What's in store for troubled Nextel Brasil?

After selling nearly all of Nextel's operations across Latin America, NII Holdings's last remaining unit continues to struggle.

Nextel Brasil swung to a net loss of US$31mn last year, from a profit of US$ 59.1mn in 2016. In the fourth quarter alone, the company lost US$15.9mn, compared to net income of US$7.5mn in 4Q16.

Operationally speaking, the picture is not so bleak. In 4Q17, for example, Nextel Brazil reported 26,800 3G/4G net subscriber additions, compared to a net loss of 32,300 in the third quarter of 2017.

In addition, 3G/4G churn for Q4 was 3.47%, a 57-basis point decrease compared to the previous quarter, while subscriber migrations from the iDEN network to 3G/4G were 23,500 – the highest quarterly level reported for 2017.

But because of the market's highly competitive scenario and growing costs, this does not necessarily materialize into good financials. Revenues were down: US$847.8mn in full-year, compared to US$963mn in 2016.

The company provided 2018 guidance of at least 300,000 3G/4G net subscriber additions and capex in line with the US$51mn last year.

ICE OUT

Norway's ICE Group (formerly AINMT), which had inked an investment agreement with NII last year, did not exercise the option to make a second investment round in the company, and prompted NII to terminate the deal at the end of February.

Last June, AINMT and NII entered into an agreement in which the Norwegians would invest US$50mn for a 30% stake in Nextel.

According to terms of the deal, AINMT would have the possibility of putting an additional US$150mn into Nextel for another 30%.

But the company put that option on hold, conditioning it to the renegotiation of Nextel debts with Brazilian and Chinese banks, and later failed to exercise the option by the required exercise option date.

SPECTRUM

On a positive note, regulator Anatel could raise spectrum caps on mobile operators, to 40% in some cases. Paired with the caps revision, Anatel is also planning new spectrum auctions, including leftover frequencies.

All that could spur consolidation in the sector, prompting for example AT&T to become a mobile player in Brazil. Under this scenario, troubled Nextel could be one of its targets.

Furthermore, a decision by Anatel at the end of 2017 to release performance bonds securing Nextel Brazil's geographic network coverage obligations represents a recovery for Nextel of up to 156mn reais (US$48mn) of cash collateral.