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NII Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript

We have also continued to move forward on our plans to target a wider range of customers. We have completed the refresh of our brand that we started last year in anticipation of our launch of 3G services. Our brand has strong recognition among both our core business customers and the high-end consumer segments we plan to target.

We continue to expand our distribution network, adding 160 points of presence in the first half of the year, which will help us as we target a wider group of customers with our expanded services.

And finally, we are building our 3G device portfolio and launched our first smartphone with plans to have 12 3G handsets in our device portfolio by year-end. So, overall, we made good progress on our 3G and expansion efforts during the quarter.

From an operational perspective, our results for the quarter were impacted by the decline in foreign currency exchange rates, and from actions we are taking in Brazil to address customers we attracted last year that are not the right fit for our services. These actions have helped stabilize ARPU in Brazil in recent months but have also driven a higher level of churn. Gokul will give you more details in a moment but let me give you a brief overview of this situation.

As we discussed on previous calls, market conditions in Brazil intensified last year with more aggressive pricing campaigns and 3G device offers by our competitors. We responded with promotions of our own, which attracted a group of price sensitive customers who didn't assign significant value to our high quality service, which are the benefits of intrinsic communications that are our key points of differentiation. In working to retain customers we also began to experience a rise in retention cost and an increase in migrations to lower price plans, both of these negatively impacted ARPU.

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