Latin American wireless operator NII Holdings Inc. (NIHD) declared mixed financial results for the first quarter of 2011. However, during the reported quarter, the company generated significant growth of subscribers.
Quarterly net income was $96.8 million or 56 cents per share compared with a net income of $48.5 million or 28 cents per share in the prior-year quarter. First-quarter 2011 EPS of 56 cents falls below the Zacks Consensus Estimate of 60 cents.
Quarterly total revenue was $1,622.8 million, up 26.5% year over year, surpassing the Zacks Consensus Estimate of $1,580 million. This impressive result was mainly attributable to strong growth of net new subscriber addition.
Quarterly operating expenses were $1,347.8 million, up 25.9% year over year. However, operating income in the first quarter of 2011 was $275 million, up 29.3% year over year. Operating margin, in the reported quarter, was 17% compared with 16.6% in the prior-year quarter. Quarterly consolidated OIBDA was $430.9 million, up 26% over the year-ago quarter.
At the end of the first quarter of 2011, NII Holdings had $2,784 million of cash, cash equivalents, and marketable securities compared with $2,305 million at the end of fiscal 2010. Total debt at the end of the reported quarter was $4,068.5 million compared with $3,265.4 million at the end of the previous year. At the end of fiscal 2010, debt-to-capitalization ratio was 0.51 compared with 0.46 at the end of fiscal 2010.
Operating Metrics
At the end the first quarter of 2011, total digital subscriber base of NII Holdings was more than 9,430,000, an improvement of 21% year over year. During the reported quarter, the company added 402,500 net new subscribers, up 6.7% year over year.
Customer churn, in the first quarter was 1.61% compared with 1.69% in the year-ago quarter. Quarterly ARPU was $49 compared with $47 in the prior-year quarter. However, quarterly costs per gross subscriber add was $286 compared with $278 in the year-ago quarter.
Fiscal 2011 Financial Outlook
Management has provided guidance that NII Holdings will add approximately 1.7 million net new subscribers in 2011. Consolidated operating revenue will be $6.6 billion. Operating income will be $1.35 billion and consolidated OIBDA will be $1.6 billion. Fiscal 2011 capital expenditure will be approximately $1.6 billion.
Recommendation
We maintain our long-term Neutral recommendation on NII Holdings. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock. This was primarily due to highly competitive nature of the Mexican wireless market, where the company’s main competitor is American Movil S.A.B. (AMX).
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