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Risk and Investment in the Global Telecommunications IndustryFiled Under: General

Abstract

In this chapter, quantitative modeling and simulation techniques are used to estimate various risk measures and the associated cost of equity for the global telecommunications industry. Our approach is to calculate several different cost-of-equity values and then use simulation techniques to build up a probability distribution for each company’s cost of equity. In this way, a clearer picture of where a company’s cost of equity lies is developed. Closing the Digital Divide could bring many benefits to developing countries but international investors and development planners must be able to make their own cost-of-equity calculations so that they can see first hand how their investment projects compare with other investment projects around the globe.

Introduction

The new economy can be characterized in a number of different ways but one way to look at the new economy is to identify industries that are undergoing the greatest amount of structural change and have the greatest opportunity for growth. Three industries stand out as having particularly promising futures: biotechnology, energy and information technology (IT). Collectively these three industries may be called the BET economy. Of these three industries, the IT industry (broadly comprised of the technology, media and
telecommunications (TMT) sub- industries) is the one industry that can contribute the most to productivity improvements in countries. Technological progress can lead to process innovation (lower cost ways of producing existing products) or product innovation. Furthermore, from neoclassical growth theory, technological improvements are the only way to increase the living standards in countries that have reached the golden rule. An increase in technology raises the production function and increases the steady state amounts of capital stock and output. In terms of economic performance, maximizing productivity growth is the single most important objective for a country to have since increases in productivity growth lead to higher living standards.

Taken From : Digital Economy – Impacts, Influences and Challenges