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Latin American wireless operator, NII Holdings Inc. (NIHD - Analyst Report) reported dismal second-quarter 2014 financial results, with the bottom line failing to meet the Zacks Consensus Estimate but the top line surpassing the same. However, total revenue significantly declined year over year.

Meanwhile, management announced that the company will probably file for Chapter 11 bankruptcy protection after it failed to fulfill its financial obligations. Consequently, in the aftermarket trade on Nasdaq, the stock price of NII Holdings plunged by 39 cents (58.78%) to stand at 27 cents.  

Net loss from continuing operations came in at $629.3 million or $3.65 per share compared with a loss of $384.9 million or $2.23 per share per in the prior-year quarter. However, adjusted loss per share of $2.85 was wider than the Zacks Consensus Estimate of $2.39. Quarterly total revenue came in at $968.8 million, down 23.1% year over year but surpassed the Zacks Consensus Estimate of $877 million.

Operating expenses increased 9.8% year over year to $1,473.2 million in the reported quarter. Operating loss was $504.4 million against $82 million in the year-ago quarter. Quarterly consolidated Operating income before Depreciation and Amortization stood at a negative $137.1 million compared with $100.9 million in the previous-year quarter.

In the second-quarter 2014, NII Holdings consumed $317.5 million cash from operations while capital expenditure stood at $123 million. At the end of the quarter under review, NII Holdings had $946.6 million in cash, cash equivalents and marketable securities compared with $2,319.6 million at the end of 2013. Total debt stood at $5,776.9 million against $5,696.6 million at the end of 2013.

Operating Metrics

As on Jun 30, 2014, NII Holdings had 9.3611 million subscribers, down 5.6% year over year. Within this, iDEN subscribers were 6.3764 million, down 29.4% year over year and WCDMA subscribers were 2.9847 million, up a whopping 237% year over year. In the reported quarter, NII Holdings lost a total of 77,000 subscribers compared with a net addition of 100,500 subscribers in the year-ago quarter. During the quarter, 303,900 customers migrated from iDEN to WCDMA against 274,000 in the prior-year quarter.

Quarterly total customer churn rate was 3.39% compared with 2.67% in the year-ago quarter. iDEN customer churn rate was 3.91% against 2.74% in the year-earlier quarter. WCDMA customer churn rate was 2.08% against 1.75% in the year-ago quarter. Quarterly average revenue per user was $28 compared with $36 in the prior-year quarter. Costs per gross add was $296 against $276 in the year-earlier quarter.

 Our Take

NII Holdings, which provides telecom services under the Nextel brand, is facing severe competitive threat from America Movil S.A.B. (AMX - Analyst Report) and Telefonica S.A. (TEF - Analyst Report). These companies are aggressively deploying 3G wireless technologies in major Latin American markets, offering faster download speeds for smartphones.

Moreover, the company is facing serious problems with its roaming services after Sprint Corp. (S - Analyst Report), from which it licenses the Nextel brand for Latin America, closed its iDEN network in Mexico last June.

In Mar 2014, NII Holdings hired investment bank UBS AG as an advisory body to explore several strategic options for its future course of business. The strategies include forming a partnership with other wireless operators, disinvestment of some parts of its existing business or a merger or complete sell out of the company to any prospective buyer. NII Holdings currently has a Zacks Rank #4 (Sell).

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