NII Holdings Lags, Lowers Outlook - Analyst Blog
November 08 2012 - 7:15AM
Zacks
Latin American wireless operator
NII Holdings Inc. (NIHD) declared dismal financial
results for the third quarter of 2012, on the back of higher churn,
weaker exchange rate, lower average revenue per user (ARPU) and
higher operating expenses arising from the roll out of 3G
networks.
Adjusted loss per share of 48 cents
was wider than the Zacks Consensus Estimate loss of 30 cents per
share. On a GAAP basis, net loss in the reported quarter was $82.4
million or 48 cents per share compared with a net loss of $0.3
million or a break-even per share in the prior-year quarter.
Quarterly total revenue was
$1,491.9 million, down 14.9% year over year but surpassed the Zacks
Consensus Estimate of $1,485 million.
Quarterly operating expenses
contracted 5.1% year over year to $1,459.4 million. Operating
income in the third quarter of 2012, plunged 85% year over year to
$32.5 million.
Operating margin in the reported
quarter was 2.2% compared with 12.4% in the prior-year quarter.
Quarterly consolidated OIBDA (Operating Income before Depreciation
and Amortization) stood at $217.9 million, down by a significant
44% year over year, hammered by foreign exchange fluctuation rate,
reduced ARPU and higher cost associated with the roll out of 3G
networks.
At the end of the third quarter of
2012, NII Holdings had $1,685.1 million in cash, cash equivalents
and marketable securities compared with $2,666.3 million at the end
of 2011. Total debt at the end of the reported quarter was $4,639.7
million compared with $4,818.2 million at the end of 2011.
Debt-to-capitalization ratio for the reported period was 0.61
compared with 0.60 at the end of 2011.
Operating
Metrics
At the end of the third quarter of
2012, total digital subscriber base at NII Holdings increased 10.8%
year over year to 11,357,400. During the reported quarter, the
company added 152,500 net new subscribers, down 64.8% year over
year. Customer churn in the reported quarter was 2.65% against
1.78% in the prior-year quarter and was mainly impacted by the
increased churn rate in Brazil, Peru and Argentina. Quarterly
subscriber revenue ARPU was $37 compared with $49 in the year-ago
quarter. Quarterly, service and other revenue ARPU was $42 as
compared to $55 in the year-ago quarter. Such reduction in ARPU was
mainly fueled by fluctuation in foreign currency-exchange rate.
However, quarterly costs per gross subscriber added was $281
compared with $332 in the year-ago quarter.
Outlook
NII Holdings provided reduced
outlook for 2012. The company reduced OIBDA guidance to $1 billion
from a prior guidance of $1.4 billion at the end of 2012.
Recommendation
Completion of 3G Push-to-Talk (PTT)
services in Peru coupled with the launch of 3G handsets will act as
near-term catalysts for the company’s growth. Moreover, the
company’s strategy in Brazil to concentrate on the high-end
customers is expected to improve both ARPU and subscriber base
going forward.
However, delay in the launch of 3G
services across the major markets of Brazil and Mexico has not only
resulted in a slowdown in customer addition but also increased its
churn rate. Moreover, increased promotional expenses and stiff
competition from America Movil (AMX) and
Telefonica (TEF), who are aggressively deploying
next-generation wireless technologies in major Latin American
markets, may hinder its growth prospect going forward.
We, thus, maintain our long-term
Neutral recommendation on NII Holdings. Currently, the company
retains a Zacks #3 Rank, implying a short-term Hold rating on the
stock.
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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