Latin American wireless operator
NII Holdings Inc.
) declared dismal financial results for the second quarter of 2012,
on the back of a slowdown in subscriber addition, higher churn and
higher operating expenses, arising from the roll out of 3G
Net loss in the reported quarter was $103.5 million or 60 cents
per share compared with a net income of $122.7 million or 71 cents
per share in the prior-year quarter. Reported loss per share of 60
cents was much below the Zacks Consensus Estimate of 6 cents
earnings per share.
Quarterly total revenue was $1,495.8 million, down 14.7% year
over year and also below the Zacks Consensus Estimate of $1,535
Quarterly operating expenses increased 0.9% year over year to
$1,456.9 million. Operating income in the second quarter of 2012
declined by a whopping 87.4% year over year to $38.9 million.
Operating margin in the reported quarter was 2.6% compared with
17.7% in the prior-year quarter. Quarterly consolidated OIBDA
(Operating Income Before Depreciation and Amortization) stood at
$211.2 million, down 55.7% year over year, hammered by foreign
exchange fluctuation rate, reduced ARPU and higher cost associated
with the roll out of 3G networks.
At the end of the second quarter of 2012, NII Holdings had
$1,962.2 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 $4,619.4
million compared with $4,818.2 million at the end of fiscal 2011.
Debt-to-capitalization ratio for the reported period was 0.61
compared with 0.60 at the end of fiscal 2011.
At the end of the second quarter of 2012, total digital
subscriber base at NII Holdings increased 14.2% year over year to
11,206,900. During the reported quarter, the company added 234,800
net new subscribers, down 38.6% year over year. Customer churn in
the reported quarter was 2.30% against 1.71% in the prior-year
quarter, and was mainly impacted by the increased churn rate in
Brazil and Mexico. Quarterly ARPU was $38 compared with $51 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 $282 compared with $298 in the
NII Holdings provided reduced outlook for full fiscal 2012. The
company expects to gain 1 million subscribers for the full year.
The company expects operating revenue and OIBDA to reach $6.1
billion and $1 billion respectively at the end of fiscal 2012. The
company also expects its capital expenditure to slowdown to $1.5
billion for 2012.
Completion of 3G Push-to-Talk (PTT) services in Peru coupled
with the launch of 3G handsets will act as near-term catalysts for
the company's growth.
However, delay in the launch of 3G services across the major
markets of Brazil and Mexico has not only resulted in a slowdown in
customer addition but also increased its churn rate. Moreover,
increased promotional expenses and stiff competition from
), 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 #4 Rank, implying a
short-term 'Sell" rating on the stock.
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