Latin American wireless operator, NII Holdings Inc. (NIHD) targets to sell 4,500 wireless towers by the middle of fiscal 2013 across Brazil and Mexico. The amount to be realized from the sale will be utilized to fund its 3G deployment goal across these regions.
NII Holdings is planning to raise nearly $1 billion during fiscal 2013 either through tower sale or by issuing senior notes. After selling the towers, the company may lease them back.
At the end of the fourth quarter of 2012, NII Holdings had $1,588.3 million in cash, cash equivalents and marketable securities. In addition, the total debt at the end of the reported quarter was $4,866.2 with a very high debt-to-capitalization ratio of 0.68.
To make matters worse, Standard and Poor’s (S&P) lowered NII Holdings’ corporate credit rating by one notch to B-, which is close to junk status. So it will be difficult for the company to raise enough debt from the market.
NII Holdings’s objective to cover both the highly lucrative Brazilian and Mexican market require huge cash. These markets are hugely dominated by America Movil S.A.B. de C.V. (AMX - Analyst Report) and Telefornica SA (TEF - Analyst Report). To counter such competition, NIHD plans to aggressively rollout its new 3G service integrated with the Push to Talk (PTT) technology by the end of 2013.
On the flip side, America Movil started deploying 4G LTE across these regions, which may increase customer churn for NII Holdings going forward.
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.
Thus, it is to be seen how NII Holdings survives against such sustained headwinds without merging with any major telecom carrier.
Currently, NII Holdings carries a Zacks Rank #3 (Hold).