NII Holdings, Inc. (NASDAQ: NIHD) today announced its financial results for the second quarter of 2016. For the quarter, the Company generated consolidated operating revenues of $249 million, consolidated adjusted operating income before depreciation and amortization (adjusted OIBDA) of $14 million and a consolidated operating loss of $29 million. The Company's consolidated adjusted OIBDA excludes the impact of non-cash asset impairments, restructuring charges and other unusual items. Capital expenditures were $4 million for the quarter. The Company ended the quarter with $429 million in consolidated cash and short-term investments and $208 million of cash held in escrow. The Company reported net subscriber losses of 179,000 in the quarter, which were primarily driven by continued subscriber losses on the Company's iDEN network.
"We continued to make progress this quarter toward improving our operating results," said Steve Shindler, Chief Executive Officer. "Our team in Brazil has maintained a steady focus on managing our cost structure to align with our revenue stream, resulting in improved adjusted OIBDA and lower cash burn. Our subscriber results reflect both our strategy to selectively load subscribers with attractive ARPU and profitability profiles and the challenging economic and competitive environment in Brazil that continues to put pressure on our churn."
Nextel Brazil's average monthly service revenue per subscriber (ARPU) for the second quarter of 2016 increased 6% on a constant currency basis compared to the same quarter last year, but declined by $1 on a reported basis due to a 14% year-over-year decline in the average value of the Brazilian real. Nextel Brazil's average monthly churn rate for the quarter increased to 3.99 percent in the second quarter of 2016 from 3.34 percent in the same quarter last year due to increases in both 3G and iDEN churn. Nextel Brazil's cost per gross addition (CPGA) was $99 for the second quarter of 2016, a $108 decrease from the same quarter last year, primarily due to an increase in new 3G postpaid subscribers in Brazil who use their own handsets rather than purchasing a new one from the Company. Nextel Brazil's cash cost per user (CCPU) was $16 for the second quarter of 2016, a $5 decrease from the same quarter last year primarily resulting from reductions in various operating costs and a decline in local currency exchange rates.
"We continued to focus on our liquidity, which increased by $62 million during the quarter primarily from the recovery of $57 million of cash that was securing performance bonds in Brazil," said Dan Freiman, Chief Financial Officer. "We were also able to keep our cash burn low as we continued to benefit from cost reductions in our business while keeping our revenues stable."
Receipt of Bank Covenant Waivers in Brazil
The Company also announced that Nextel Brazil, its wholly-owned operating subsidiary, has secured waivers from Banco do Brazil and Caixa Econômica Federal related to certain financial covenants in its local bank loans. In accordance with the waivers, the lenders have agreed to waive Nextel Brazil's obligation to comply with a net debt to earnings before interest, taxes, depreciation and amortization, or EBITDA, ratio test for the June 30, 2016 measurement date. The next measurement date for the net debt to EBITDA ratio test will be December 31, 2016, at which point Nextel Brazil must maintain a net debt to EBITDA ratio of no greater than 3.5.
Roaming and RAN Sharing Agreement
In May 2016, Nextel Brazil entered into an amendment to a nationwide roaming voice and data services agreement with Telefonica Brazil S.A. to reduce the usage rates for roaming traffic. Concurrently, Nextel Brazil entered into a 10-year radio access network, or RAN, sharing agreement with Telefonica under which Telefonica will permit Nextel Brazil to use its tower and equipment infrastructure to transmit telecommunications signals on Nextel Brazil's spectrum. These agreements require Nextel Brazil to meet certain minimum annual commitments over a five-year period totaling 800 million Brazilian reais, which replaced the remaining commitments under the original roaming agreement. Nextel Brazil is required to prepay 250 million Brazilian reais shortly after the agreements become effective with receipt of regulatory approvals, which occurred in early August. The Company expects the RAN sharing agreement to provide significant financial benefits to Nextel Brazil. It will allow Nextel Brazil to cease operating a significant number of its transmitter and receiver sites in low-usage areas, which would reduce future operating expenses. In addition, Nextel Brazil will be able to forego construction of new transmitter and receiver sites and utilize the RAN sharing agreement to fulfill regulatory coverage obligations, which would reduce future operating expenses and capital expenditures.
Additional details regarding the Company's results, including a more detailed explanation on local currency operating metrics, are included in the Company's Quarterly Report on Form 10-Q for the three months endedJune 30, 2016 that was filed with the Securities and Exchange Commission today. In 2015, the Company sold its operations in Mexico and Argentina, and as a result, all results presented in this press release reflect these markets as discontinued operations. Additional operational and financial details, including a quarterly earnings presentation, are also available under the Company's Investor Relations link at www.nii.com.
In addition to the financial results prepared in accordance with accounting principles generally accepted in the United States (GAAP) provided throughout this press release and in the attached financial tables, NII Holdings has presented consolidated adjusted OIBDA, as well as Nextel Brazil's ARPU, CCPU, and CPGA. These measures are non-GAAP financial measures and should be considered in addition to, but not as substitutes for, the information prepared in accordance with GAAP. Reconciliations from GAAP results to these non-GAAP financial measures are provided in the notes to the attached financial tables. To view these and other reconciliations of non-GAAP financial measures that the Company uses, visit the investor relations link atwww.nii.com.
About NII Holdings, Inc.
NII Holdings, Inc., a publicly held company based in Reston, Virginia, is a provider of differentiated mobile communication services for businesses and high value consumers in Brazil. NII Holdings, operating under the Nextel brand, offers fully integrated wireless communication tools with digital cellular voice services, data services and wireless Internet access. Visit the Company's website at www.nii.com.
