Shareholders are offloading Latin American telecom operator, NII Holdings Inc. (NIHD), from their portfolio after the company sounded a warning on liquidity last month. Recently, NII Holdings suffered another setback when investors filed a class action suit against the company and its board of directors.
NII Holdings said the company has sufficient funds to meet its financial obligations for this year. However, it added that it may face problems in meeting financial obligations 2015 onward. The company has approximately $1.7 billion in cash and $5.8 billion of debt. The company also stated that after losing 247,000 subscribers in the previous quarter, it has to evaluate different opportunities and will have to increase its operating performance considerably to increase liquidity.
Despite benchmarks touching all-time highs, NII Holdings’ stock declined 75% in the last one year. The company’s earnings have fallen drastically over the past one year. In the recently concluded quarter, NII Holdings’ net loss from continuing operations was $745.6 million or $4.33 per share compared with a net loss of $476.4 million or $2.77 per share in the prior-year quarter. Quarterly total revenue stood at $1,080.9 million, down 21.8% year over year. Customer churn was 3.85% as against 3.4% in the prior-year quarter. Average revenue per user was $31 versus $40 in the year-ago quarter.
The suit filed by investors has aggravated the company’s problems. Law firms Frank & Bianco LLP and Levi & Korinsky LLP have started an investigation into the company for the period Feb 25, 2010–Feb 27, 2014. Investors have claimed that the company has provided misleading statements and ambiguous information about company’s business, financial statement and future projections.
Recently, NII Holdings decided to explore several strategic options for its future course of business and hired investment bank UBS AG as an advisory body. These strategies include forming partnerships with other wireless operators, disinvestment of some parts of its existing business or a merger or complete sell out of the company to any prospective buyer.
In order to increase liquidity, NII Holdings sealed a deal with American Tower Corporation (AMT). Per the deal, the company sold 2,790 Brazilian towers and 1,666 Mexican towers for $413 million and $398 million, respectively.
We believe that the company will face more problems from 2015 until it makes a significant turnaround in its business. Unfortunately, management is expecting that the subscriber base will deteriorate in Mexico going forward.
NII Holdings currently has a Zacks Rank #3 (Hold).