The Latin American telecom operator
NII Holdings Inc.
) has failed to establish its iDEN walkie-talkie based phone
service as a potential replacement of other digital technology
formats, such as GSM or CDMA, used by mobile-phone giants in
The company, which provides telecom services under the Nextel
brand, is facing severe competitive threat from
America Movil S.A.B.
). These companies are aggressively deploying 3G wireless
technologies in major Latin American markets, offering faster
download speed for smartphones.
Mounting competitive pressure is resulting in substantial
subscriber loss for NII Holdings. Despite a $1.5 billion
investment in its iDEN network, management estimated that the
company is likely to lose around 650,000 subscribers in Mexico in
Recently, NII Holdings announced that it expects to lose
approximately 400,000 subscribers in Mexico during the ensuing
fourth quarter. The forecast is based on the modification of its
customer deactivation policy for inactive prepaid
In the U.S.,
) was the largest provider of iDEN network. However, the company
completely abandoned this technology in 2013. NII Holdings is
dependent on a single infrastructure supplier, Motorola
Solutions. The company confirmed its deal extension with Motorola
Solutions for the supply of iDEN handsets and iDEN network
infrastructure through Dec 31, 2014.
iDEN technology is not as widely used as other digital
wireless networks. As a result, the company's competitors, which
use GSM or CDMA technology, benefit from economies of scale, and
lower costs of handsets and infrastructure equipment.
In the third quarter of 2013, NII Holdings' total revenue was
down 21.7% whereas net loss was up a whopping 255.7% year over
year. Customer churn was 3.59% compared with 2.54% in the
prior-year quarter. Average revenue per user was $31 against $40
in the year-ago quarter.
The company has decided to reduce its headquarter's workforce
by over 25% along with eliminatiion of over 1,400 manpower in
market operations. This restructuring process is aimed to
streamline management's structure, which is expected to improve
efficiency and reduce costs by $50-$55 million per annum.
Currently, NII Holdings carries a Zacks Rank #3 (Hold).
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