NEW YORK-NII Holdings, formerly Nextel International, hopes for a Nasdaq stock listing now that it has emerged from bankruptcy and is headed back into the black, said Byron Siliezar, chief financial officer.
“Our goal is to be both profitable and free cash flow positive by year-end,” he said, defining free cash flow as the remainder left after subtracting capital expenses from EBITDA, or earnings before interest, taxes, depreciation and amortization.
NII took an unusual route to going public when, as part of its reorganization, it creditors participated in a November rights offering that gave them a certain number of stock shares, depending on how much the bankrupt company owed them.
“We went from a highly leveraged company with US$2.8 billion in debt and significant funding requirements related to a top-line focus on building a network to an independent, OTC (over the counter) company with US$430 million in debt and a focus on the bottom line and profitability,” Siliezar said.
NII Holdings, of which U.S.-based Nextel Communications now owns 35 percent, down from 99 percent, has abandoned its Asian strategy to focus on five Latin American markets-Mexico, Brazil, Peru, Argentina and Chile.
While undergoing bankruptcy reorganization last year amid local currency depreciation ranging from 73 percent in Argentina to 10 percent in Mexico, NII Holdings nevertheless closed out 2002 with 1.2 million subscribers, all postpaid, up from 742,000 at the end of 2000. At the same time, the carrier posted revenues of US$780.4 million, an 18-percent increase from 2001, while also reducing receivables by 10 percent compared with the prior year. Overall bad debt had dropped by half to less than 3 percent of revenues in 2002, compared with 6 percent in 2001.
“We are not necessarily trying to be the largest wireless company in Latin America,” Siliezar said at the recent Legg Mason Wood Walker Telecom Conference.
In Mexico, its largest market, NII holdings has a 2-percent market share with 517,000 subscribers, whose monthly average revenue per user (ARPU) is US$78. Although the carrier is conserving cash, this year it plans to expand its Mexican network, which covers 36 million people, into Baja, California, United States, so it can link to Nextel Communications in the United States.
In Brazil, where NII’s 394,000 subscribers constitute a 1-percent market share, ARPU totaled US$31 last year, down from US$33 in 2001, largely due to the impact of the currency devaluation.
“We are focused (there) on reducing costs and leveraging our infrastructure as much as possible,” Siliezar said.
As a general strategy, NII has analyzed the profitability of different rate plans and worked to move customers to those that make the most sense both for them and itself. The enhanced specialized mobile radio operator also has reduced its average handset subsidy by US$30 through redeploying churned phones. At the same time, NII plans to incorporate Motorola’s new 6:1 vocoder into its handset offerings by mid-year.
NII has licenses covering 18.7 million people and subscribers totaling 207,200 in Argentina, where churn and bad debt spiked last year due to currency depreciation and banking restrictions, and ARPU dropped to US$29, down from US$66 in 2000.
Peru has been a more positive experience, with ARPU rising to US$54 last year from US$39 in 2000, and subscribers increasing to 129,800, or 5 percent of the market, from 68,300 two years earlier.
“We believe we have a very solid position in Latin America and can grow subscribers, revenues and EBITDA, despite the currency crisis in our markets,” Siliezar said.
“We have analyzed the opportunity in Chile and are working closely with the government to upgrade to digital. We have had some other overtures, but for now, we will stay where we are.” GW
