NII HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(in millions, except per share amounts, and unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenues
Service and other
revenues $745.5 $563.4 $391.3 $288.3
Digital handset and
accessory revenues 35.4 28.2 19.4 15.6
780.9 591.6 410.7 303.9
Operating expenses
Cost of service
(exclusive of
depreciation included
below) 194.3 149.5 97.9 77.4
Cost of digital handset
and accessory sales 110.6 98.5 56.3 51.2
Selling, general and
administrative 257.2 180.7 138.0 93.6
Depreciation 53.1 40.6 28.3 20.6
Amortization 2.8 7.3 1.5 3.4
618.0 476.6 322.0 246.2
Operating income 162.9 115.0 88.7 57.7
Other income (expense)
Interest expense (26.2) (26.9) (13.3) (10.9)
Interest income 10.1 5.4 5.6 3.2
Debt conversion expense (8.9) - (8.9) -
Loss on early
extinguishment of
debt, net - (79.3) - -
Foreign currency
transaction gains, net 2.1 8.2 0.1 1.5
Other (expense) income,
net (3.6) 1.8 (1.7) 2.8
(26.5) (90.8) (18.2) (3.4)
Income before income tax
provision and cumulative
effect of change in
accounting principle 136.4 24.2 70.5 54.3
Income tax provision (60.8) (47.1) (40.0) (24.5)
Income (loss) before
cumulative effect of
change in accounting
principle 75.6 (22.9) 30.5 29.8
Cumulative effect of
change in accounting
principle, net of income
taxes - 0.9 - -
Net income (loss) $75.6 $(22.0) $30.5 $29.8
Income (loss) before
cumulative effect of
change in accounting
principle per common
share, basic $1.07 $(0.33) $0.43 $0.43
Cumulative effect of
change in accounting
principle per common
share, basic - 0.01 - -
Net income (loss) per
common share, basic $1.07 $(0.32) $0.43 $0.43
Income (loss) before
cumulative effect of
change in accounting
principle per common
share, diluted $0.96 $(0.33) $0.40 $0.40
Cumulative effect of
change in accounting
principle per common
share, diluted - 0.01 - -
Net income (loss) per
common share, diluted $0.96 $(0.32) $0.40 $0.40
Weighted average number
of common shares
outstanding, basic 71 69 71 70
Weighted average number
of common shares
outstanding, diluted 86 69 86 85
CONSOLIDATED BALANCE SHEET DATA
(in millions)
June 30, December 31,
2005 2004
(unaudited)
Cash, cash equivalents and short-term
investments $555.8 $369.4
Accounts receivable, less allowance for
doubtful accounts of $11.3 and $8.1 183.8 160.7
Property, plant and equipment, net 731.7 558.2
Intangible assets, net 76.6 68.0
Total assets 1,960.4 1,491.3
Long-term debt, including current portion 781.3 603.5
Total liabilities 1,325.2 1,069.3
Stockholders' equity 635.2 422.0
NII HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS AND METRICS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(UNAUDITED)
NII Holdings, Inc.
(subscribers in thousands)
Three Months Ended
June 30,
2005 2004
Total digital subscribers (as of June 30) 2,120.4 1,664.3
Net subscriber additions 135.3 111.2
Churn (%) 1.8% 1.8%
Average monthly revenue per handset/unit
in service (ARPU)(1) $58 $55
Cost per gross add (CPGA) (1) $339 $334
Nextel Mexico
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenues
Service and other
revenues $445.9 $353.8 $233.0 $180.4
Digital handset and
accessory revenues 11.0 10.3 5.9 5.2
456.9 364.1 238.9 185.6
Operating expenses
Cost of service 79.9 63.1 42.6 32.6
Cost of digital handset
and accessory sales 56.1 51.3 27.5 26.2
Selling, general and
administrative 131.7 96.6 71.0 50.0
Depreciation and
amortization 31.1 34.6 15.9 17.1
298.8 245.6 157.0 125.9
Operating income $158.1 $118.5 $81.9 $59.7
Total digital subscribers
(as of June 30) 937.1 753.1
Net subscriber
additions 54.5 50.2
Churn (%) 1.8% 1.7%
ARPU (1) $79 $76
CPGA (1) $485 $458
Nextel Brazil
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenues
Service and other revenues $132.9 $84.9 $70.7 $43.1
Digital handset and
accessory revenues 11.4 8.9 6.2 5.5
144.3 93.8 76.9 48.6
Operating expenses
Cost of service 56.6 39.2 25.9 20.5
Cost of digital handset
and accessory sales 26.2 25.0 13.4 14.0
Selling, general and
administrative 47.8 22.3 26.9 9.6
Depreciation and
amortization 12.5 5.5 7.1 2.9
143.1 92.0 73.3 47.0
Operating income $1.2 $1.8 $3.6 $1.6
Total digital subscribers
(as of June 30) 536.2 424.1
Net subscriber additions 32.4 23.9
Churn (%) 2.1% 2.3%
ARPU (1) $41 $32
CPGA (1) $254 $245
Nextel Argentina
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenues
Service and other
revenues $114.7 $78.9 $60.9 $41.7
Digital handset and
accessory revenues 10.5 8.0 5.9 4.5
125.2 86.9 66.8 46.2
Operating expenses
Cost of service 40.3 29.6 20.9 15.7
Cost of digital handset
and accessory sales 19.4 15.0 10.8 7.8
Selling, general and
administrative 31.6 22.2 16.9 11.7
Depreciation and
amortization 7.7 5.0 4.4 2.5
99.0 71.8 53.0 37.7
Operating income $26.2 $15.1 $13.8 $8.5
Total digital subscribers
(as of June 30) 432.3 322.5
Net subscriber additions 31.7 26.4
Churn (%) 1.2% 1.1%
ARPU (1) $42 $40
CPGA (1) $184 $185
Nextel Peru
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenues
Service and other
revenues $51.4 $45.3 $26.4 $22.8
Digital handset and
accessory revenues 2.4 1.0 1.4 0.5
53.8 46.3 27.8 23.3
Operating expenses
Cost of service 16.9 17.1 8.2 8.3
Cost of digital handset
and accessory sales 8.7 7.2 4.6 3.2
Selling, general and
administrative 16.4 14.0 8.5 7.3
Depreciation and
amortization 4.0 2.6 2.1 1.4
46.0 40.9 23.4 20.2
Operating income $7.8 $5.4 $4.4 $3.1
Total digital subscribers
(as of June 30) 214.8 164.6
Net subscriber additions 16.7 10.7
Churn (%) 1.9% 2.2%
ARPU (1) $40 $45
CPGA (1) $212 $245
(1) For information regarding ARPU and CPGA, see "Non-GAAP Reconciliations
for the Six and Three Months Ended June 30, 2005 and 2004" included in this
release.
NON-GAAP RECONCILIATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(UNAUDITED)
Operating Income Before Depreciation and Amortization
Consolidated operating income before depreciation and
amortization, or OIBDA, represents operating income before depreciation and
amortization expense. Consolidated OIBDA is not a measurement under accounting
principles generally accepted in the United States, may not be similar to
consolidated OIBDA measures of other companies and should be considered in
addition to, but not as a substitute for, the information contained in our
statements of operations. We believe that consolidated OIBDA provides useful
information to investors because it is an indicator of operating performance,
especially in a capital intensive industry such as ours, since it excludes
items that are not directly attributable to ongoing business operations. Our
consolidated OIBDA calculations are commonly used as some of the bases for
investors, analysts and credit rating agencies to evaluate and compare the
periodic and future operating performance and value of companies within the
wireless telecommunications industry. Consolidated OIBDA can be reconciled to
our consolidated statements of operations as follows (in millions):
NII Holdings, Inc.
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
Consolidated operating
income $162.9 $115.0 $88.7 $57.7
Consolidated depreciation 53.1 40.628.3 20.6
Consolidated amortization 2.8 7.3 1.5 3.4
Consolidated operating
income before depreciation
and amortization 218.8 $162.9 $118.5 $81.7
Guidance Revised Guidance
Estimate Estimate
For the For the
Year Ended Year Ended
December 31, December 31,
2005 2005
Consolidated operating income $329.0 $346.6
Consolidated depreciation 116.0 122.5
Consolidated amortization 5.0 5.9
Consolidated operating income before
depreciation and amortization $450.0 $475.0
Average Monthly Revenue Per Handset/Unit in Service (ARPU)
Average monthly revenue per handset/unit in service, or
ARPU, is an industry term that measures service revenues, which we refer to as
subscriber revenues, per period from our customers divided by the weighted
average number of handsets in commercial service during that period. ARPU is
not a measurement under accounting principles generally accepted in the United
States, may not be similar to ARPU measures of other companies and should be
considered in addition, but not as a substitute for, the information contained
in our statements of operations. We believe that ARPU provides useful
information concerning the appeal of our rate plans and service offerings and
our performance in attracting and retaining high value customers. Other revenue
includes revenues for such services as roaming, service and repair,
cancellation fees, analog and other. ARPU can be calculated and reconciled to
our consolidated statement of operations as follows (in millions, except ARPU):
NII Holdings, Inc.
Three Months Ended
June 30,
2005 2004
Consolidated service and other revenues $391.3 $288.3
Less: consolidated analog revenues (2.3) (2.3)
Less: consolidated other revenues (33.5) (22.3)
Total consolidated subscriber revenues $355.5 $263.7
ARPU calculated with subscriber revenues $58 $55
ARPU calculated with service and other revenues $64 $60
Nextel Mexico
Three Months Ended
June 30,
2005 2004
Service and other revenues $233.0 $180.4
Less: analog revenues (1.2) (1.3)
Less: other revenues (17.1) (12.7)
Total subscriber revenues $214.7 $166.4
ARPU calculated with subscriber revenues $79 $76
ARPU calculated with service and other revenues $86 $83
Nextel Brazil
Three Months Ended
June 30,
2005 2004
Service and other revenues $70.7 $43.1
Less: analog revenues (0.6) (0.6)
Less: other revenues (6.7) (3.1)
Total subscriber revenues $63.4 $39.4
ARPU calculated with subscriber revenues $41 $32
ARPU calculated with service and other revenues $45 $35
Nextel Argentina
Three Months Ended
June 30,
2005 2004
Service and other revenues $60.9 $41.7
Less: other revenues (8.2) (5.1)
Total subscriber revenues $52.7 $36.6
ARPU calculated with subscriber revenues $42 $40
ARPU calculated with service and other revenues $49 $45
Nextel Peru
Three Months Ended
June 30,
2005 2004
Service and other revenues $26.4 $22.8
Less: other revenues (1.7) (1.5)
Total subscriber revenues $24.7 $21.3
ARPU calculated with subscriber revenues $40 $45
ARPU calculated with service and other revenues $43 $48
Cost per Gross Add (CPGA)
Cost per gross add, or CPGA, is an industry term that is
calculated by dividing our selling, marketing and handset and accessory subsidy
costs, excluding costs unrelated to initial customer acquisition, by our new
subscribers during the period, or gross adds. CPGA is not a measurement under
accounting principles generally accepted in the United States, may not be
similar to CPGA measures of other companies and should be considered in
addition, but not as a substitute for, the information contained in our
statements of operations. We believe CPGA is a measure of the relative cost of
customer acquisition. CPGA can be calculated and reconciled to our consolidated
statements of operations as follows (in millions, except CPGA):
NII Holdings, Inc.
Three Months Ended
June 30,
2005 2004
Consolidated digital handset and accessory
revenues $19.3 $15.7
Less: consolidated cost of handset and
accessory sales 56.3 51.2
Consolidated handset subsidy costs 37.0 35.5
Consolidated selling and marketing 54.2 40.1
Costs per statement of operations 91.2 75.6
Less: consolidated costs unrelated to initial
customer acquisition (8.8) (9.4)
Customer acquisition costs $ 82.4 $66.2
Cost per Gross Add $339 $334
Nextel Mexico
Three Months Ended
June 30,
2005 2004
Digital handset and accessory revenues $5.9 $5.2
Less: cost of handset and accessory sales 27.5 26.2
Handset subsidy costs 21.6 21.0
Selling and marketing 33.8 24.9
Costs per statement of operations 55.4 45.9
Less: costs unrelated to initial customer
acquisition (5.2) (5.6)
Customer acquisition costs $50.2 $40.3
Cost per Gross Add $485 $458
Nextel Brazil
Three Months Ended
June 30,
2005 2004
Digital handset and accessory revenues $6.2 $5.5
Less: cost of handset and accessory sales 13.4 14.0
Handset subsidy costs 7.2 8.5
Selling and marketing 10.4 7.3
Costs per statement of operations 17.6 15.8
Less: costs unrelated to initial customer
acquisition (1.2) (2.9)
Customer acquisition costs $16.4 $12.9
Cost per Gross Add $254 $245
Nextel Argentina
Three Months Ended
June 30,
2005 2004
Digital handset and accessory revenues $5.9 $4.5
Less: cost of handset and accessory sales 10.8 7.9
Handset subsidy costs 4.9 3.4
Selling and marketing 5.4 3.8
Costs per statement of operations 10.3 7.2
Less: costs unrelated to initial customer
acquisition (1.7) (0.4)
Customer acquisition costs $8.6 $6.8
Cost per Gross Add $184 $185
Nextel Peru
Three Months Ended
June 30,
2005 2004
Digital handset and accessory revenues $1.4 $0.5
Less: cost of handset and accessory sales 4.6 3.1
Handset subsidy costs 3.2 2.6
Selling and marketing 3.4 3.1
Costs per statement of operations 6.6 5.7
Less: costs unrelated to initial customer
acquisition (0.6) (0.5)
Customer acquisition costs $6.0 $5.2
Cost per Gross Add $212 $245
Net Debt
Net debt represents total long-term debt less cash, cash
equivalents and short-term investments. Net debt to consolidated operating
income before depreciation and amortization represents net debt divided by
consolidated operating income before depreciation and amortization. Net debt is
not a measurement under accounting principles generally accepted in the United
States, may not be similar to net debt measures of other companies and should
be considered in addition to, but not as a substitute for, the information
contained in our balance sheets. We believe that net debt and net debt to
consolidated operating income before depreciation and amortization provide
useful information concerning our liquidity and leverage. Net debt as of June
30, 2005 can be calculated as follows (in millions):
Total long-term debt $768.9
Less: cash, cash equivalents and
short-term investments 555.8
Net debt $213.1
Net debt to revised consolidated OIBDA guidance and net debt
to revised consolidated operating income guidance for the year ended December
31, 2005 are as follows:
Net debt to revised consolidated operating income
before depreciation and amortization guidance 0.4
Net debt to revised consolidated operating income
guidance 0.6
Cash, Cash Equivalents and Short-Term Investments
Consolidated cash, cash equivalents and short-term
investments represents total cash and cash equivalents plus short-term
investments. Consolidated cash, cash equivalents and short-term investments is
not a measurement under accounting principles generally accepted in the United
States, may not be similar to consolidated cash, cash equivalents and short-term
investment measures of other companies and should be considered in addition to,
but not as a substitute for, the information contained in our balance sheets.
We believe that consolidated cash, cash equivalents and short-term investments
provides useful information concerning our liquidity. Consolidated cash, cash
equivalents and short-term investments as of June 30, 2005 can be calculated as
follows (in millions):
Consolidated cash and cash
equivalents $544.9
Plus: short-term investments 10.9
Consolidated cash, cash equivalents
and short-term investments $555.8