Managing Spectrum Valuation Bias
Delegating spectrum valuation to local business units can introduce bias and lead to overpayment. Coleago explores why it happens and how operators can manage the risk.
As spectrum auctions become more frequent and expensive, accurately valuing spectrum has become both more critical and more challenging for mobile operators and their shareholders. This paper examines the risks that arise when spectrum valuation is delegated to local business units and how incentive misalignment and information asymmetry can introduce a systematic upward bias in valuations.
Drawing on extensive advisory experience, the analysis explains how local management teams often favour acquiring more spectrum, even at high prices, because spectrum costs are typically treated separately from operating budgets and performance metrics. Combined with the complexity of spectrum valuation and uncertainty around future demand, technology evolution and auction design, this creates classic “principal–agent” problems that can result in overbidding and shareholder value destruction.
The paper argues that managing valuation bias requires a disciplined, evidence-based approach and independent challenge. Without robust governance and objective valuation processes, group executives and shareholders risk paying more than the intrinsic value of spectrum, particularly in highly competitive auctions.
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