NII Holdings Announces Second Quarter 2013 Results

RESTON, Va., Aug. 1, 2013 /PRNewswire/ -- NII Holdings, Inc. [NASDAQ: NIHD] today announced its consolidated financial results for the second quarter of 2013, which reflect the results of Nextel Peru as discontinued operations. During the quarter, the Company added 100,000 net subscribers to its network, bringing its ending subscriber base to over 9.9 million, a 2 percent increase from June 30, 2012. Financial results for the quarter included consolidated operating revenues of $1.26 billion, down 11 percent from the level reported in the second quarter of 2012, and consolidated adjusted OIBDA, which excludes the impact of non-cash asset impairment and restructuring charges, of $101 million, a 55 percent decline compared to the same period last year. The decrease in consolidated adjusted OIBDA was driven by incremental investments related to the Company's deployment of its planned next generation networks, costs to migrate customers to the Company's next generation network in Mexico, weaker average foreign currency exchange rates, and lower average revenue per subscriber (ARPU) on a local currency basis. For the second quarter of 2013, the Company generated a consolidated operating loss of $82 million and a consolidated net loss of $396 million, or $2.30 per basic share. The net loss includes $104 million of foreign currency transaction losses resulting from weaker foreign currency exchange rates and $100 million of non-cash income tax expense related to a deferred tax valuation allowance the Company recognized during the period. Capital expenditures were $218 million for the quarter, of which $113 million was paid in cash.

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"We're making progress on a number of initiatives that are key to our goal of improving the fundamentals of our business; however, we continue to experience significant challenges, including the impact of Sprint's shutdown of its iDEN network in the U.S. on our operations in Mexico," said Steve Shindler, NII Holdings' chief executive officer. "While we expect the situation in Mexico will continue to negatively impact our results in the second half of the year, we are working to address these challenges by completing and expanding the coverage of our next generation networks, as well as increasing our marketing efforts to enhance consumer awareness of the new products and services they support. The rigor and discipline that we have added to our next generation network deployment process is enabling us to meet the timeline we set for building our new networks, as evidenced by the recent launch of wireless broadband services in our Sao Paulo market that will enhance our competitive position in Brazil."  

NII Holdings' consolidated ARPU was $36 for the second quarter of 2013, down almost $5 compared to the same period last year. This decline resulted from lower priced rate plans the Company offered as part of its customer retention efforts and in response to more aggressive competition in recent quarters, primarily in Brazil and Mexico, and from the year-over-year weakening in local foreign currency exchange rates. The Company reported consolidated churn of 2.67 percent for the second quarter, up about 50 basis points from the level reported for the same period last year.  Consolidated cost per gross add (CPGA) was $276 for the second quarter, a $25 decrease compared to the second quarter of 2012.

The Company ended the quarter with $5.8 billion in total debt and $1.8 billion in consolidated cash and investments, resulting in net debt of $4.0 billion. During the second quarter, the Company issued $700 million in senior notes due 2019 and used proceeds of that financing to repay the entire outstanding balance of its bank loan in Mexico and certain bank loans in Brazil, improving its debt maturity schedule.

"We've made good progress executing against our financing objectives," said Juan Figuereo, NII Holdings' executive vice president and chief financial officer. "We raised $1.6 billion in the bond markets year to date, which we used to enhance liquidity and improve our maturity profile. Additionally, with the agreement to sell our operations in Peru, we took another important step towards refocusing on our strategic markets, and expect to add approximately $400 million to our liquidity at completion of this transaction. All of these efforts will enable us to complete the deployment and expand the coverage and capabilities of our next generation networks in Mexico and Brazil, the markets which offer the best opportunity for us to return to profitable growth and improve our cash flow profile." 

A presentation highlighting NII Holdings' second quarter 2013 results is available on the Investor Relations page of the Company's web site.  Additional information relating to NII Holdings' second quarter 2013 results will be provided on the Company's earnings call on Thursday, August 1, 2013 from 8:30 AM to 9:15 AM EDT. The call will be available via webcast, online www.nii.com on the Investor Relations page or by phone at the numbers provided below.                                            

Phone:
Domestic
1.800.591.6942 pass-code: NII HOLDINGS
International
1.617.614.4909 pass-code: NII HOLDINGS
Please click here for additional Global Access Numbers

All participants are asked to dial in 10-15 minutes prior to the start of the conference call. If you are unable to participate, a rebroadcast of the conference call will be available for two weeks following the call.

For a replay of this call, please use the following:

Conference Call Replay:
Domestic
1.888.286.8010 pass-code: 98266541
International
1.617.801.6888 pass-code: 98266541

The financial results provided throughout this press release are prepared in accordance with accounting principles generally accepted in the United States, or GAAP. NII has presented consolidated adjusted OIBDA, ARPU, CPGA and net debt.  These measures are non-GAAP financial measures and should be considered in addition to, but not as substitutes for, the information prepared in accordance with GAAP. Reconciliations from GAAP results to these non-GAAP financial measures are provided in the notes to the attached financial tables. To view these and other reconciliations of non-GAAP financial measures that the Company uses and information about how to access the conference call discussing NII's second quarter 2013 results, visit the investor relations link at www.nii.com.

About NII Holdings, Inc.
NII Holdings, Inc., a publicly held company based in Reston, Va., is a provider of differentiated mobile communication services for businesses and high value consumers in Latin America. NII, operating under the Nextel brand in Brazil, Mexico, Argentina, Peru and Chile, offers fully integrated wireless communications tools with digital cellular voice services, data services, wireless Internet access and Nextel Direct Connect^® and International Direct Connect^SM, a digital two-way radio. NII is a Fortune 500 and Barron's 500 company, and has also been named one of the best places to work among multinationals in Latin America by the Great Place to Work^® Institute. The company trades on the NASDAQ market under the symbol NIHD. Visit the company's website at www.nii.com.

Nextel, the Nextel logo and Nextel Direct Connect and International Direct Connect are trademarks and/or service marks of Nextel Communications, Inc., and are used by NII's subsidiaries under license in Latin America.

Visit NII's news room for news and to access our markets' news centers: www.nii.com/newsroom.

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995.  This news release includes "forward-looking statements" within the meaning of the securities laws. The statements in this news release regarding the business outlook, future performance and forward-looking guidance, as well as other statements that are not historical facts, are forward-looking statements.  Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.  With respect to these forward-looking statements, management has made assumptions regarding, among other things, network usage, customer growth and retention, pricing, operating costs, the timing of various events, the economic and regulatory environment and the foreign exchange rates that will prevail during 2013.  Future performance cannot be assured and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include the risks and uncertainties relating to the impact of more intense competitive conditions and changes in economic conditions in the markets we serve; the impact on our financial results, and potential reductions in the recorded value of our assets, that may result from fluctuations in foreign currency exchange rates and, in particular, fluctuations in the relative values of the currencies of the countries in which we operate compared to the U.S. dollar; the risk that our network technologies will not perform properly or support the services our customers want or need, including the risk that technology developments to support our services will not be timely delivered; the risk that customers in the markets we serve will not find our services attractive; unexpected results of litigation; and the additional risks and uncertainties that are described in NII Holdings' Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as well as in other reports filed from time to time by NII Holdings with the Securities and Exchange Commission. This press release speaks only as of its date, and NII Holdings disclaims any duty to update the information herein.

Media Contacts:

NII Holdings, Inc.
1875 Explorer Street, Suite 1000
Reston, VA. 20190
(703) 390-5100
www.nii.com

Investor Relations:Tim Perrott
(703) 390-5113
tim.perrott@nii.com

Media Relations:Claudia Restrepo
(786) 251-7020
claudia.restrepo@nii.com

NON-GAAP RECONCILIATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED)

Consolidated OIBDA and Consolidated Adjusted OIBDA

Consolidated operating income before depreciation and amortization, or OIBDA, represents operating income before depreciation and amortization expense. Consolidated adjusted operating income before depreciation and amortization, or adjusted OIBDA, represents consolidated operating income before depreciation expense, amortization expense, material non-cash asset impairments, severance costs associated with publicly announced restructuring plans and other material non-recurring charges. During the fourth quarter of 2012, we converted our consolidated OIBDA metric to a consolidated adjusted OIBDA metric to better align this metric with our business objectives. Consolidated OIBDA and consolidated adjusted OIBDA are not measurements under accounting principles generally accepted in the United States, may not be similar to consolidated OIBDA and consolidated adjusted OIBDA measures of other companies and should be considered in addition to, but not as substitutes for, the information contained in our statements of operations. We believe that consolidated OIBDA and consolidated adjusted OIBDA provide useful information to investors because they are indicators of our operating performance, especially in a capital intensive industry such as ours, since they exclude items that are not directly attributable to ongoing business operations. Consolidated OIBDA and consolidated adjusted OIBDA can be reconciled to our consolidated statements of operations as follows (in millions):

Average Monthly Revenue Per Handset/Unit in Service (ARPU)

Average monthly revenue per subscriber unit in service, or ARPU, is an industry term that measures service revenues, which we refer to as subscriber revenues, per period from our customers divided by the weighted average number of subscriber units in commercial service during that period.  ARPU is not a measurement under accounting principles generally accepted in the United States, may not be similar to ARPU measures of other companies and should be considered in addition, but not as a substitute for, the information contained in our statements of operations.  We believe that ARPU provides useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high value customers.  Other revenue includes revenues for such services as roaming, handset maintenance, cancellation fees, analog and other.  ARPU can be calculated and reconciled to our consolidated statement of operations as follows (in millions, except ARPU):

Cost per Gross Add (CPGA)

Cost per gross add, or CPGA, is an industry term that is calculated by dividing our selling, marketing and handset and accessory subsidy costs, excluding costs unrelated to initial customer acquisition, by our new subscribers during the period, or gross adds.  CPGA is not a measurement under accounting principles generally accepted in the United States, may not be similar to CPGA measures of other companies and should be considered in addition, but not as a substitute for, the information contained in our statements of operations.  We believe CPGA is a measure of the relative cost of customer acquisition.  CPGA can be calculated and reconciled to our consolidated statements of operations as follows (in millions, except CPGA):

Net Debt

Net debt represents total debt less cash, cash equivalents, short-term and long-term investments. Net debt is not a measurement under accounting principles generally accepted in the United States, may not be similar to net debt measures of other companies and should be considered in addition to, but not as a substitute for, the information contained in our balance sheets. We believe that net debt  provides useful information concerning our liquidity and leverage. Net debt as of June 30, 2013 can be calculated as follows (in millions):

Impact of Foreign Currency Fluctuations

The following table shows the impact of changes in foreign currency exchange rates on certain financial measures for the three and six months ended June 30, 2012 compared to the same period in 2013 by (i) adjusting the relevant measures for the three and six months ended June 30, 2012 to levels that would have resulted if the average foreign currency exchange rates for the three and six months ended June 30, 2012 were the same as the average foreign currency exchange rates that were in effect for the three and six months ended June 30, 2013; and (ii) comparing the actual and adjusted financial measures for the three and six months ended June 30, 2012 to the similar financial measures for the three and six months ended June 30, 2013 to show the percentage change in those measures before and after taking those adjustments into account. The amounts reflected in the following table for operating income before depreciation and amortization on a consolidated basis and segment earnings for Nextel Brazil, Nextel Mexico and Nextel Argentina, before the adjustments for changes in foreign currency exchange rates, are based on the calculations contained elsewhere in these non-GAAP reconciliations for the three and six months ended June 30, 2013 and 2012. The average foreign currency exchange rates for each of the relevant currencies during each of the three and six months ended June 30, 2013 and 2012 are included in the notes to the table below. The information reflected in the following table is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our statements of operations. We believe that these calculations provide useful information concerning our relative performance for the three and six months ended June 30, 2013 compared to the same period in 2012 by removing the impact of the significant difference in the average foreign currency exchange rates in effect for those periods.

SOURCE NII Holdings, Inc.