NII Holdings, Inc.
- which offers wireless service through its Nextel brand in Latin
America - will be launching its first 3G service in Mexico
In the last quarter, the company experienced a massive increase
in subscriber churn mainly attributable to delay in 3G service
launch across its Latin American markets. Consequently, to gain
market traction, NII Holdings is looking forward to continuously
expand its 3G footprint by making huge investment in Latin American
countries like Peru, Chile, Mexico and Brazil. As a result of its
aggressive 3G rollout plan, the company has earmarked a huge
investment of $3 billion in the Mexican market, which is mainly
), holding nearly 71% of the wireless market.
The new 3G service plan will offer a maximum 21 mbps downloading
speed supported by HSPA+ technology and will cover important cities
like Mexico City, Guadalajara, Monterrey, Puebla and Cancun. The
company will offer its subscribers 3G-based smartphones powered
with walkie-talkie technology.
From this year onwards, NII Holdings started offering its unique
3G service plan integrated with new Push to Talk (PTT) technology
in Peru and Chile. Moreover, inclusion of Mexico (the largest
market for the company after Brazil) under its 3G plan from this
month onwards and Brazil by the year end will boost both its
subscriber and ARPU growth in the forthcoming quarters. In
addition, the company has taken other initiatives to rollout more
retail outlets in order to attract wider group of customers apart
from providing enhanced back office service to its customers.
Despite such expansive initiatives, NII Holdings will face stiff
competition from America Movil and other wireless carriers, which
have successfully deployed their 3G network across their
footprints. Moreover, America Movil will be launching its first 4G
services in Mexico from this year onwards, which will further act
as a headwind for NII Holdings going forward. Furthermore, NII
Holdings' highly leveraged balance sheet (leveraged ratio increased
from 0.51 in 2010 to 0.61 in 2011) will hinder its ambitious growth
We, thus, maintain our long-term Neutral recommendation for NII
Holdings, Inc. Currently, it has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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