The Latin American telecom operator NII Holdings Inc. (NIHD) has decided to reduce its headquarter’s workforce by over 25% along with eliminating over 1,400 manpower in marker operations.
This restructuring process is aimed to streamline management’s structure, which is expected to improve efficiency and reduce cost by $50-$55 million per annum. The company will incur a one-time severance expense of $25-$35 million in 2013. Of this, around $8.6 million in charges already accounted for in the company's third-quarter 2013 results.
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 speed for smartphones. Mounting competitive pressure is resulting in substantial subscriber loss for NII Holdings.
In the third quarter of 2013, NII Holdings’ total revenue was down 21.7% whereas net loss was up a whopping 255.7% year over year. Customer churn was 3.59% compared with 2.54% in the prior-year quarter. Average revenue per user was $31 against $40 in the year-ago quarter.
The company lost around 178,000 subscribers in the third quarter. Yesterday, NII Holdings announced that it expects to lose approximately 400,000 subscribers in Mexico during the ensuing fourth quarter. The estimation is based on the modification of its customer deactivation policy for inactive prepaid subscribers.
Meanwhile, NII Holdings struck a deal with American Tower Corp. (AMT - Analyst Report) to sell 2,790 Brazilian wireless towers and 1,666 Mexican wireless towers for $413 million and $398 million, respectively. The proceeds will be utilized to fund the company’s 3G deployment goal across Latin American regions. Currently, NII Holdings has a Zacks Rank #3 (Hold).