Thursday, December 16, 2010

NII Holdings Lines Up 3G Licenses

NII Holdings (NIHD) is a recent addition to the Opportunistic Long Only portfolio and on Tuesday they announced the winning of 3G licenses in Brazil that covers the majority of the population. This comes after recently winning such licenses back in October in Mexico as well. Considering the costs of $715M to buy the Brazil license and several billion to build it out, the major issue is whether they'll have the cash to fund this massive expansion.

NIHD is a leading wireless provider in Latin America and a major force in the important markets of Brazil and Mexico. They currently have over 3M subscribers in both markets along with a total of 8.6M subscribers when adding in Argentina, Chile, and Peru.

2012 will be a massive year as they begin implementing the 3G networks in Brazil and Mexico, but that leaves 2011 as a year of major capital expenditures for a company with $544M in net debt. Considering they have $2.4B in consolidated cash and investments they likely will find an affordable way to fund this expansion. According to Bloomberg, Brazil's national development bank will help finance the network which would be extremely bullish.

For 2011, several analysts now expect earnings to exceed $3 leaving the stock trading at $45 with only a 15 PE multiple. While not overly cheap, the company now has 2 major catalysts especially with Brazil likely hitting prime exposure by 2012 as the Olympics and World Cup approach. NIHD might provide an ideal way to invest in the growth of both Brazil and Latin America. Don't neglect Mexico as it was the first major stock market to retake the 2008 highs.

The stock was recently purchases in the upper $30s as fears over losing a major partner for the Mexico network caused unwarranted panic. The stock also bounced nicely off the 200ema providing an opportune investing zone. Investors need to understand that NIHD now holds major assets in these licenses. Funding issues may abound but they are a savy network operator that should easily attract an investment dollars needed.


Brazil 3G license:


- Nextel Brazil is the winning bidder in the auction for a 20MHz license in the 1.9-2.1GHz frequency band in major Brazilian metropolitan markets, covering approximately 182.4 million people, or 97% of the Brazilian population 
- Nextel Brazil plans to move forward to invest, build and deploy a nationwide 3G network with commercial service beginning in 2012 



Via Bloomberg:


  • The airwaves will double the growth potential of NII in Brazil by making the company a national competitor, Sergio Chaia, president of its Brazilian unit, told reporters today in Brasilia. The company plans to invest as much as 5 billion reais over five years on its expansion.
  • “It’s a promising market,” Chaia said. Only 8 percent of Brazilians use wireless high-speed Internet, he said. “Nextel sees room to grow in this area.”
  • NII will add the data service to its network as soon as possible, he said, without providing a date. The company will pay for the expansion with cash and financing from Brazil’s national development bank, known as BNDES, Chaia said.
  • “It gives them a material spectrum position in the largest market in Latin America,” said King, who is based in Baltimore and recommends buying NII shares. “We view this as a significant positive.”

Disclosure: Long NIHD

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