NII Holdings, Inc. (Nasdaq: NIHD) announced its preliminary consolidated financial results for the fourth quarter and full year 2012. For the fourth quarter, the Company expects to report consolidated operating revenues of approximately $1.5 billion, net subscriber additions of approximately 2,200, and total capital expenditures of approximately $525 million.
The Street is at revs of $1.47 billion.
For the full year 2012, the Company expects to report approximately 650,000 net subscriber additions, bringing its total year-end subscriber base to approximately 11.4 million, an estimated 6 percent increase over year-end 2011. The Company expects to report full year 2012 consolidated operating revenues of $6.1 billion and adjusted OIBDA of between $930 million and $950 million for the full year. The Company's adjusted OIBDA excludes the impact of non-cash impairment and restructuring charges, including a $300 million impairment charge related to the Company's operations in Chile described below. Total capital expenditures for the full year 2012 are expected to be $1.5 billion. The Company expects that it will end the year with $1.6 billion in total cash, cash equivalents and short-term investments and total debt of $4.9 billion, resulting in net debt of $3.3 billion.
*** Consensus views are at FY12 revs of $6.11 billion.
"While 2012 was a pivotal year for NII as we made progress in the deployment of our 3G networks and new service offerings, we fell well short of expectations. We intend to get back to delivering results in 2013 that meet expectations through solid execution and have already taken steps to streamline our business operations both at our headquarters and in our markets consistent with that goal," said Steve Shindler, NII Holdings' chairman and interim chief executive officer. "We are confident the investments we are making now will enhance our competitive position and create value over the long-term. We recognize the industry challenges facing our business today, and we are taking steps to fortify the Company's operations to generate long-term growth and profitability."
As planned, during the fourth quarter, Nextel Brazil took actions to remove certain unprofitable customers from its subscriber base, which resulted in an estimated 292,000 net subscriber loss for its operations during the fourth quarter. The Company believes that the actions have improved the quality of Nextel Brazil's subscriber base and will position Nextel Brazil to return to subscriber growth starting in the first quarter of 2013. The Company expects to report a slight increase in local currency average (service) revenue per subscriber in Brazil for the fourth quarter compared to the third quarter of 2012. Nextel Brazil also expects to more broadly offer voice and data services on its new 3G network in Sao Paulo by the end of the second quarter of 2013 and in Rio de Janeiro by the end of 2013.
Nextel Mexico is expected to report 41,000 net subscriber additions for the fourth quarter and remains on schedule to extend its 3G network coverage to match its existing iDEN coverage by the end of the third quarter of 2013. The Company expects to report a slight decrease in local currency average (service) revenue per subscriber in Mexico for the fourth quarter compared to the third quarter of 2012.
In 2013, the Company plans to continue to invest in the deployment of its 3G networks with a particular focus on building those networks and improving results in its core markets of Mexico and Brazil. The Company also announced that it is continuing to support its operations in Peru, Chile and Argentina, while also exploring strategic options for these markets, such as partnerships, service arrangements and asset sales to maximize the value of those businesses and generate additional liquidity. Due in part to this change in focus and in connection with the preparation of the fourth quarter 2012 financial statements, the Company expects to recognize a non-cash asset impairment charge of approximately $300 million related to the Company's operations in Chile. The impact of this non-cash charge is excluded from the Company's 2012 adjusted OIBDA results.
The Company is also in the process of pursuing a sale and leaseback of an aggregate of up to 4,500 telecommunication towers that it owns in Brazil and Mexico through a competitive bidding process. The Company is currently evaluating offers from a number of interested parties and expects to be in a position to complete these transactions during the course of 2013. However, there can be no assurance as to if, or when, any such transaction will occur or the amount of proceeds, if any, that it may raise.
In 2013, the Company will continue to invest in expanding the coverage of its new 3G platforms that will enable it to provide a broader range of products and services, significantly expand its addressable markets to include high value individual subscribers to complement its current corporate customer base, and to improve its overall competitive position in its core markets. During the year, the Company plans to provide voice and data services on its 3G network in Sao Paulo and Rio de Janeiro, and complete network coverage in key markets in Mexico to establish network coverage parity with the Company's iDEN network. As a result of these efforts, the Company expects additional year-over-year expenses relating to the deployment and operation of its 3G networks. While these additional expenses will put negative pressure on the Company's expected adjusted OIBDA, the Company expects these investments will position it to drive subscriber growth and profitability in future years.
Taking into consideration the plans to focus on its core markets and its 3G deployment plans for 2013, the Company issued the following consolidated outlook for 2013. This outlook is based upon a number of assumptions and estimates that, while presented with numerical specificity and considered reasonable by us, when taken as a whole, are inherently subject to significant business, economic and competitive uncertainties, and are necessarily speculative in nature. The actual results that the Company will achieve for 2013 could vary materially from those in this outlook.
* Consolidated adjusted OIBDA in the range of $600 million to $650 million;
* Consolidated revenues in the range of $5.7 billion to $5.9 billion;
* Mid-single digit growth rate for its consolidated subscriber base; and
* Total capital expenditures of approximately $1 billion, which represents a reduction in capital expenditures of approximately one-third relative to the prior year.
Consistent with the definition of adjusted OIBDA, which excludes the impact of restructuring costs and non-cash asset impairment charges, the Company's adjusted OIBDA guidance for 2013 does not reflect the impact of non-cash asset impairment or restructuring charges that may be incurred in 2013. In January 2013, the Company began evaluating the feasibility of discontinuing the broader use of software previously developed for use in multiple markets, and the possibility of restricting its ongoing use to one of the Company's markets. The Company's ultimate decision regarding the use of this software could result in a non-cash impairment charge of up to $85 million. The Company's 2013 adjusted OIBDA guidance does not take into account the impact of this potential non-cash charge, as well as other potential non-cash charges that could be required in 2013.
The Company expects that its negative 2013 operational free cash flow, defined as adjusted OIBDA less capital expenditures, will improve by about $200 million compared to 2012. It is the Company's goal to improve operational free cash flow to reach breakeven, on a quarterly basis, towards the end of 2014. The Company's 2013 outlook is based on a number of key assumptions. Actual results could differ materially if any of these assumptions prove inaccurate. In addition, the Company's results could be materially and adversely affected by any of the risks set forth in the "Risk Factors" included as an exhibit to the Company's Current Report on Form 8-K dated February 5, 2013.
"We are taking an aggressive approach to complete our 3G network deployments, streamline our vendor relationships, improve our cost structure, and prioritize investments in our core markets. While we expect the increase in our 3G related operating expenses to result in a decline in our adjusted OIBDA for 2013 as we deploy our new networks, we believe that these investments are critical as we position the Company to be competitive for the long-term and to drive profitable growth in the future," added Shindler.