NII Holdings, Inc.
) has recently declared dismal second-quarter 2012 results where
both its top and bottom lines fell short of the Zacks Consensus
NII Holdings reported weak subscriber addition during the second
quarter of fiscal 2012 coupled with lower Average Revenue per
Subscriber (ARPU) and higher churn rate. Delay in the launch of 3G
services and reduction of customer retention cost has resulted in
such disapointing results.
NII Holding's leverage ratio has also increased from 0.50 in
2010 to 0.61 in 2011, indicating its higher dependency on debt
financing. We believe that the company will issue more such senior
notes in the upcoming quarters to fund their newly launched 3G
networks across all its markets as well as take part in spectrum
auction, which in turn, will further increase its leverage
Lack of funds may be a constraint for the company to take part
in future spectrum auction, which will be held in Argentina and
other Latin American countries in the near future.
NII Holdings continues to face stiff competition from
), which has already completed rolling out 3G services in Mexico
and the major cities of Brazil and also has plans to roll out its
first 4G/LTE service in Mexico from September, 2012 onwards,
thereby causing more problems for the company going forward.
Despite such headwinds, the company is continuously maintaining
a stable subscriber growth. It has already received strong response
from its 3G service launch in Peru and Chile. Moreover, to boost
its ARPU growth as well as offer value added services to its
subscribers, the company also added 12 new smartphones supporting
3G technology.We, thus, maintain our long-term Neutral
recommendation on NII Holdings, Inc.
Currently, NII Holdings, Inc. has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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