Year-end Bonanza for NII Holdings

December 15, 2010 | Zacks
NII Holdings Inc. (NIHD – Analyst Report), a small-sized wireless services provider in several Latin American markets received yet another shot in its arm. Yesterday, the company announced that it has won wireless licenses in Brazil, which were recently auctioned by the Brazilian telecom authority National Telecommunications Agency (Anatel).  NII Holdings won 11 of the 13 lots of licenses for the 20 MHz wireless spectrum in the 1.9-2.1 GHz frequency band. NII Holdings has to pay approximately $714.4 million to Anatel for these wireless licenses.
NII Holdings has decided to deploy 3G wireless network to provide high-speed mobile broadband services including data and video transmission. NII Holdings is currently operating in Brazil under the brand name of Nextel Brazil. The company offers iDEN network and service around 3.1 million subscribers. The new wireless spectrum licenses will cover almost 97% of the nearly 182.5 million people in Brazil. NII Holdings can now service all major metropolises in the country including Sao Paulo, Rio de Janeiro and Brasilia.
Brazil is the largest emerging market in the Latin American region. Its wireless segment is vastly untapped. Currently, just around 8% of Brazilians use high-speed Internet. This indicates tremendous growth potential for NII Holdings in this country. Management is expecting to launch 3G wireless services in Brazil from 2012. The company will spend more than $3 billion in the next 5 years to expand 3G wireless networks nationwide. We believe these wireless licenses will give NII Holdings a strong foothold against its bigger rivals such as Telefonica S.A. (TEF – Analyst Report) and Amercia Movil S.A.B. (AMX – Analyst Report).
In August 2010, the Mexican Wireless regulator CoFeTel approved the auction bid submitted by NII Holdings Mexican subsidiary Nextel Mexico for a 30 MHz nationwide block in the 1.7 GHz band of wireless frequency. Nextel Mexico is currently working on building its nationwide 3G wireless networks in Mexico. The company has decided to launch 3G services in certain areas of Mexico in the next 12-18 months. Management is expecting huge revenue potential from these new services in 2012 and beyond.
At present, NII Holdings has a 3G network in Peru. It has won 3G wireless airwaves in Brazil and Mexico, the two most powerful economies in Latin America. The company is also exploring options to deploy 3G mobile services in Chile and Argentina. All these developments are expected to pave the way for long-run growth of NII Holdings. We maintain our long-term Neutral recommendation for NII Holdings. Currently, it is a short-term #3 (Hold) Rank stock.
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