NII Holdings' CEO Discusses Q1 2012 Results - Earnings Call Transcript

NII Holdings (NIHD)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET

Executives

Tim Perrott -

Steven P. Dussek - Chief Executive Officer and Director

Gokul V. Hemmady - Chief Financial Officer, Chief Transformation Officer and Executive Vice President

Analysts

Christopher C. King - Stifel, Nicolaus & Co., Inc., Research Division

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

James D. Breen - William Blair & Company L.L.C., Research Division

Kevin M. Roe - Roe Equity Research, LLC

Rizwan S. Ali - Deutsche Bank AG, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for holding, and welcome to the NII Holdings First Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's conference call will be available for rebroadcast for the following 2 weeks beginning later today. Domestic callers may access the rebroadcast by dialing (888) 286-8010 and entering passcode 49825668. International participants may access the rebroadcast by dialing 617-801-6888 and entering passcode 49825668. [Operator Instructions] I will now turn the conference over to our host, Tim Perrott, Vice President of Investor Relations and Corporate Communications. Please go ahead, sir.

Tim Perrott

Thank you, Frances. And good morning to everyone, and thank you for joining NII Holdings' First Quarter 2012 Results Conference Call. With me on the call today are Steve Dussek, our CEO; and Gokul Hemmady, our Executive Vice President and CFO.

As a preliminary matter, let me inform you that some of the issues discussed today that are not historical will be forward looking and, as such, should be taken in the context of the risks and uncertainties that are outlined in the SEC filings of NII Holdings, including our 2011 Form 10-K filed with the SEC on February 23, 2012, as well as other documents we have filed with the SEC.

In addition, during this call, we'll be discussing certain financial metrics that do not conform to Generally Accepted Accounting Principles in the U.S, or better known as GAAP. For a reconciliation of these financial metrics to GAAP, please access NII's Investor Relations link at nii.com.

I would now like to introduce Steve Dussek, our CEO. Steve?

Steven P. Dussek

Thank you, Tim. Good morning, and thank you for joining our call today.

Our results in the first quarter reflect both successes and challenges. We made progress on our key initiatives for the year, but our operating performance in some of our markets fell below our expectations. I want to give you my insight into both of these areas.

First, looking at our operating results, our net add performance was below what we wanted to accomplish in the first quarter. The factors contributing to the net add results varied somewhat from market to market, but strong competition was a common contributor across our markets. Also, the decisions we made last quarter to scale back our prepaid offering in Argentina and to delay the launch of 3G Push-to-Talk services in Peru contributed to the shortfall.

In Brazil, strong competition continues to create a difficult environment as pricing remains aggressive and the adoption of 3G devices has accelerated. This situation has made it more challenging for us to generate quality growth in the near term as we develop a broader set of services on 3G that are necessary for our long-term success.

We are changing certain policies and rate plans in order to improve our performance in Brazil. While we believe that these actions are the best approach to achieve our long-term objectives, we anticipate that the general competitive environment will continue to weigh on our results for the next several quarters.

Having said that, I would like to emphasize that we see tremendous opportunity for NII in Brazil for the long run. The investments that we are making today to deploy our advanced platform will allow us to greatly expand our product set, service capabilities and coverage in an expanding market. All of this will position us to capture higher levels of profitable growth in the future.

In Peru, as you are aware, last quarter we made the decision to delay a broader rollout of our 3G Push-to-Talk product while we made adjustments to improve the quality of the service. This was the right decision, as quality will be one of the most important ingredients to drive profitable growth in the future. This delay, combined with higher customer churn, resulted in lower net adds for the quarter. I will provide more information in a few moments, but we are happy to report that we have completed improvements to our 3G Push-to-Talk service and we are making this service available on a broader scale in Peru beginning in May. We expect this service to contribute to our growth beginning in the third quarter.

In Argentina, as we discussed in our last call, after experiencing positive initial customer acceptance of our prepaid trial service, we made the decision to take a more deliberate approach to growing our prepaid base so that we can better understand the characteristics of the customers who prefer this service and how best to serve them. We will use that learning to find the right balance between prepaid subscriber growth and profitability. As a result, we reported a fairly significant sequential decline in our prepaid gross subscribers during the first quarter. Going forward, we expect prepaid plans to be a component of our strategy in Argentina and may contribute more growth in the coming quarters.

We expect that we will continue to face challenges through the balance of this year, but we believe that the actions we've taken and planned to date will create a path to reach our 2012 net add goals. These actions include our more aggressive offering of voice services on our 3G network in Peru and our launch of services on our 3G networks in Chile and Mexico later this year.

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