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Latin American wireless operator NII Holdings Inc. ( NIHD - Analyst Report ) provided a dismal outlook for fiscal 2013, slashing its revenue and OIBDA projections by a significant margin. The new guidance was on the back of delay in the launch of 3G technology, higher churn, weaker exchange rate and lower average revenue per user (ARPU).
NII Holdings expects revenue to be in the range of $5.7–$5.9 billion and adjusted OIBDA to stay in the band of $600–$650 million. Additionally, the company expects mid-single digit subscriber growth for the projected year along with $1 billion of capital expenditure.
NII Holdings plan to successfully roll out 3G network across the highly lucrative Brazilian market. However, it may not prove to be beneficial for the company as these Latin American markets are hugely dominated by America Movil S.A.B. de C.V. ( AMX - Analyst Report ) and Telefornica SA ( TEF - Analyst Report ) . Moreover, America Movil started deploying 4G LTE across these regions, which may further expand churn rate for NII Holdings going forward.
Furthermore, deployment of 3G networks requires huge cash which happens to be a major drawback for NII Holdings, thereby slowing down things further.
Moreover, NII Holdings is involved in the process of phasing out Motorola Solution’s ( MSI - Analyst Report ) Integrated digital enhanced technology (IDEN) and consequently integrating its new Push to Talk (PTT) technology, hence driving cost and delaying the 3G launch.
To make matters worse, Standard and Poor’s (S&P) lowered NII Holdings’ corporate credit rating by one notch to B- from the previous B rating status. The company’s debt now falls six tiers below the investment grade and is the second of its kind in the last six months after its rating was lowered in August following weak second-quarter 2012 results.
Thus, it is to be seen how long NII Holdings can face such sustained headwinds without merging with any major telecom carriers.
Currently, NII Holdings carries a Zacks Rank #4 (Sell).
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