Neutral on Latin Wireless Co. NIHD

NII Holdings, Inc. (NIHD - Analyst Report), formerly known as Nextel International, is licensed to provide wireless services in Mexico, Brazil, Argentina, and Peru. The company remains challenged with higher churn levels than expected and a possible slowdown in regional economics that may impact business communications needs. However, overall demand of wireless services in Latin America in the longer term and the company's expansion activities into untapped markets remain encouraging.

NIHD's growth is being driven by strong demand for its wireless services including the recently launched International Direct Connect (IDC), the first of its kind push-to-talk service on an international basis. Weather related issues and weaker-than-expected subscriber additions are issues that we believe impacted the stock price. We take a conservative approach to valuation, maintaining our Hold recommendation until we assess stronger net subscriber additions.

NIHD is trading at 12.4x our estimate for 2008 earnings, which represents a discount to the forward P/E ratio for the S&P 500 and the peer group (consisting of other pure-play wireless operators in the Americas region) averages. On the basis of enterprise value (EV) to EBITDA (a common valuation metric for wireless carriers), the stock is trading at

6.5x estimated EBITDA for 2008, at a discount to the peer group average. Given the company's solid fundamentals and respectable growth prospects partially offset by the risk of doing business in Latin America, we believe NIHD should continue to trade closer to the industry group. In recognition of the sharp valuation decline and near-term concerns of net subscriber addition growth rates, we maintain our Hold rating and reduce our valuation target to $42.50 share based on 13x 2008 earnings projection.

Rangana Bhattacharya contributed to this report.

Read the full analyst report on NIHD.