We reiterate our long-term Neutral recommendation on
NII Holdings Inc.
) based on its low-level of current valuation and recent
Why Kept at Neutral?
NII Holdings continues to perform poorly. On a GAAP basis, the
net loss in the reported quarter was $207.5 million or $1.21 per
share compared with a net income of $13.6 million or 8 cents per
share in the prior-year quarter.
Quarterly total revenue was $1,413.4 million, down 13.5% year
over year and also below the Zacks Consensus Estimate of $1,451
million. The dismal result was due to higher churn, weaker
exchange rate, lower ARPU and higher operating expenses.
Nevertheless, NII Holdings aims to complete 3G network
deployment in Brazil and Mexico, improve operational performances
and realign its business to enhance return over the long term.
The company is also deploying 3G network in Chile and plans to
add 4,400 3G cell sites in 2013.
Risk/Reward Virtually Balanced
NII Holdings has already started offering 3G services in
Mexico and will launch the next generation service on a wide
basis in Brazil by the second half of 2013. This is expected to
boost subscriber growth. NII Holdings continues to transfer
customers from iDEN to 3G in Mexico and plans to cover 33% of the
country by 2013.
Recently, NII Holdings has joined Motorola Mobility, a
), to launch Atrix HD smartphone in Mexico. With Atrix HD, Nextel
Mexico customers will be able to enjoy the push-to-talk service
with a high-end smartphone. Additionally, we believe that the
stock is currently undervalued as the stock has plunged nearly
85% in the last year.
NII Holdings is phasing out its iDEN network and consequently
integrating its new Push-to-Talk (PTT) technology, thus, driving
expenses. Key competitors like
America Movil S.A.B. de C.V.
) have completed the rollout of 3G services in major Latin
American countries. However, NII Holdings lags far behind its
competitors in 3G network deployment.
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