures and its measurement particularly for Islamic banks. In its attempt to develop a theoretical framework of the proposed model, the research provides a classification of operational risks in major Islamic financial contracts. In addition, rather than adopting the existing operational risk measurement methods, this research develops a proposed measurement model attributed as Delta Gamma Sensitivity Analysis- Extreme Value Theory (DGSA-EVT) model. DGSA-EVT is a model to measure high frequency-low severity (HF-LS) and low frequency-high severity (LF-HS) type of operational risks. This is the core of this research’s methodological contribution. As regards to the empirical contributions, in analysing operational value at risk (opVaR), this research carefully analyses the behaviour of the data by taking into account volatility, skewness and kurtosis of the variables. In the modelling, volatility analysis employs two models: constant-variance model and exponential weighted moving average (EWMA) model. Results of the empirical tests show that the operational risk variables in this research are non-normal; thus, non-normality involving skewness and kurtosis as well as volatility has to be taken into account in the estimation of VaR. In doing so, this research employs Cornish-Fisher expansion upon which the confidence interval of operational variables is an explicit function of the skewness and kurtosis as well as the volatility. Empirical findings by deploying a set of econometrics tests reveal that for financing activities, the role of maintaining operational efficiency as part of an Islamic bank’s fiduciary responsibilities is immensely high. However, people risk is enormous and plays a dominant role in affecting the level of operational risk exposures in Islamic banks in investment activities

Performance evaluation of stochastic systems with dedicated delivery bays and general on-street parking

As freight deliveries in cities increase due to retail fragmentation and e-commerce, parking is becoming a more and more relevant part of transportation. In fact, many freight vehicles in cities spend more time parked than they are moving. Moreover, part of the public parking space is shared with passenger vehicles, especially cars. Both arrival processes and parking and delivery processes are stochastic in nature. In order to develop a framework for analysis, we propose a queueing model for an urban parking system consisting of delivery bays and general on-street parking spaces. Freight vehicles may park both in the dedicated bays and in general on-street parking, while passenger vehicles only make use of general on-street parking. Our model allows us to create parsimonious insights into the behavior of a delivery bay parking stretch as part of a limited length of curbside. We are able to find explicit expressions for the relevant performance measures, and formally prove a number of monotonicity results. We further conduct a series of numerical experiments to show more intricate properties that cannot be shown analytically. The model helps us shed light onto the effects of allocating scarce urban curb space to dedicated unloading bays at the expense of general on-street parking. In particular, we show that allocating more space to dedicated delivery bays can also make passenger cars better off

Cost based optimization for strategic mobile radio access network planning using metaheuristics

La evolución experimentada por las comunicaciones móviles a lo largo de las últimas décadas ha sido motivada por dos factores principales: el surgimiento de nuevas aplicaciones y necesidades por parte del usuario, así como los avances tecnológicos. Los servicios ofrecidos para términales móviles han evolucionado desde el clásico servicio de voz y mensajes cortos (SMS), a servicios más atractivos y por lo tanto con una rápida aceptación por parte de usuario final como, video telephony, video streaming, online gaming, and the internet broadband access (MBAS). Todos estos nuevos servicios se han convertido en una realidad gracias a los avances técnologicos, avances tales como nuevas técnicas de acceso al medio compartido, nuevos esquemas de codificiación y modulación de la información intercambiada, sistemas de transmisión y recepción basados en múltiples antenas (MIMO), etc. Un aspecto importante en esta evolución fue la liberación del sector a principios de los años 90, donde la función reguladora llevado a cabo por las autoridades regulatorias nacionales (NRA) se ha antojado fundamental. Uno de los principales problemas tratados por la NRA espcífica de cada nación es la determinación de los costes por servicios mayoristas, esto es los servicios entre operadores de servicios móvilles, entre los que cabe destacar el coste por terminación de llamada o de inteconexión. El servicio de interconexión hace posible la comunicación de usuarios de diferente operadores, así como el acceso a la totalidad de servicios, incluso a aquellos no prestados por un operador en concreto gracias al uso de una red perteneciente a otro operador, por parte de todos los usuarios. El objetivo principal de esta tesis es la minimización de los costes de inversión en equipamiento de red, lo cual repercute en el establecimiento de las tarifas de interconexión como se verá a lo largo de este trabajo. La consecución de dicho objetivo se divide en dos partes: en primer lugar, el desarrollo de un conjunto de algoritmos para el dimesionado óptimo de una red de acceso radio (RAN) para un sistema de comunicaciones móvilles. En segundo lugar, el diseño y aplicación de algoritmos de optimización para la distribución óptima de los servicios sobre el conjunto de tecnologías móviles existentes (OSDP). El modulo de diseño de red proporciona cuatro algoritmos diferenciados encargados del dimensionado y planificación de la red de acceso móvil. Estos algoritmos se aplican en un entorno multi-tecnología, considerando sistemas de segunda (2G), tercera (3G) y cuarta (4G) generación, multi-usuario, teniendo en cuenta diferentes perfiles de usuarios con su respectiva carga de tráfico, y multo-servicio, incluyendo voz, servicios de datos de baja velocidad (64-144 Kbps), y acceso a internet de banda ancha móvil. La segunda parte de la tesis se encarga de distribuir de una manera óptima el conjunto de servicios sobre las tecnologías a desplegar. El objetivo de esta parte es hacer un uso eficiente de las tecnologías existentes reduciendo los costes de inversión en equipamiento de red. Esto es posible gracias a las diferencias tecnológicas existente entre los diferentes sistemas móviles, que hacen que los sistemas de segunda generación sean adecuados para proporcionar el servicio de voz y mensajería corta, mientras que redes de tercera generación muestran un mejor rendimiento en la transmisión de servicios de datos. Por último, el servicio de banda ancha móvil es nativo de redes de última generadón, como High Speed Data Acces (HSPA) y 4G. Ambos módulos han sido aplicados a un extenso conjunto de experimentos para el desarrollo de análisis tecno-económicos tales como el estudio del rendimiento de las tecnologías de HSPA y 4G para la prestación del servicio de banda ancha móvil, así como el análisis de escenarios reales de despliegue para redes 4G que tendrán lugar a partir del próximo año coinicidiendo con la licitación de las frecuencias en la banda de 800 MHz. Así mismo, se ha llevado a cabo un estudio sobre el despliegue de redes de 4G en las bandas de 800 MHz, 1800 MHz y 2600 MHz, comparando los costes de inversión obtenidos tras la optimización. En todos los casos se ha demostrado la mejora, en términos de costes de inversión, obtenida tras la aplicación de ambos módulos, posibilitando una reducción en la determinación de los costes de provisión de servicios. Los estudios realizados en esta tesis se centran en la nación de España, sin embargo todos los algoritmos implementados son aplicables a cualquier otro país europeo, prueba de ello es que los algoritmos de diseño de red han sido utilizados en diversos proyectos de regulación