Still Neutral on NII Holdings - Analyst Blog
December 12 2012 - 11:35AM
Zacks
NII Holdings, Inc., (NIHD) 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 future.
NII Holdings continues to face stiff competition from
America Movil (AMX), 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.
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
NII HLDGS-CL B (NIHD): Free Stock Analysis Report
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