NII Holdings Inc.
), which offers wireless services through its Nextel brand in
Latin America, has agreed to sell its Peruvian business to
Chile's Empresa Nacional de Telecomunicaciones S.A. (or Entel),
for around $400 million. NIHD will use the sale proceeds to focus
on two of its largest markets, Mexico and Brazil.
Per the agreement, Entel will purchase the shares of Nextel
Peru. The deal is expected to close in the second half of 2013,
subject to regulatory approvals. Shareholders reacted positively
to the news as the stock leaped 7.93% to close at $4.90 in the
after market trade on Thursday, in Nasdaq.
Nextel Peru provides wireless services across major business
centres in Peru using the W-CDMA (Wideband-Code Division Multiple
Access) technology that offers high-speed Internet access. At the
end of 2012, Nextel Peru provided services to 1,659,500 handsets
and other devices and has contributed only 5.6% to the company's
However, Nextel Peru's 2012 revenue suffered a 2.3% decline as
cut-throat competition from larger operators like
America Movil S.A.B. de C.V.
) affected its ARPU (Average Revenue per User).
Reston Va.-based NIHD is currently rolling out its 3G service
in different parts of Brazil and Mexico. This will allow the
company to provide quality wireless services to its high-value
customers, thus driving ARPU growth. Last year, in an attempt to
improve its network capacity, NIHD won the Brazilian government's
approval to acquire the privately held Unicel do Brazil
Offloading the assets will provide NIHD with the much-needed
liquidity to continue with its third generation network
deployment in Brazil and Mexico. On the other hand, the
acquisition will allow Entel to expand its business in foreign
Nevertheless, NIHD remains constrained with its high-leverage
position of $5 billion, which we believe might restrict
expansion. Thus, despite the sale of one of its loss-making
units, we remain sceptical about the success of the
NII Holdings currently carries a Zacks Rank #5 (Strong Sell).
Among the other companies in the telecom industry,
China Telecom Corp Limited
), with a Zacks Rank #2 (Buy), is a better option for
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