Valuing Innovative 4G (LTE) Technology with Real Options Approach

This paper contains the analysis of pitfalls related with innovationbased investments valuation. Being long-term projects with high uncertainty, innovation-based investments suffer from different types of errors if traditional discounted cash flow methodology is used for their valuation. The real options methodologyis being used for a long time as an alternative view at the evaluation of such projects, but the novelty of this paper is in the original approach based upon the consideration of the wide variety of project implementation scenarios. The presented weighted average polynomial option pricing model (WAPOPM) may help investors to increase the quality of decisions concerning their participation in innovation-based opportunities. The case of 4G (LTE) implementation in MTS Company (Russia) is considered.