NII Holdings to Explore Strategic Options - Analyst Blog

NII Holdings Inc. NIHD, the struggling Latin American wireless service provider, has decided to explore several strategic options for its future course of business. The company has hired investment bank UBS AG as an advisory body.

These include forming a partnership with other wireless operators, disinvestment of some part of its existing business or a merger or complete sale out of the company to any prospective buyer.

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

NII Holdings failed to establish its iDEN walkie-talkie based phone service as a potential replacement to other digital technology formats such as, GSM or CDMA used by mobile-phone giants in Mexico and Brazil.

Furthermore, NII Holdings is currently under a potential liquidity trap. The company has approximately $1.7 billion in cash and $5.8 billion of debt. Management stated that it has sufficient funds to meet the company's obligations in 2014.

However, NII Holdings is poised to face serious troubles from 2015 until it makes a significant turnaround in its business. Unfortunately, management is expecting that the subscriber base will only deteriorate in Mexico going forward. The company has retained Rothschild Inc. as its financial adviser.

In the fourth quarter of 2013, NII Holdings' total revenue was down 21.8% whereas net loss was up a whopping 56.3% year over year. Customer churn was 3.85% compared with 3.4% in the prior-year quarter. Average revenue per user was $31 against $40 in the year-ago quarter. The stock price has tumbled a whopping 88.5% in the last year. Currently, NII Holdings has a Zacks Rank #3 (Hold).

In order to overcome financial crisis, NII Holdings struck a deal with American Tower Corp. AMT. Per the deal, the company sold 2,790 Brazilian towers and 1,666 Mexican towers for $413 million and $398 million, respectively.

In Dec 2013, the company downsized 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 costs by $50 - $55 million per annum.