NII Likely to File for Bankruptcy Protection as Users Depart

Aug 12, 2014 5:11 pm ET

(Updates trading in fifth paragraph.)

Aug. 12 (Bloomberg) -- NII Holdings Inc., the mobile-phone carrier that’s been losing subscribers in Latin America, said it will probably file for Chapter 11 bankruptcy protection because it can’t fulfill financial obligations. The shares plunged.

The company’s financial performance, combined with the inability to meet its borrowing terms, means NII is likely to file for bankruptcy, according to a statement yesterday. The carrier has until Aug. 15 to certify to banks that it’s complying with its debt covenants, after which the lenders can declare a default, according to a filing.

NII, which offers Nextel mobile-phone service and has units in Brazil, Mexico, Chile and Argentina, has been losing customers as America Movil SAB and Telefonica SA offer faster download speeds for smartphones. Revenue at NII slumped 23 percent in the second quarter, and it reported a net loss of 77,000 subscribers in the period.

“Despite the actions we’ve taken to improve our operational performance, we have fallen short in our efforts, leaving the company with a liquidity position that is not sufficient to support the business,” said Steve Shindler, NII’s chief executive officer, in the statement.

Shares of the Reston, Virginia-based company dropped 76 percent to 16 cents at the close in New York. They had already plunged 90 percent in the past year through the close of regular trading yesterday.

Brazil, Mexico

The company’s struggles are a disappointment for Brazil and Mexico, where regulatory agencies had championed NII, setting aside airwave licenses for a new competitor so that larger rivals couldn’t outspend it on valuable capacity. Brazil went even further in 2012, exempting small carriers like NII from fees to connect calls to larger companies’ customers.

The airwave licenses came too late for NII to build faster networks that could compete with America Movil and Telefonica. The company lost 269,000 customers in Brazil, its largest market, in 2012, before recovering last year with 111,900 user gains. In Mexico, NII shed 637,200 subscribers in 2013, and losses have continued this year.

In March, NII hired UBS AG as a financial adviser for advice on potential strategic opportunities, including partnerships, a merger or a sale of the company or its assets. The company announced in December that it would cut 1,400 jobs.

NII ended the second quarter with $5.8 billion in total debt and $1 billion in consolidated cash, restricted cash and investments, according to yesterday’s statement.

The net loss for the second quarter widened to $623.3 million, or $3.62 a share, from a loss of $396.4 million, or $2.30, a year earlier, the company said.