Nextel's woes worsen with another bad quarterly result

Friday, November 10, 2017

US telecom company NII Holdings, controller of Nextel Brazil, suffered yet another poor performance in the third quarter as its operations struggle due to competition and the continuous loss of iDen (radio) customers.

Nextel reported operating losses of US$30.7mn in Q3, reversing profits of US23.6mn in the same period of last year. The firm's operating revenues also slipped 21.7% to US$200mn. Meanwhile, NII posted a net loss of US$94.5mn, down from US$1.41bn in 3Q16.

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Throughout the year, as cash burn increased, NII Holdings injected an additional US$173mn into the company, which came from the sale of Nextel México. But without new capital – NII hinted that it will not be able to bail out Nextel again – the operator could run out of cash by mid-2018.

In the meantime, Norway's Ice Group (formerly AINMT), which this year acquired a 30% stake in Nextel Brazil, called for more time to study whether it will exercise its option to make a second investment in the carrier, which would mean acquiring another 30% stake for US$150mn.

"Our results this quarter were impacted by continued pressure on our revenues from both competitive forces and the wind down of our iDEN business," Nextel Brazil CEO Roberto Rittes said in an earnings statement.

Nextel's iDen customer base declined 53.2% over the 12 months to end-September, reaching around 450,000 subscribers. The company has already informed its clients that the technology will be officially disconnected in early 2018, which means that the migration to 3G and 4G needs to be accelerated.

"We have launched new commercial offers that positively impacted our gross adds for the quarter and are taking actions that we believe will improve our cost structure, limit spending and reduce churn," added Rittes.

At the Telcomp telecom conference this week in Sao Paulo, before the release of the results, Rittes said that operators – Nextel included –needed to embrace the OTT concept and provide further digital, customer automation services. This can result in greater efficiency and less churn, but on the other hand the investment to structure it could be an issue for Nextel.