Subject: [NEXTEL-1] NII To Launch Cross-Border Call Service In Latin America

From: [email-masked]
Date: Fri, 30 Apr 2004 13:07:05 -0400

=DJ   NII To Launch Cross-Border Call Service In Latin America 
(2004/04/29 6:20PM) 
 
    By Mike Esterl 
    Of DOW JONES NEWSWIRES 
 
NEW YORK (Dow Jones)--In a matter of days, Latin Americans will be 
able to talk over thousands of miles by pushing a single button. 

Officials with NII Holdings Inc. (NIHD), an offspring of Nextel 
Communications (NXTL), said Thursday they will roll out a cross-
border, push-to-talk service for its clients south of the Rio Grande 
in the first week of May. 

"The tests are complete and the service works phenomenally well," 
Chief Operating Officer Lo van Gemert said in a conference call 
after the wireless carrier released its first-quarter earnings 
report. 

NII has been growing by leaps and bounds in Latin America as it 
carves out a lucrative niche through its proprietary Direct Connect, 
a walkie-talkie technology that's popular with construction, 
transportation and security companies. 

The Virginia-based company reported earlier Thursday a net loss of 
$40 million, reversing four straight quarters of profit, as it 
booked a one-time charge of $79 million linked to the retirement of 
high-priced debt through a cash tender offer. 

The company's stock price tumbled 4.8% to $36.13 on the Nasdaq as a 
heavier-than-usual 1.9 million shares exchanged hands. 

Analysts saw some good numbers above the bottom line, however. NII's 
combined subscriber base in Argentina, Brazil, Mexico and Peru 
reached 1.55 million users at the end of March, an increase of 
89,200 from the end of December. 

Operating profit in the first quarter jumped to $54 million, up 50% 
from the fourth quarter and 38% higher than a year ago. Consolidated 
revenue came in at $277 million, a 4.9% rise from the fourth quarter 
and up 37% on the year, as NII continues to bounce back from a 
Chapter 11 debt restructuring in late 2002. 

In a report, Morgan Stanley analyst Vera Rossi, who has an 
overweight recommendation on the stock, said NII had a "strong 
quarter across the board," adding that it delivered better-than-
expected results in most areas. 

Despite Thursday's sell-off, which came on a day when most Latin 
American stocks fell sharply, NII's stock is up 45% since the end of 
December and hit a record intraday high of $41.95 earlier this week. 
The company recently carried out a three-for-one stock split, after 
its shares more than tripled in value last year. 

NII introduced cross-border capability on its Direct Connect 
technology late last year for customers on the Mexican-U.S. border. 

Now it's extending that option across the region - a potentially big 
draw for multinational companies looking for a quick and efficient 
way for staff stretching from Mexico City to Buenos Aires to stay in 
touch. 

NII officials declined to say Thursday how much they plan to charge 
clients for the service. But the new option is likely to further 
boost the company's average revenue per user, which already stood at 
$55 a month in the first quarter, more than three times the industry 
average for wireless providers in Latin America. 

"I think it's a wonderful proposition," said Wally Swain, a wireless 
analyst based in Bogota with the Yankee Group, a technology research 
firm, of the cross-border plans. 

Swain said multinationals will be attracted by the idea of 
securing "virtually free long-distance" capabilities within a closed 
network that bypasses typical cross-border headaches and settlement 
charges. 

But the service also could attract some regulatory heat if long-
distance carriers complain the service is undercutting their 
business, he added. 

NII is preparing to roll out its cross-border option after Mexico's 
America Movil SA (AMX) announced Wednesday it hopes to launch its 
own push-to-talk service in Mexico as early as the fourth quarter 
before expanding it across seven other Latin American markets. 

America Movil has more than 40 million customers in the region, 
almost thirty times as large as NII's subscriber base, and is neck-
and-neck with Spain's Telefonica Moviles SA (TEM) at the top of 
Latin America's wireless pecking order. 

NII officials insisted Thursday that they're not concerned about 
America Movil honing in on their push-to-talk business. 

"We believe we have a better product both in terms of quality and 
functionality," Steve Shindler, NII's chairman and chief executive 
officer, told investors in the conference call. 

Swain, of the Yankee Group, said NII's confidence isn't misplaced. 
He noted that America Movil's GSM wireless technology isn't as 
suited to transmitting push-to-talk calls as the CDMA technology 
that NII uses, with the former taking up to six seconds to establish 
calls. 

"Six seconds is too long to wait" for corporate customers that have 
come to rely on the almost-instantaneous voice connections that 
NII's Direct Connect offers, he said. 

NII reported Thursday that its churn rate, which measures how many 
of its customers drop the service, fell to 2.0% in the first 
quarter, from 2.6% a year ago, and the ninth straight quarterly 
decline. 

Its biggest market remains Mexico, where it booked $173 million in 
revenue in the first three months of 2004, up from $126 million in 
the year-earlier period. The number of NII subscribers in the 
country reached 703,000, up 45,000 from the end of December, and 
operating income rose to $53 million from $34 million in the year-
earlier quarter. 

The company also logged some progress in Brazil, the market where it 
has struggled the most. First-quarter revenue in South America's 
largest economy rose to $43 million from $34 million in the like 
2003 period, while it added 16,000 subscribers to bring its customer 
base to 400,000. Perhaps most encouraging, the churn rate fell to 
2.3% from 4.2% a year ago. 

NII estimated in late February that revenue will jump 28% to $1.2 
billion this year and that its subscriber base will grow by 19%, or 
285,000 customers. 

Officials said it was too early to start revising those forecasts 
just yet. 

"As we did last year, we prefer to wait for more than one quarter" 
before adjusting estimates, Shindler said on the conference call. 

Byron Siliezar, NII's chief financial officer, did calculate that 
the buyback of senior notes and paying down of vendor debt in the 
first quarter should save the company about $27 million in annual 
interest expenses. 

The company had $244 million in net debt at the end of March. 

In addition to providing technology, Nextel still holds a large 
minority stake in NII, which converted $2.3 billion of debt into 
common stock as part of its restructuring in 2002.

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