NII Holdings, Inc.
) has recently declared lackluster third-quarter 2012 results
where both its top and bottom lines fell short of the Zacks
Consensus Estimates. As a result, the company also slashed its
OIBDA guidance for full fiscal 2012.
NII Holdings reported weak subscriber addition during the
third quarter of fiscal 2012 coupled with lower Average Revenue
per Subscriber (ARPU) and higher churn rate. Delay in the launch
of 3G services and reduction of customer retention cost have
contributed to the dismal financial result.
NII Holdings' leverage ratio has also increased from 0.50 in
2010 to 0.61 in 2011, indicating its higher dependency on debt
financing. We believe that the company will issue more such
senior notes in the upcoming quarters to fund their newly
launched 3G networks across all its markets as well as to take
part in spectrum auction, which in turn, will further increase
its leverage ratio. Lack of funds may be a constraint for the
company to take part in future spectrum auction, which will be
held in Argentina and other Latin American countries in the near
NII Holdings continues to face stiff competition from
), which has already completed rolling out 3G services in Mexico
and the major cities of Brazil. Moreover, the latter started
offering its first 4G LTE service in Mexico, thereby causing more
problems for the company going forward.
Despite such headwinds, the company is continuously
maintaining a stable subscriber growth. It has already received
strong response from its 3G service launch in Peru and Chile.
Moreover, to boost its ARPU growth as well as offer value added
services to its subscribers, the company added 12 new smartphones
supporting 3G technology. We, thus, maintain our long-term
Neutral recommendation on NII Holdings, Inc.
Currently, the company has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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