Subject: [NEXTEL-1] Nextel Latin America Offspring Pushes Cross-Border Plan

From: [email-masked]
Date: Wed, 29 Oct 2003 16:00:17 -0500

http://biz.yahoo.com/djus/031029/1405001503_2.html
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Nextel Latin America Offspring Pushes Cross-Border Plan
Wednesday October 29, 2:05 pm ET

By Mike Esterl, Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Some time next year, a person in Buenos Aires will pick
up a walkie-talkie and call someone in New York - or Mexico City, or Lima, or
Sao Paulo.
That's the plan of NII Holdings Inc. (NasdaqNM:NIHD - News) , which is 33% owned by Nextel
Communications and reported another quarter of healthy growth Wednesday
in its Latin American operations after emerging from a Chapter 11 restructuring
in late 2002.

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NII's Direct Connect wireless technology, which connects callers on its
network at the push of a button, is currently being offered to 1.39 million
domestic clients in Argentina, Brazil, Mexico and Peru.
In September, though, NII subscribers in Baja California, Mexico began making
push-to-talk calls to Nextel customers in the U.S. - a cross-border exchange
that NII plans to rapidly extend all the way to Argentina as it tries to change
the way employees at multinational companies keep in touch.
"We're hoping to have everything up and running by the middle of next year,"
Steve Shindler, NII's chairman, said during a conference call with investors.
NII officials didn't provide any figures for the recent start-up of operations
in Baja California, which borders California, but said the early returns have
been encouraging.
Byron Siliezar, NII's chief financial officer, told Dow Jones Newswires that
patching together the networks of the five countries will involve only a "
minimal" investment, after the company already spent $4 billion in Latin America
in recent years to build up infrastructure.
He estimated that NII would probably charge its clients a premium of around $
10 a month for the cross-border calling option. The company reported that
average monthly revenue per subscriber, or ARPU, was $55 in the third quarter.
NII is targeting high-volume corporate clients in Latin America who are
seeking an easy way to stay in contact with employees in the field. It boasts
Coca-Cola Co. (NYSE:KO - News) , Fedex Corp. (NYSE:FDX - News) and Grupo Bimbo SA among its
client base.
NII's shares on the Nasdaq were down 1.9% to $68.45 on volume of 592,000
shares around 1:30 EST (1830 GMT).
The shares have been on a tear since its initial listing on the Nasdaq at $
20.60 in late February. It reached a record closing high of $71.50 on Oct. 13.
Its market capitalization is just under $1.5 billion.
Reports Strong 3Q Growth, But Brazil Lags
Earlier Wednesday, Virginia-based NII reported a net income of $38 million, or
$1.81 per basic share, in the third quarter, its third straight quarterly
profit, compared with a net loss of $36 million in the year-earlier period.
Operating revenue in the three-month period totaled $246 million, up 31% from
the like 2002 quarter, as it added 58,000 new subscribers. Operating income
surged 119% to $43 million, boosted in part by a $7 rise in ARPU from the year-
earlier period.
The company raised $288 million in net proceeds through the sale of common
stock and issuance of convertible notes during the most recent quarter, using
most of the proceeds to pay down debts. Net debt has been sliced nearly in half
this year, to $104 million, from $201 million in January.
NII's Chapter 11 restructuring, which concluded last November, converted $2.3
billion of debt into common stock. Nextel had owned 100% of NII before the
restructuring.
In a report Wednesday, Vera Rossi, a telecommunications analyst at Morgan
Stanley, called the third-quarter results "better than expected" and reiterated
her "overweight" recommendation on the stock.
Company executives said Wednesday they're sticking to their guidance of $240
million in operating income before depreciation and amortization for 2003,
despite already having racked up $186 million of that amount in the first nine
months of the year.
Officials said the recent weakening of the local currency in Mexico, which
generated 60% of NII's revenue and provided 44% of its subscriber base in the
third quarter, could cap profitability in the coming months. They calculated
that the peso, which opened Wednesday at MXN11.065 to the dollar, averaged
MXN10.56 during the third quarter.
NII also plans to spend around $5 million during the fourth quarter to provide
existing subscribers improved handsets at a discount in order to reduce churn,
or customer turnover.
"We think it's an eminently worthwhile investment with a very quick payback,"
Siliezar said in a telephone interview, noting that it costs the company about $
100 to keep a customer and $330 to go out and find a new one.
NII's churn rate edged down to 2.4% in the third quarter from 2.5% in the
second quarter, the seventh straight quarterly drop.
Company officials added that there's a "strong possibility" that NII could
surpass its earlier guidance of 180,000 net subscriber additions in 2003,
although they declined to be more specific.
Third-quarter operating revenue in Mexico jumped to $148 million from $107
million in the year-earlier period, as operating income nearly doubled to $37
million and ARPU rose to $80 from $75, tops in the region.
NII's Argentine operations also booked solid growth, as South America's
second-largest consumer market rebounds from last year's financial meltdown and
11% economic contraction. Operating revenue in the third quarter more than
doubled to $29 million from a year ago, as the number of subscribers rose by 19,
000 from June to 257,000 and the churn rate narrowed to 1.1% from 2.3% a year
ago.
But its Brazilian operations continued to lag, with operating revenue in the
quarter slipping to $35 million from $39 million in the year-earlier period.
ARPU remained stuck at $30, $7 less than in neighboring Argentina.
Siliezar said NII focused most of its investments on Mexico during last year's
debt restructuring, but that it's working overtime now to boost its branding,
competitive pricing and distribution channels in Latin America's largest market.
Officials noted that NII's subscriber base in Brazil had 2,000 net additions
during the third quarter, raising the number of its customers there to 371,000.
That's a tiny increase and still down from 412,000 a year ago, but suggests that
the shrinkage of recent quarters has ended.
"We continue to believe it's a very attractive market," said Siliezar.

-By Mike Esterl, Dow Jones Newswires; 201-938-4026; [email-masked]

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