Dismal 1Q for NII Holdings - Analyst Blog

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Latin American wireless operator NII Holdings Inc. ( NIHD ) declared dismal financial results for the first quarter of 2012 on the back of higher operating expenses, arising from the roll out of 3G networks and stiff competition mainly in Brazilian market.

Net income in the reported quarter was $10.9 million or 6 cents per share compared with a net income of $96.8 million or 56 cents per share in the prior-year quarter. Reported EPS per share of 6 cents was much below the Zacks Consensus Estimate of 22 cents.

Total revenue in the quarter was $1,630.1 million, up 0.4% year over year and 2.2% sequentially but missed the Zacks Consensus Estimate of $1,704 million.

Quarterly operating expenses increased 7% year over year to $1,442.4 million. Operating income in the first quarter of 2012 declined 31.7% year over year to $187.7 million. The decline in operating income was mainly attributable to higher selling marketing expenses, higher customer retention cost and expenditure pertaining to the implementation of new W-CDMA based networks.

Operating margin in the reported quarter was 11.5% compared with 16.9% in the prior-year quarter. Quarterly consolidated OIBDA (Operating Income Before Depreciation and Amortization) stood at $357.7 million, down 17% year over year.

At the end of the first quarter of 2012, NII Holdings had $2,336.6 million in cash, cash equivalents, and marketable securities compared with $2,666.3 million at the end of fiscal 2011. Total debt at the end of the reported quarter was $4,710.1 million compared with $4,826.6 million at the end of the previous year. Debt-to-capitalization ratio for the period was 0.59 compared with 0.61 at the end of fiscal 2011.

Operating Metrics

At the end the first quarter of 2012, total digital subscriber base at NII Holdings increased 16.4% year over year to 10,972,100. During the reported quarter, the company added 260,000 net new subscribers, down 35.4% year over year.

Customer churn in the reported quarter was 2.07% versus 1.61% in the prior-year quarter, and was mainly impacted by the increased churn rate in Brazil and Mexico. Quarterly ARPU was $42 compared with $49 in the year-ago quarter. Such reduction in ARPU was mainly fueled by fluctuation in foreign currency-exchange rate. However, quarterly costs per gross subscriber added was $283 compared with $286 in the year-ago quarter.

Recommendation

Completion of 3G Push-to-Talk (PTT) services in Peru coupled with the launch of 3G handsets will act as near-term catalysts for growth. However, increased promotional expenses and stiff competition from America Movil ( AMX ) and Telefonica ( TEF ), who are aggressively deploying next-generation wireless technologies in major Latin American markets, may hinder its growth prospect going forward. We thus maintain our long-term Neutral recommendation on NII Holdings.

Currently, NII Holdings has a Zacks #3 Rank, implying a short-term Hold rating on the stock.


 
AMER MOVIL-ADR ( AMX ): Free Stock Analysis Report
 
NII HLDGS-CL B ( NIHD ): Free Stock Analysis Report
 
TELEFONICA S.A. ( TEF ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMX , NIHD , TEF

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