NII Holdings to Sell Peru Business - Analyst Blog
April 05 2013 - 11:20AM
Zacks
NII Holdings Inc.
(NIHD), which offers wireless services through its Nextel brand in
Latin America, has agreed to sell its Peruvian business to Chile’s
Empresa Nacional de Telecomunicaciones S.A. (or Entel), for around
$400 million. NIHD will use the sale proceeds to focus on two of
its largest markets, Mexico and Brazil.
Per the agreement, Entel will
purchase the shares of Nextel Peru. The deal is expected to close
in the second half of 2013, subject to regulatory approvals.
Shareholders reacted positively to the news as the stock leaped
7.93% to close at $4.90 in the after market trade on Thursday, in
Nasdaq.
Nextel Peru provides wireless
services across major business centres in Peru using the W-CDMA
(Wideband-Code Division Multiple Access) technology that offers
high-speed Internet access. At the end of 2012, Nextel Peru
provided services to 1,659,500 handsets and other devices and has
contributed only 5.6% to the company’s total revenue.
However, Nextel Peru's 2012 revenue
suffered a 2.3% decline as cut-throat competition from larger
operators like Telefonica SA (TEF) and
America Movil S.A.B. de C.V. (AMX) affected its
ARPU (Average Revenue per User).
Reston Va.-based NIHD is currently
rolling out its 3G service in different parts of Brazil and Mexico.
This will allow the company to provide quality wireless services to
its high-value customers, thus driving ARPU growth. Last year, in
an attempt to improve its network capacity, NIHD won the Brazilian
government’s approval to acquire the privately held Unicel do
Brazil Telecomunicacoes Ltd.
Offloading the assets will provide
NIHD with the much-needed liquidity to continue with its third
generation network deployment in Brazil and Mexico. On the other
hand, the acquisition will allow Entel to expand its business in
foreign countries.
Nevertheless, NIHD remains
constrained with its high-leverage position of $5 billion, which we
believe might restrict expansion. Thus, despite the sale of one of
its loss-making units, we remain sceptical about the success of the
company.
NII Holdings currently carries a
Zacks Rank #5 (Strong Sell). Among the other companies in the
telecom industry, China Telecom Corp Limited
(CHA), with a Zacks Rank #2 (Buy), is a better option for
investors.
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
CHINA TELCM-ADR (CHA): Free Stock Analysis Report
NII HLDGS-CL B (NIHD): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis Report
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