Latin American wireless operator
NII Holdings Inc.
) declared dismal financial results for the third quarter of
2012, on the back of higher churn, weaker exchange rate, lower
average revenue per user (ARPU) and higher operating expenses
arising from the roll out of 3G networks.
Adjusted loss per share of 48 cents was wider than the Zacks
Consensus Estimate loss of 30 cents per share. On a GAAP basis,
net loss in the reported quarter was $82.4 million or 48 cents
per share compared with a net loss of $0.3 million or a
break-even per share in the prior-year quarter.
Quarterly total revenue was $1,491.9 million, down 14.9% year
over year but surpassed the Zacks Consensus Estimate of $1,485
Quarterly operating expenses contracted 5.1% year over year to
$1,459.4 million. Operating income in the third quarter of 2012,
plunged 85% year over year to $32.5 million.
Operating margin in the reported quarter was 2.2% compared
with 12.4% in the prior-year quarter. Quarterly consolidated
OIBDA (Operating Income before Depreciation and Amortization)
stood at $217.9 million, down by a significant 44% 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 third quarter of 2012, NII Holdings had
$1,685.1 million in cash, cash equivalents and marketable
securities compared with $2,666.3 million at the end of 2011.
Total debt at the end of the reported quarter was $4,639.7
million compared with $4,818.2 million at the end of 2011.
Debt-to-capitalization ratio for the reported period was 0.61
compared with 0.60 at the end of 2011.
At the end of the third quarter of 2012, total digital
subscriber base at NII Holdings increased 10.8% year over year to
11,357,400. During the reported quarter, the company added
152,500 net new subscribers, down 64.8% year over year. Customer
churn in the reported quarter was 2.65% against 1.78% in the
prior-year quarter and was mainly impacted by the increased churn
rate in Brazil, Peru and Argentina. Quarterly subscriber revenue
ARPU was $37 compared with $49 in the year-ago quarter.
Quarterly, service and other revenue ARPU was $42 as compared to
$55 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 $281 compared with
$332 in the year-ago quarter.
NII Holdings provided reduced outlook for 2012. The company
reduced OIBDA guidance to $1 billion from a prior guidance of
$1.4 billion at the end of 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. Moreover, the company's strategy in
Brazil to concentrate on the high-end customers is expected to
improve both ARPU and subscriber base going forward.
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, the company retains a Zacks #3 Rank,
implying a short-term Hold rating on the stock.
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