Latin American wireless operator NII Holdings Inc. (NIHD) declared mixed financial results for the second quarter of 2011. However, management raised its fiscal 2011 financial outlook buoyed by its upcoming 3G wireless network launch in Mexico, Brazil and Chile.
Quarterly net income was $113.6 million or 66 cents per share compared with a net income of $75.5 million or 44cents per share in the prior-year quarter. Second-quarter 2011 EPS of 66 cents was significantly below the Zacks Consensus Estimate of 75 cents.
Quarterly total revenue was $1,750.2 million, up 29% year over year, surpassing the Zacks Consensus Estimate of $1,709 million. This impressive result was primarily attributable to strong growth in net new subscriber addition.
Quarterly operating expenses were $1,449.2 million, up 27.2% year over year. However, operating income in the second quarter of 2011 was $301 million, up 41.3% year over year.
Operating margin, in the reported quarter, was 17.2% compared with 15.8% in the prior-year quarter. Quarterly consolidated OIBDA (Operating Income Before Depreciation and Amortization) and was a record-high $473 million, up 36% over the year-ago quarter.
At the end of the second quarter of 2011, NII Holdings had $2,942.5 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 $4,774.3 million compared with $3,265.4 million at the end of the previous year. At the end of the second quarter of 2011, debt-to-capitalization ratio was 0.56 compared with 0.46 at the end of fiscal 2010.
Operating Metrics
At the end the second quarter of 2011, total digital subscriber base of NII Holdings was 9,812,200, an improvement of 20% year over year. During the reported quarter, the company added 382,100 net new subscribers, down 2.6% year over year.
Customer churn in the second quarter was 1.71%, and remains same year over year. Quarterly ARPU was $51 compared with $47 in the prior-year quarter. However, quarterly costs per gross subscriber added was $305 compared with $286 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 $7.1 billion. Consolidated OIBDA will be $1.75 billion. Fiscal 2011 capital expenditure will be approximately $1.7 billion.
Recommendation
We maintain our long-term Neutral recommendation on NII Holdings. Currently, it holds a short-term Zacks #2 Rank (Buy) on the stock. This was primarily due to highly lucrative nature of the Mexican and other Latin American wireless markets, despite the presence of a strong competitor American Movil S.A.B. (AMX).
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