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NII rises after announcing Nextel Peru stake sale

NEW YORK (AP) -- Shares of the wireless service provider NII Holdings Inc. climbed Friday as the company announced that it is selling its stake in Nextel del Peru SA for about $400 million.

THE SPARK: Late Thursday, NII said that it was selling its stake to Empresa Nacional de Telecomunicaciones SA (Entel). NII said that the sale is part of its strategy to concentrate its capital and other resources on its two biggest markets: Mexico and Brazil. The deal is expected to close during the second half of the year.

THE ANALYSIS: Christopher King of Stifel Nicolaus said in a client note that the asset sale validates what he feels is NII's strong physical asset value. The analyst said that the company is still assessing its assets in Argentina and Chile, with possible sales of those assets within the next six to 12 months. If those assets are sold, it would leave NII solely focused on Brazil and Mexico.

The analyst maintained a "Buy" rating and $23 price target.

William Blair's Jim Breen said that the deal gives Entel access to Peru, as it currently has no operations in the country. Entel has a 37 percent market share in Chile. The analyst said that the Nextel Peru sale should help minimize some of NII's overall cash burn aside from the proceeds it will receive from the transaction.

Breen reiterated an "Outperform" rating.

There was no immediate response to an email to Reston, Va.-based NII for comment.

SHARE ACTION: NII's stock rose 59 cents, or 12.9 percent, to $5.13 in morning trading. Over the past year, the shares have traded between $4.11 and $19.63. The stock is down 36.3 percent for the year-to-date.