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Eurotel

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EUROTEL CASE 2011

Recommendation on EUROTEL License Valuation

Recommendation
A regression analysis suggest to bid for licenses for 3G in three countries (Hungary, Russia and Turkey). The following outcome was calculated with Mobile Subscribers in million and $GDP per 1000 people as the independent variables; | Predicted Price per person ($Mil) | Predicted Price for all license ($Mil) | Hurdle Valuation per Capita ($Mil) | Hurdle Valuation ($Mil) | Hungary | 14.7946366 | 149.4258295 | 7.24 | 73.1 | Rossia | 9.78 | 1408.45 | 28.19 | 4060 | Turkey | 57.09 | 3739.30 | 74.67 | 4891 |
Based on the comparison of the predicted prices with the hurdle valuations generated by the NPV analysis, EUROTEL should bit for Russia and Turkey but not for Hungary because the predicted price exceeded the hurdle valuation for Hungary. On the contrary, the predicted prices for Russia and Turkey ($9.78 are 57.09Mil) are lower than the hurdle valuations ($28.19 and $74.67 Mil).

Advantage of Using Linear Regression
The linear regression has an advantage in that it enables to build a model using the historical data to predict the license values. Also, given that the coefficient of the regression is significantly different from zero, the regression can demonstrate that the regression has relatively accurate predication.

Regression Result
The regression analysis was conducted and the following result was calculated.

Regression Analysis
To make sure the regression is accurately conducted, the following steps were checked; (1) Multicollinearity
As seen in Table A, the correlation matrix was created to avoid including two variables with high positive or negative correlation. Before jumping into regression analysis, the correlations that exceed 0.4 or go under -0.4 were eliminated as those correlations goes into multicollinearlity difficulties. Then, the

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