Latin American wireless operator NII Holdings Inc. (NIHD) declared excellent financial results for its fourth quarter of 2010. This was primarily due to higher net subscriber addition and significantly higher operating income before depreciation and amortization.
Quarterly net income was $98.6 million or 57 cents per share compared with a net income of $59.6 million or 35 cents per share in the prior-year quarter. However, in the reported quarter, NII Holdings incurred $17 million of net charges for special items. Fourth quarter 2010 adjusted EPS of 67 cents beat the Zacks Consensus Estimate of 66 cents.
Quarterly total revenue was $1,520.1 million, up 23.1% year over year and mostly in line with the Zacks Consensus Estimate of $1,521 million. This impressive result was mainly due to strong growth of net new subscriber addition.
Quarterly operating expenses were $1,290.9 million, up 21.8% year over year. However, operating income in the fourth quarter of 2010 was $229.2 million, up 30.8% year over year. Operating margin, in the reported quarter, was 15.1% compared with 14.2% in the prior-year quarter. Quarterly consolidated OIBDA was $378.6 million, up 27% over the year-ago quarter.
At the end of fiscal 2010, NII Holdings had $2,305 million of cash, cash equivalents, and marketable securities compared with $2,620.4 million at the end of fiscal 2009. Total debt, at the end of fiscal 2010 was $3,265.4 million compared with $3,580.8 million at the end of fiscal 2009. At the end of fiscal 2010, debt-to-capitalization ratio was 0.46 compared with 0.57 at the end of fiscal 2009.
Operating Metrics
At the end fiscal 2010, total digital subscriber base of NII Holdings was 9,027,500, an improvement of 22.3% year over year. During the reported quarter, the company added 436,100 net new subscribers, up 25.7% year over year.
Customer churn, in the fourth quarter was 1.60% compared to 1.85% in the year-ago quarter. Quarterly ARPU was $50 compared with $48 in the prior-year quarter. However, quarterly costs per gross add was $313 compared with $305 in the year-ago quarter.
Fiscal 2011 Financial Outlook
Management has provided a 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 the highly competitive nature of the Mexican wireless market where the company’s main competitor is American Movil S.A.B. (AMX).
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
NII HLDGS-CL B (NIHD): Free Stock Analysis Report
Zacks Investment Research
