NII HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in millions, except per share amounts, and unaudited)
Nine Months Three Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Restated Restated
Operating revenues
Service and other revenues $853.8 $644.4 $299.0 $235.0
Digital handset and accessory
revenues 43.7 31.2 17.1 11.3
897.5 675.6 316.1 246.3
Operating expenses
Cost of service (exclusive of
depreciation included below) 229.4 169.8 83.7 69.5
Cost of digital handset and
accessory sales 143.2 91.4 50.7 32.6
Selling, general and
administrative 281.9 228.5 99.4 77.3
Depreciation 58.5 32.0 20.1 13.1
Amortization 29.8 28.4 9.9 9.8
742.8 550.1 263.8 202.3
Operating income 154.7 125.5 52.3 44.0
Other income (expense)
Interest expense (38.5) (49.2) (11.6) (18.3)
Interest income 9.2 7.1 3.6 1.9
(Loss) gain on early
extinguishment of debt, net (79.3) 22.4 -- 22.4
Foreign currency transaction
gains (losses), net 0.1 14.2 0.1 (3.3)
Other expense, net (0.4) (8.6) (1.7) (1.6)
(108.9) (14.1) (9.6) 1.1
Income before income tax provision 45.8 111.4 42.7 45.1
Income tax provision (38.7) (18.7) (19.0) (5.7)
Net income $7.1 $92.7 $23.7 $39.4
Net income per common share, basic $0.10 $1.51 $0.34 $0.63
Net income per common share,
diluted $0.10 $1.43 $0.32 $0.60
Weighted average number of common
shares outstanding, basic 69,500 61,449 69,705 62,695
Weighted average number of common
shares outstanding, diluted 72,398 64,711 79,196 65,692
CONSOLIDATED BALANCE SHEET DATA
(in millions and unaudited)
September December
30, 31,
2004 2003
Restated
Cash, cash equivalents and short-term
investments $336.5 $405.4
Accounts receivable, less allowance for
doubtful accounts of $8.3 and $9.0 147.1 120.6
Property, plant and equipment, net 467.9 366.8
Intangible assets, net 165.6 192.2
Total assets 1,322.6 1,231.2
Long-term debt, including current portion 593.6 536.8
Total liabilities 981.6 896.2
Stockholders' equity 341.0 335.1
NII HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS AND METRICS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
NII Holdings, Inc.
(subscribers in thousands)
Three Months Ended
September 30,
2004 2003
Total digital subscribers (as of September 30) 1,783.0 1,387.3
Net subscriber additions 118.7 58.8
Churn (%) 1.7% 2.4%
Average monthly revenue per handset/unit in
service (ARPU) (1) $54 $55
Cost per gross add (CPGA) (1) $331 $342
Nextel Mexico
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Nine Months Three Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Restated Restated
Operating revenues
Service and other revenues $534.3 $403.7 $185.1 $147.8
Digital handset and accessory
revenues 16.6 13.5 6.6 4.8
550.9 417.2 191.7 152.6
Operating expenses
Cost of service 97.7 83.1 35.5 36.3
Cost of digital handset and
accessory sales 74.8 52.0 26.9 17.8
Selling, general and administrative 150.0 120.1 50.8 42.3
Depreciation and amortization 66.6 51.8 21.7 18.8
389.1 307.0 134.9 115.2
Operating income $161.8 $110.2 $56.8 $37.4
Total digital subscribers (as of
September 30) 804.5 615.9
Net subscriber additions 51.4 35.2
Churn (%) 1.7% 2.1%
ARPU (1) $75 $80
CPGA (1) $472 $456
Nextel Brazil
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Nine Months Three Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Operating revenues
Service and other revenues $130.6 $99.0 $46.8 $35.4
Digital handset and accessory
revenues 13.5 7.7 5.5 2.5
144.1 106.7 52.3 37.9
Operating expenses
Cost of service 61.0 39.1 23.1 14.5
Cost of digital handset and
accessory sales 36.7 18.9 13.3 8.0
Selling, general and administrative 38.0 37.5 15.7 10.4
Depreciation and amortization 9.7 2.9 3.8 1.5
145.4 98.4 55.9 34.4
Operating (loss) income $(1.3) $8.3 $(3.6) $3.5
Total digital subscribers (as of
September 30) 454.7 371.2
Net subscriber additions 30.6 1.5
Churn (%) 2.1% 3.6%
ARPU (1) $33 $30
CPGA (1) $234 $248
Nextel Argentina
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Nine Months Three Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Operating revenues
Service and other revenues $119.8 $73.3 $43.9 $29.1
Digital handset and accessory
revenues 11.8 8.3 4.2 3.4
131.6 81.6 48.1 32.5
Operating expenses
Cost of service 44.0 22.1 16.4 10.1
Cost of digital handset and
accessory sales 21.7 11.4 7.3 4.1
Selling, general and administrative 34.9 25.9 13.3 9.5
Depreciation and amortization 6.4 2.7 2.4 1.4
107.0 62.1 39.4 25.1
Operating income $24.6 $19.5 $8.7 $7.4
Total digital subscribers (as of
September 30) 349.1 256.8
Net subscriber additions 26.6 18.8
Churn (%) 1.1% 1.1%
ARPU (1) $39 $37
CPGA (1) $170 $144
Nextel Peru
(dollars in millions, except ARPU and CPGA, and subscribers in thousands)
Nine Months Three Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Operating revenues
Service and other revenues $68.4 $67.6 $23.0 $22.4
Digital handset and accessory
revenues 1.8 1.7 0.7 0.5
70.2 69.3 23.7 22.9
Operating expenses
Cost of service 25.8 24.9 8.3 8.3
Cost of digital handset and
accessory sales 10.0 8.4 3.2 2.5
Selling, general and administrative 21.2 19.5 7.3 6.1
Depreciation and amortization 5.2 2.9 1.9 1.0
62.2 55.7 20.7 17.9
Operating income $8.0 $13.6 $3.0 $5.0
Total digital subscribers (as of
September 30) 174.7 143.4
Net subscriber additions 10.1 3.3
Churn (%) 1.9% 2.4%
ARPU (1) $43 $50
CPGA (1) $249 $318
(1) For information regarding ARPU and CPGA, see "Non-GAAP Reconciliations for
the Nine and Three Months Ended September 30, 2004 and 2003" included in this
release.
NON-GAAP RECONCILIATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(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.
Three Months Ended
September 30,
2004 2003
Consolidated operating income $52.3 $44.0
Consolidated depreciation 20.1 13.1
Consolidated amortization 9.9 9.8
Consolidated operating income before
depreciation and amortization $82.3 $66.9
NII Holdings, Inc.
Guidance
Estimate
For the Year Ended
December 31,
2004
Consolidated operating income $207.0
Consolidated depreciation 83.0
Consolidated amortization 40.0
Consolidated operating income before depreciation and
amortization $330.0
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
September 30,
2004 2003
Consolidated service and other revenues $299.0 $235.0
Less: consolidated analog revenues (2.2) (1.9)
Less: consolidated other revenues (24.3) (12.6)
Total consolidated subscriber revenues $272.5 $220.5
ARPU calculated with subscriber revenues $54 $55
ARPU calculated with service and other
revenues $59 $59
Nextel Mexico
Three Months Ended
September 30,
2004 2003
Consolidated service and other revenues $185.1 $147.8
Less: consolidated analog revenues (1.3) (0.8)
Less: consolidated other revenues (13.7) (7.2)
Total consolidated subscriber revenues $170.1 $139.8
ARPU calculated with subscriber revenues $75 $80
ARPU calculated with service and other
revenues $81 $84
Nextel Brazil
Three Months Ended
September 30,
2004 2003
Consolidated service and other revenues $46.8 $35.4
Less: consolidated analog revenues (0.6) (0.6)
Less: consolidated other revenues (3.8) (1.7)
Total consolidated subscriber revenues $42.4 $33.1
ARPU calculated with subscriber revenues $33 $30
ARPU calculated with service and other
revenues $36 $32
Nextel Argentina
Three Months Ended
September 30,
2004 2003
Consolidated service and other revenues $43.9 $29.1
Less: consolidated other revenues (5.3) (2.6)
Total consolidated subscriber revenues $38.6 $26.5
ARPU calculated with subscriber revenues $39 $37
ARPU calculated with service and other
revenues $45 $40
Nextel Peru
Three Months Ended
September 30,
2004 2003
Consolidated service and other revenues $23.0 $22.4
Less: analog revenues (0.1) (0.1)
Less: consolidated other revenues (1.5) (1.3)
Total consolidated subscriber revenues $21.4 $21.0
ARPU calculated with subscriber revenues $43 $50
ARPU calculated with service and other
revenues $46 $53
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
September 30,
2004 2003
Consolidated digital handset and accessory
revenues $17.1 $11.3
Less: consolidated cost of handset and
accessory sales 50.7 32.6
Consolidated handset subsidy costs
Handset subsidy costs 33.6 21.3
Consolidated selling and marketing Handset
subsidy costs 40.0 32.8
Costs per statement of operations Handset
subsidy costs 73.6 54.1
Less: consolidated costs unrelated to initial
customer
acquisition (8.5) (4.2)
Customer acquisition costs $65.1 $49.9
Cost per Gross Add $331 $342
Nextel Mexico
Three Months Ended
September 30,
2004 2003
Digital handset and accessory revenues $6.6 $4.8
Less: cost of handset and accessory sales 26.9 17.8
Handset subsidy costs 20.3 13.0
Selling and marketing 25.1 20.2
Costs per statement of operations 45.4 33.2
Less: costs unrelated to initial customer
acquisition (5.4) (2.2)
Customer acquisition costs $40.0 $31.0
Cost per Gross Add $472 $456
Nextel Brazil
Three Months Ended
September 30,
2004 2003
Digital handset and accessory revenues $5.5 $2.5
Less: cost of handset and accessory sales 13.3 8.0
Handset subsidy costs 7.8 5.5
Selling and marketing 7.1 6.0
Costs per statement of operations 14.9 11.5
Less: costs unrelated to initial customer
acquisition (1.8) (1.8)
Customer acquisition costs $13.1 $9.7
Cost per Gross Add $234 $248
Nextel Argentina
Three Months Ended
September 30,
2004 2003
Digital handset and accessory revenues $4.2 $3.4
Less: cost of handset and accessory sales 7.3 4.1
Handset subsidy costs 3.1 0.7
Selling and marketing Handset subsidy costs 3.9 3.0
Costs per statement of operations 7.0 3.7
Less: costs unrelated to initial customer --
acquisition (0.7)
Customer acquisition costs $6.3 $3.7
Cost per Gross Add $170 $144
Nextel Peru
Three Months Ended
September 30,
2004 2003
Digital handset and accessory revenues $0.7 $0.5
Less: cost of handset and accessory sales 3.2 2.5
Handset subsidy costs 2.5 2.0
Selling and marketing 2.8 2.4
Costs per statement of operations 5.3 4.4
Less: costs unrelated to initial customer
acquisition (0.5) (0.1)
Customer acquisition costs $4.8 $4.3
Cost per Gross Add $249 $318
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 September 30, 2004 can be calculated as follows (in millions):
Total long-term debt $591.8
Less: cash, cash equivalents and
short-term investments 336.5
Net debt $255.3
Net debt to consolidated OIBDA guidance and net debt to consolidated operating income guidance for the year ended December 31, 2004 are as follows:
Net debt to consolidated operating income
before depreciation and amortization guidance 0.77
Net debt to consolidated operating income
guidance 1.23