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Why NII Holdings, Inc. Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NII Holdings, (NASDAQOTH: NIHDQ  ) fell more than 10% during intraday trading Monday after the company provided an update regarding its accelerated growth plan and business restructuring.

So what: Specifically, NII Holdings indicated that it's not only reducing its headquarters staff by over 25%, but also eliminating more than 1,400 positions in its market operations.

The end result, NII says, will be a more streamlined management structure, which should both improve efficiency, and reduce costs by around $50 million to $55 million annually. Consequently, the move will also result in one-time severance expenses in the range of $25 million to $35 million, including around $8.6 million in charges already accounted for in the company's third-quarter 2013 results.

Separately, NII also said it expects to lose approximately 400,000 subscribers in Mexico during the fourth quarter, primarily stemming from modification of its customer deactivation policy for inactive prepaid subscribers.

Finally, NII also confirmed it has officially closed the bulk of its previously announced sale of up to 2,790 communications sites to American Tower. As of today, NII has closed the sale of 1,940 of those sites in Brazil -- which it will lease back from American Tower for a minimum of 12 years -- for total proceeds of $348 million. This will provide much-needed liquidity for NII to complete the transformation of its NexTel subsidiaries in Latin America.

Now what: While this may be a necessary step to ensure NII Holdings' long-term survival, I think investors would be wise to let the dust settle before thinking about opening a position. Until NII can prove it has what it takes to stem the bleeding and achieve sustained long-term profitability, you'll find me on the sidelines.

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Related Tickers

12/31/1969 7:00 PM
NIHDQ $0.00 Down +0.00 +0.00%
NII Holdings, Inc. CAPS Rating: **