NII Holdings to Underperform - Analyst Blog


We downgrade our recommendation on NII Holdings Inc. ( NIHD ) to Underperform backed by our assessment that the company's nightmare will continue in the near future. NII Holdings reported dismal financial results for the third quarter of 2011. Both the top line and bottom line were well below the Zacks Consensus Estimates.In synergy with the somber results, management slashed its fiscal 2011 financial outlook mainly driven by volatile macro-economic condition coupled with significant depreciation of several Latin American currencies in comparison with U.S. dollars.

During the previous quarter, net customer additions declined. NII Holdings added 433,300 net new subscribers, down 0.6% year over year.Moreover,quarterly costs per gross subscriber addition were $335 compared with $267 in the year-ago quarter, indicating a rise in customer acquisition cost. Moreover, stiff competitive scenarios in Latin American markets are other impediments for such reduced outlook. We believe intensifying competition and increased promotional expenses may reduce the company's near-term growth opportunity.

Key competitors are aggressively deploying next-generation wireless technologies in major Latin American markets.  For example, America Movile S.A.B. ( AMX ) has completed rolling out 3G services in Mexico and the major cities of Brazil. It also has 60% 3G penetration in Argentina, Paraguay and Uruguay.

Telefonica S.A. ( TEF ) rolled out 3G services in Latin America and currently commands a major share of the Brazilian 3G market. Telefonica also completed deployment of 3G networking in 8 Mexican and Venezuelan cities.NII Holdings is far behind other carriers in terms of 3G networks. NII Holdings lacks market diversification strategy as it focuses only on Latin American region. Brazil solely contributes over 50% of the company's revenue. So any change in Brazilian economy or regulation will hugely affect the company's business.

AMER MOVIL-ADR ( AMX ): Free Stock Analysis Report
NII HLDGS-CL B ( NIHD ): Free Stock Analysis Report

TELEFONICA S.A. ( TEF ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AMX , NIHD , TEF

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