NIHD Gets Government Nod for Unicel

NII Holdings Inc. ( NIHD - Analyst Report ) , which offers wireless service through its Nextel brand in Latin America, has received the Brazilian government approval to acquire the privately held Unicel do Brazil Telecomunicacoes Ltda. The deal will provide NIHD with additional network capacity in the Sao Paolo metropolitan area.

According to the Brazilian telecoms regulator Anatel, NII Holdings had earlier filed a change of control request with them. This extension of support provided by the Brazilian government will enable NIHD to close the transaction quickly and will cost the company around $370 million Brazilian Reais (approximately $181 million).

In the second quarter, the company experienced a massive increase in subscriber churn mainly attributable to the delay in 3G service launch across its Latin American markets. Consequently, in an effort to gain market traction, NII Holdings is looking forward to continuously expand its 3G footprint by making huge investment in the Latin American countries like Peru, Chile, Mexico and Brazil.

Reston, Virginia-based NII Holdings is planning to launch third generation telecom service in Brazil by the end of this year, which will allow it to compete better with larger Brazilian operators like Telefonica Brazil S.A. ( VIV - Analyst Report ) and TIM Participacoes S.A. Last year, the company paid a total compensation of around $595 million to acquire spectrum in Sao Paulo, Rio de Janeiro and Brasilia.

Unicel, which is 49% owned by Hits Group of Saudi Arabia, offers GSM service under the Aeiou brand. The company began offering wireless service in Sao Paulo in August 2008 and has acquired an extension of 2.5 MHz spectrum in the 900 MHz band. If NIHD can clinch the deal, it will not only get hold of Unicel’s customer base, but will also provide it with more space to offer faster internet downloads and data traffic through its network in Brazil’s largest telecom market.

We, maintain our long-term Neutral recommendation on NII Holdings. Also, the company retains a Zacks #3 Rank, implying a short-term Hold rating.