When presenting preliminary fourth quarter and full year results for 2012, which were below market expectations, NII Holdings said its Brazilian unit will offer voice and data services more broadly on its 3G network in São Paulo by the end of the second quarter of 2013 and in Rio de Janeiro by the end of the year. NII Holdings operates in Latin America under the Nextel brand.
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NII Holdings said that its 3G network plans in Mexico were on schedule and that it aims to extend coverage to match its existing iDEN footprint by the end of the third quarter of 2013.
NII Holdings added that it is continuing to support its operations in Peru, Chile and Argentina, while also exploring strategic options for these markets, such as partnerships, service arrangements and asset sales to maximize the value of those businesses and generate additional liquidity.
“We think the company sent a clear message in the press release by acknowledging that Peru, Chile and Argentina are non-strategic assets and that it would not be investing in these markets,” stated Kevin Smithen and Zach Horat, analysts with Macquarie Capital. “We believe that exiting from Peru and Chile could save NII Holdings $200 million in annual [earnings before interest, taxes, depreciation and amortization].”
In fact, NII Holdings did note that it is focusing its 3G network deployment investments on Mexico and Brazil to improve results in those two core markets.
The company launched 3G services in Mexico in September. Nextel has not made an official announcement, although it quietly launched 3G data plans in Brazil in December. Macquarie Capital released a statement saying they believe interim CEO and board chairman, Steve Shindler, has chosen to accelerate 3G investments in Mexico and Brazil in order to stabilize average revenue per user and churn.
In addition, NII Holdings said it is in the process of selling and leasing back an aggregate of up to 4,500 telecommunication towers in Brazil and Mexico through a competitive bidding process. “We also believe that the tower sale is imminent and will provide significant additional liquidity. Based on our estimate there will be $744 million in proceeds at $155,000 per site,” noted the Macquarie Capital analysts.
Results
When discussing NII Holdings’ results, Shindler said that the company has made progress in deploying 3G networks and new service offerings, but fell well short of expectations. In a statement, Shindler said NII Holdings intends to get back to delivering results that meet expectations through solid execution. He expressed confidence that the investments the company is making now will enhance Nextel’s competitive position and create value over the long-term.
NII Holdings issued the following consolidated outlook for 2013:
- Consolidated adjusted OIBDA in the range of $600 million to $650 million.
- Consolidated revenues in the range of $5.7 billion to $5.9 billion.
- Mid-single digit growth rate for its consolidated subscriber base.
- Total capital expenditures of approximately $1 billion, which represents a reduction in capital expenditures of approximately one-third relative to the prior year.
For 2012, the company expects to report consolidated operating revenues of approximately $1.5 billion; net subscriber additions of approximately 650,000 customers; and total capital expenditures of approximately $525 million. NII Holdings expects that it will end the year with $1.6 billion in total cash, cash equivalents and short-term investments and total debt of $4.9 billion, resulting in net debt of $3.3 billion.
