NII Holdings Management Discusses Q4 2012 Results - Earnings Call Transcript

Feb.28.13 | About: NII Holdings, (NIHD)

NII Holdings (NASDAQ:NIHD)

Q4 2012 Earnings Call

February 28, 2013 8:30 am ET

Executives

Tim Perrott

Steven M. Shindler - Executive Chairman, Chief Executive Officer and Member of Finance Committee

Gokul V. Hemmady - Chief Operating Officer

Juan R. Figuereo - Chief Financial Officer and Executive Vice President

Analysts

Christopher C. King - Stifel, Nicolaus & Co., Inc., Research Division

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

James D. Breen - William Blair & Company L.L.C., Research Division

Kevin Smithen - Macquarie Research

Andres Coello - Scotiabank Global Banking and Markets, Research Division

Michel Morin - Morgan Stanley, Research Division

Kevin M. Roe - Roe Equity Research, LLC

Walter Piecyk - BTIG, LLC, Research Division

Mauricio Fernandes - BofA Merrill Lynch, Research Division

Soomit Datta - New Street Research LLP

Operator

Ladies and gentlemen, thank you for holding, and welcome to the NII Holdings' Fourth Quarter Year-End 2012 Earnings Conference Call. [Operator Instructions] Today's conference will be available for rebroadcast through -- for the following 2 weeks, beginning later today. Domestic callers may access the rebroadcast by dialing 1 (888) 286-8010 and entering passcode 87381158. International participants may access the rebroadcast by dialing 1 (617) 801-6888 and entering passcode 87381158. [Operator Instructions] .

I will now turn the conference over to our host, Tim Perrott, Vice President of Investor Relations and Corporate Communications. Please go ahead, sir.

Tim Perrott

Yes, and thank you, and good morning to everyone, and thank you for joining NII Holdings' fourth quarter and year-end 2012 results conference call.

With me on the call today are Steve Shindler, our interim CEO; Juan Figuereo, our CFO and Gokul Hemmady, our COO.

As a preliminary matter, let me inform you that some of the issues discussed today that are not historical will be forward looking, and as such, should be taken in the context of the risks and uncertainties that are outlined in the SEC filings of NII Holdings, including our Form 10-K filed with the SEC this morning, as well as other documents we have filed with the SEC.

In addition, during this call, we'll be discussing certain financial metrics that do not conform to Generally Accepted Accounting Principles in the U.S. or better known as GAAP. For a reconciliation of these financial metrics to GAAP, please access NII's Investor Relations link at nii.com.

I would now like to introduce Steve Shindler, our CEO. Steve?

Steven M. Shindler

Thank you, Tim. Good morning, and thank you for joining our call today. As most of you know, earlier this month, we announced our preliminary 2012 results and 2013 outlook. We will provide more insight into the drivers of our results later in the call. But before we do, I wanted to give you my perspective on our business based on what I've seen since I returned as CEO 2 months ago.

Since my return, I've been reacquainting myself with the details of our operations and ensuring that we make the decisions necessary to get our business back on a growth track. I have spent time with our teams in the market, visited stores and met with customers to understand what we're doing well and what we need to do better. In my recent visits to our markets, I experienced firsthand the powerful differentiators of our business, making me even more excited and energized about our prospects. We have a strong brand and loyal customers. We provide excellent customer care, and offer products and services that our customers want. We also offer a unique service that allows users to communicate instantly in a way that isn't available from our competitors. Based on all that I've seen, I'm convinced that our ability to win in the market and attract customers remains intact.

Of course, our team and the Board are disappointed with our recent results, and I expect you are, too. Let me share with you my insights and thoughts on actions we're taking to get back on track.

First, and I believe most important, I found that we had lost some of our focus on execution. Our company has a history of operating with a relentless focus on the details of our business, which I believe has been the key driver of our success. But over the past year or so, we lost some of that focus. Not everywhere mind you, but we have lost it in enough places that our results suffered. That was certainly the case in Brazil where the competing demands of building our new network while operating a growing business resulted in a failure to track our execution at a level of detail required for success.

I also found that dealing with the complexity of building our new networks, including the changes to our distribution channels and supporting systems, was more difficult than we had anticipated. We believe that our new networks will significantly increase our available market and revenue opportunity. But the transition to the new platform in a higher frequency band requires nearly twice the number of transmitter sites to deliver high-quality voice and data services. Completing our plan will create the network platform that positions us to capture more growth and provides the path to deploy future technologies like LTE when the opportunity arises.

And finally, I found, in some cases, that we had put core processes and tasks that we should have been doing ourselves into the hands of consultants and vendors. I believe that these and other factors contributed to our lack of execution in recent quarters.

Going forward, we are going to do things differently. Beginning in 2013, we're getting back to the basics of the business. We have instituted internal processes designed to closely track our progress against our goals. Some measures are reported on a daily basis to ensure that we focus each and every day on executing our plans. Most of what we do this year will focus on how to drive profitable growth while we continue to build and extend the coverage of our new networks.

We will realign our resources across our markets in order to deliver results especially in our core markets of Brazil and Mexico. To that end, we've taken steps to strengthen our management team. We'll also improve our efficiency by implementing cost reduction initiatives as we transition to our new networks and capture the new customers we expect to serve.

Finally, we're taking steps to improve our liquidity position including raising $750 million in new financing earlier this month and pursuing our proposed tower sale-leaseback transaction, all of which are designed to provide more flexibility as we complete our investment plans. We believe that all of these actions will put us in a position to improve our execution and grow profitably in the future.

While we have much work ahead of us, I think it's important to recognize our accomplishments in building a company that's positioned for future success. For example, using only a 2G platform, we now generate about 13% of the total wireless market revenues in Mexico and estimate that our subscribers there represent 25% of the postpaid market. And we estimate that our high-value customers generate about 8% of the total wireless market revenues in Brazil. These achievements using our 2G platform highlight the strength of the differentiation we bring to the market and our team's ability to deliver value by meeting our customers' needs.

Given what we've been able to accomplish using our 2G platform, you can understand why I'm excited about what our team will be able to do with more capable networks. Our new networks will allow us to significantly expand the services and devices that we can offer, especially new data services, while maintaining the differentiated push-to-talk services and quality of support that our customers expect. This will position us to serve our traditional customer base more effectively while offering attractive new services to those customers and to the new high-value customer segments that we plan to target.

I believe that we're on the right path to capture this opportunity. Our research showed that our high performance push-to-talk services continued to be a strong differentiator that meets our customers’ needs by providing reliable, immediate communications. But in many cases, our customers also want data services and a wider variety of handsets. Let me give you an example based on a recent meeting I had with one of our customers in Peru, a business owner with a mobile workforce. Here, you have what I refer to as a chooser and a user. The chooser, the gentlemen that I met with, selects the telecom provider for the business. He's typically an owner or a senior manager in a business with a number of handsets in use. The users are the broader group of employees who use our service in their day-to-day roles in the business. This particular customer had a large field sales force that depended on reliable immediate communication and high-touch customer service. This, of course, is at the core of what we've always offered. This is who we are.

For the sales force, our push-to-talk service is the perfect tool because their work demands the ability to communicate instantly using a rugged handset. On the other hand, the manager and others at his level each own more than 1 handset and are interested in our smartphones that allow them to communicate with the users in the business while also utilizing more robust data services. This segment of the business market is currently underserved by us because we haven't been able to completely meet the chooser's needs with our 2G platform. Our transition to our new networks will enable us to provide these customers with the devices and services that meet their needs.

With all of this as background, our efforts in 2013 will focus on making the investments for our future as we deploy our new networks in our major markets, begin to offer new services to customers and bring discipline and a culture of execution back into the day-to-day operation of our business. This will be a building year but our goals will be simple. We will complete the major portion of our new networks in 2 of the most populous cities in the world, São Paulo and Rio de Janeiro, while extending our 3G coverage to match our iDEN coverage in Mexico. We will return to our roots as a company focused on execution and delivering results on key operating metrics to drive improved performance. We will win in the market by providing the differentiated services and support our customers expect. We will drive significant cost reductions in our business. And we will pursue other strategies to improve our liquidity position including the proposed tower sale-leaseback transaction. Our success in achieving these goals is central to our broader goal of delivering profitable growth.

Now, I'll turn the call over to Gokul Hemmady, our Chief Operating Officer, for a review of some highlights of our operating results.

Gokul V. Hemmady

Thank you, Steve, and good morning, everyone.

I'd like to spend some time reviewing our operation's performance in 2012 and the actions we are taking to strengthen our competitive position as we make the transition to our new network.

Juan will go into the main drivers behind our financial results in a moment. But let me start with some highlights of our operating results for 2012.

We added 4.1 million growth subscribers, 11% increase from 2011 as a result of continued demand for our services in Mexico, the launch of our 3G networks in Peru and Chile, and growth on our prepaid base in Argentina. Consolidated churn was 2.64%, 90 basis points higher than 2011, primarily driven by higher churn in Brazil as we executed our plan to clean up our subscriber base as discussed on our last call.

We generated 650,000 net adds, down from 1.7 million net adds in 2011, primarily because of the higher churn levels in Brazil, which resulted in a net subscriber loss of 269,000 for the year in that market.

Consolidated ARPU was $38, down $10 from 2011, primarily due to the effect of lower local currency ARPU levels in Brazil and weaker foreign currency exchange rates, which represented more than 50% of the decrease.

Consolidated CPGA was $275, down $28 from 2011 as more of our growth adds were generated through lower-cost channels and prepaid subscribers made up a higher proportion of our gross add mix.

Now, I'd like to update you on our operations at the market level starting with Brazil.

This past year was challenging for Nextel Brazil as we dealt with the impact of some of the decisions we made in 2011. As you may recall from our comments on last quarter's results call, some of the actions we took to drive growth led to addition of unprofitable customers that were not aligned with our value proposition. We found that these customers generated lower ARPU, churned more often, driving higher bad debt expense and required significant investments to retain them. They also made more frequent calls to our customer care center, resulting in higher costs.

To address this problem, we implemented a plan designed to improve the quality of our gross add loading and eliminate unprofitable customers from our subscriber base. In the initial stages of this plan, we tightened our credit policy, modified our commercial offers and altered our commission structure. These changes led to an improvement in the quality of our growth add loading in the second half of the year. We also substantially reduced our investments in retention, especially for the unprofitable customers. Following these changes in the fourth quarter, we successfully executed our plan to remove certain unprofitable customers, reducing our customer base by 292,000 subscribers during the quarter. While this was obviously a significant reduction, we think it was the right action for us to take.

We believe we are now in a position to return to positive net add growth in Brazil in the first half of 2013. In addition, with the removal of less profitable customers from our base, along with the significant reduction in our retention investments, we have experienced slightly higher local currency ARPU over the last 3 quarters.

Moving forward, we are continuing with a more disciplined metrics-driven approach to maintain a healthy customer base. We are finding that churn is lower among the better credit quality customers that we are currently loading on the network and requests for retention offers have declined. We believe that this trend will continue driving improved results as we seek to profitably grow our business in Brazil.

Before I move on to the operating results of our other markets, I wanted to share some additional highlights on Brazil.

Since becoming COO, I've spent time in Brazil, meeting with customers and working with our team to enhance our focus on execution. I am very encouraged by what I see and the progress we are making. I found that we have 2 exceptionally strong elements that create the foundation for future success. First, after having met with several customers, it's clear to me that our brand remains strong. Nextel stands for quality, with an exceptional focus on the communities of users we create. Second, our people have the passion and eagerness to win. This is our DNA and is unique to Nextel. We have a great opportunity to generate future growth. Customers want more of what we have to offer. And while we have not been in a position to serve some of their needs, soon, we will be in a position to better serve all of their needs with advanced smartphones, quality communication and high-speed data services. And together with the strong foundation provided by our brand and by our people against a backdrop of an improving regulatory structure, we expect to drive significant value in Brazil over the long run.

That said, 2013 will remain a transitional year for Brazil as we continue to invest in the deployment of our 3G network and services in order to reach our goal. We are planning to begin offering services in 32 cities in and around São Paulo in the second quarter, covering initially about 25 million POPs, and we expect our coverage in São Paulo to grow to over 40 million POPs by the end of the year. We are also planning to begin offering services in Rio by year-end, initially covering about 20 million POPs. Deploying these new networks and making the transition to the new services they support in the 2 largest markets in Brazil while continuing to deliver results are the top priorities of the Brazil organization.

Turning to Mexico. Nextel Mexico's 2012 results reflected stable operational metrics and profitable growth in our core business, achieved while making significant progress in the deployment of our new network. We launched services on our new HSPA plus network in about half of our coverage footprint at the end of the third quarter. Thus far, we have received good customer feedback about PTT voice quality, as well as the performance of our data network. The network speeds are excellent and the customer experience has been positive. While we are only getting started and still need to expand our coverage and device portfolio, we are pleased so far with our early results.

Slightly over half of our net adds were generated on our new network in the fourth quarter even though we only started actively selling services in mid-November and without iDEN parity coverage. We expect to see improvement in subscriber growth momentum in 2013 as our coverage grows to match our iDEN footprint towards the end of the third quarter, covering about 75 million POPs and as we add more devices to our portfolio.

I should note that our expectation for subscriber growth in Mexico for 2013 reflects the impact of Sprint's decommissioning of its iDEN network. We expect this to temporarily drive higher iDEN churn especially in our broader markets and a reduction in roaming revenues and International Direct Connect traffic as Sprint transitions its remaining iDEN customers to its CDMA network. We have seen some early impact of this transition as customers along the border look for new ways to meet their communication needs in anticipation of Sprint's shutdown of its iDEN network.

To mitigate this impact during the year, we expect to launch an interoperability solution between Sprint's QChat PTT service and our PTT service on our new network. We are implementing roaming partnerships with other wireless carriers in the U.S. that will support cross-border calling and push-to-talk services. We are also offering a new dual-mode handset that operates both on iDEN and our new network. Finally, we are building border coverage on our new network in areas along the U.S.-Mexican border that are expected to be in place by the third quarter of this year.

Beyond the challenges created by Sprint's transition, the competitive environment in Mexico continues to be intense. Until recently, we have been competing using services supported by our 2G platform in a market where all other carriers are offering services supported by 3G networks. In effect, we have been fighting with one hand tied behind our back. Not surprisingly, this has put significant pressure on our local currency ARPU, which was down for the year by about 7%. However, we believe that the expanded coverage of our new networks planned for this year will make the services we offer much more competitive, helping us drive more growth and improvements in ARPU by offering data and other services supported by the new network.

Now, turning to our other markets, Nextel Peru, again, drove strong subscriber growth for the quarter, generating 185,000 gross adds on our new network, including 55,000 handsets and 130,000 data cards. The ARPU of new 3G postpaid voice customers is approximately 10% higher than comparable customers on iDEN. When comparing these new 3G postpaid voice customers to the average ARPU of the entire subscriber base, the ARPU is nearly double. Net subscriber growth could have been even better but churn for our iDEN customers remains higher than anticipated. We are implementing new commercial offers coupled with improvements to network quality and a wider handset portfolio, including new smart devices, which we expect will improve retention of these customers.

Nextel Argentina continued to drive strong growth in the prepaid segment, adding 367,000 net adds for the year and over 63,000 in the quarter. Additionally, the market continues to generate positive free cash flow. Our focus in Argentina going forward will be to continue to drive operational results while looking for opportunities to enhance the long-term value of our business there.

Nextel Chile continued to steadily build its customer base during the year. In Chile, we added 45,000 net subscribers to its base during the quarter and 120,000 subscribers for the year.

Now, I'd like to turn the call over to Juan for an update of our financial results.

Juan R. Figuereo

Thank you, Gokul, and good morning, everyone.

I'll start by providing an overview of our financial results for the year in greater detail. But first, let me remind you that I'm going to be referring to certain non-GAAP metrics, which have been reconciled in our press release and on our website.

We generated $6.1 billion in consolidated operating revenue, down from $6.7 billion in 2011. This was driven by lower ARPU in Brazil coupled with weaker local currency exchange rates, offset by subscriber growth. Excluding the impact of exchange rates, revenue would have grown by 1% for the year.

We reported $936 million in adjusted OIBDA, which was comfortably within our preannounced range. It was down from $1.6 billion in 2011, resulting from the combined impact of incremental 3G investments, lower revenues and higher bad debt expenses particularly in Brazil.

Lower local market exchange rates adversely impacted our 2012 results by about $300 million compared to last year. We invested $1.5 billion in total capital expenditures in line with our expectations for the year. Mexico and Brazil accounted for 77% of the capital investment. We spent about 70% of our total capital expenditures for our 3G deployment efforts.

Consolidated adjusted OIBDA margin for the year was 15%, down 800 basis points compared to 2011. As expected, our investments in our 3G deployment, including the investment in over 4,000 new sites during the year and the expansion of our distribution channels, significantly impacted our OIBDA margins as we incurred significant portion of the costs of operating our new networks in advance of offering the services they support. As we launch services, load customers and generate revenues on the new network, we expect that OIBDA margins will improve over time.

Turning to our markets. Nextel Brazil experienced a challenging year as a result of increased competitive activity, of our lack of 3G products and services and the actions that we took to improve our subscriber base. As Gokul described earlier, we're executing plans during the year to improve our competitiveness, including deploying our 3G networks in São Paulo and Rio.

Financial results of our Brazil operations for 2012 include revenues of $2.9 billion, a decline of 16% or a 2% decline in local currency, mainly driven by decrease in ARPU related to promotional pricing plan and retention credit. More recently, the actions we took during the second half of 2012 to improve the quality of our customer base have contributed to the stabilization of our local currency ARPU in Brazil.

Nextel Brazil generated $675 million in segment earnings, down 36% from last year due primarily to lower revenues, incremental 3G expenses, higher bad debt expenses and weaker foreign currency exchange rates. The impact of local lower currency exchange rates reduced segment earnings by approximately $209 million.

Nextel Brazil invested $633 million in CapEx for the year, which was consistent with the level of investments made in 2011 as we continue to build our new network. We are also investing in IT systems and distribution channels to expand our retail presence in Brazil.

Turning to Mexico. Nextel Mexico's 2012 financial performance reflects the investments that we made in deploying our new network and the effect of competing only with services supported by our 2G network for most of the year.

Full year results for our Mexican operations include revenue of $2.1 billion, down 6% or flat in local currency compared to last year as a result of a decline in local currency ARPU from increased competitive activity and the impact of Sprint's planned shutdown of its iDEN network in the U.S. This impact was offset by additional revenues generated from growth in our subscriber base.

Nextel Mexico generated $561 million in segment earnings, down 25% from 2011 as a result of lower revenue, higher 3G expenses associated with market launches and weaker foreign currency exchange rates. The impact of weaker local currency exchange rates decreased segment earnings by approximately $55 million.

Nextel Mexico invested $524 million in CapEx in 2012, up from $387 million in the prior year, primarily driven by investments in our new network.

Turning now to our balance sheet.

As you are aware, we recently issued $750 million in high-yield notes and we'll use the proceeds to improve our liquidity position. We had good demand for the offering, which ended up being oversubscribed. We're also continuing to move forward with our plans to executive a tower-sale leaseback to further enhance our liquidity. The recent financing and the planned tower transaction, combined with the continued availability of about $530 million under our existing equipment financing arrangements, will place us in an even stronger liquidity position.

We ended the year with $1.6 billion in cash, cash equivalents and short-term investments. Long-term debt, including the current portion at year end, was $4.9 billion. Subtracting cash, cash equivalents and short-term investments, results in net debt of approximately $3.3 billion.

So from a funding perspective, our liquidity position has strengthened considerably. As we complete the build out and loading of our new networks, our efforts to further enhance our liquidity will serve as a bridge until our business moves out of the investment phase and into the cash generation phase.

Of course, over time, as we exit the build phase and add subscribers to our new networks, our goal will be to reduce our leverage as quickly as we can.

Now, turning to our guidance for the current year.

As we previously announced, our 2013 guidance is as follows: Consolidated adjusted OIBDA, which excludes the impact of any non-cash asset impairment and restructuring charges that we may incur, is expected to be in the range of $600 million to $650 million. Consolidated revenues are expected to be in the range of $5.7 billion to $5.9 billion. We expect our consolidated subscriber base will grow mid-single digits. And we expect that total capital expenditures for the year will be approximately $1 billion, which is a reduction of approximately 1/3 compared to 2012.

Our guidance for 2013 assumes that currency exchange rates will remain relatively stable through the year. Our OIBDA guidance reflects the impact of the operational expenses required to deploy our services in São Paulo and Rio de Janeiro, and to expand the coverage of our new network in Mexico. These efforts will put pressure on our OIBDA margins as we incur additional expenses related to building and operating our new networks, before they're supporting a significant revenue-generating customer base.

Our subscriber growth outlook is driven by our new network deployment schedule. We will deploy throughout the year, and therefore, will not have the full subscriber growth impact of our deployment for most of 2013. We expect that with greater coverage of our new networks in place by 2014, we will be better positioned to deliver more consistent and significant subscriber growth.

The expected decline in total CapEx in 2013 reflects the progress made on our new network construction, in addition to lower capital investments in licensing costs as customer loading on the iDEN network declines.

Finally, I would point out that implicit in our guidance is a year-over-year improvement of approximately $200 million in our operational free cash flow, which we define as adjusted OIBDA minus capital expenditures.

Looking beyond 2013, as most of our efforts turn to loading our new networks in 2014 and beyond, we expect to return to OIBDA growth and to seek consistent OIBDA margin expansion.

With expanding margins and decreasing CapEx requirements, we expect to be on a path to return to positive free cash flow generation. Most importantly, we expect to emerge from the build phase in a stronger competitive position, ready to capture a larger market opportunity.

Now, I'd like to turn the call back over to Steve.

Steven M. Shindler

Thanks, Juan.

As you've heard, we're making changes in the way we manage our business and sharpening our focus in several areas. Our efforts will address many different aspects of the business and I thought it would be helpful for you to hear my thoughts in key areas that I will monitor to assess our progress. These areas are network deployment, operational improvement, new services success and value creation.

In the area of network deployment, I'll be monitoring closely the timing and quality of our network deployments in our coverage expansion, look for us to begin to deploy our new services in São Paulo beginning in the second quarter, and in Rio by year end. Additionally, we must reach coverage parity with iDEN on our new network in Mexico in the third quarter of this year.

For operational improvement, I'll be assessing our performance in a number of operating metrics across our markets and especially in Brazil. Churn and bad debt in Brazil should improve by mid-year from fourth quarter levels. On a consolidated basis, we should see clear improvements in our operational performance during the second half of the year. We'll also review and possibly modify some of our vendor relationships in the areas of network operations and IT in order to improve the quality and efficiency of the services provided.

For new services, you should expect to see improving traction on our new 3G and expanded device offerings in the second half of the year.

Finally, in the area of value creation, I'll be monitoring our progress on our proposed tower-sale leaseback transaction to ensure that we unlock the value of these assets and add to our liquidity position. If the conditions are favorable, we expect to complete the transaction by mid-year.

And last, we are focusing on making further improvements to our cost structure. We are targeting cost efficiencies across all of our markets, as well as at our corporate headquarters. We expect to reduce our headquarter's costs by approximately 1/3 in 2013.

We have a lot to accomplish this year and we'll be doing things differently in order to position our company to generate more profitable growth. I am passionate about our business and I'm determined to return us to the disciplined focus on execution that has been our core strength in the past. I believe that we have the right strategy and a committed team that will execute on the initiatives and deliver results.

Operator, we will now take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Chris King with Stifel, Nicolaus.

Christopher C. King - Stifel, Nicolaus & Co., Inc., Research Division

Two questions for you. First of all, I guess, just was wondering if you could kind of give us a 30,000-foot view of your outlook in terms of EBITDA, and specifically margins, kind of going out over the next couple of years. Obviously, we've seen a huge degradation in margins over the past 2 years, certainly some of that's FX, some of that's 3G buildout-related. Just was wondering if you could talk a little bit about the path, hopefully building off of a low watermark here in 2013 to get back to healthier EBITDA margins in the long run. And then secondly, just wanted to touch on your outlook for the provision for doubtful accounts, a line item there. Do you see that materially stepping back in 2013 due to the involuntary churn off of the unprofitable subscribers in Brazil? What does that look like in your models kind of going forward here in the near term?

Steven M. Shindler

Okay. Chris, I'll take the first question. I guess a couple of perspectives that I would offer as I think about where we are and what we need to do over the course of the next several years to get back to strong margins and rapidly growing OIBDA line that would be more in line with our expectations than yours. I'm certainly very pleased to be able to come back and assess what has been our true differentiation to date and how we're going to be able to apply that and be competitive as we move forward post the completion of this buildout. But you've seen us execute over many years and be able to bring a high number of customers, high-profile customers with excellent metrics into our portfolio by delivering a high-quality network, the best customer service using our prestigious and aspirational brands, going after the highest-usage customers and all tied together with our PTT solution that brings the instant communications and ties our customers into a community and brings a strong value proposition with the lowest rate per minute. All of those advantages that we bring or have brought to our existing customer base are going to remain with us as we now untie the hand behind our back by not having a 3G solution and add to that portfolio of differentiators an excellent new network that has broadband and high-speed data services, very much in demand from our customers, and the best smartphones from all over the world. And we believe that, that combination brings us into a new arena. It more than doubles our potential number of customers that we can go after, our self-defined target market. We've spent a lot of time with you in the past kind of telling you about how we go about assessing that, but it's really based on usage patterns. And if you look at 400 million people that live in the population of the markets where we serve, we really only had about 1/8 of that or 50 million subs that we could go after -- potential subs. And we've been able to get to 25% penetration of that target market. The buildout of these new networks, in our view, doubled that potential universe of customers from 1/8 to 1/4 or call it 100 million potential subscribers, and we think that the combination of our differentiation and unleashing the power of the new data services gives us a great opportunity to go after another 50 to 60 million potential customers. Clearly, we'd love to get back to 25% penetration of that, but we don't really need to go anywhere near that number in order to get meaningful increases in the OIBDA. So I would look at it and say, to add another 6 or 7 million customers over the next few years, this is -- as an example or an illustration of what we would task ourselves to try to achieve. If we're able to do that, which is a fraction of the new target market, maintain an ARPU in the high $30s and move our margin, as you suggest, back into the mid-20%s, you're talking about a company that can get close to a $2 billion OIBDA run rate, which would be significantly better than our historical highs and roughly 3x what we're telling you we're going to get done this year. How do we improve that margin? The main area is by loading the new network. And I'm sure that Juan and Gokul will address some questions on this, this morning. But the main reason for our margin being down at the level that it will be this year is because we have all of the expenses related to the new networks, and we have no revenue coming from those new networks as of today. So once we begin to bring customers onto that, once we get the benefits of some of the mobile termination rates in Brazil and get to load that network, there's a lot of things that will enable us to significantly improve the margins back to the mid-20%s type range where we've been in the past. And we think the combination of all those things position us to get back to well above our historical highs on the OIBDA level. I'll let Juan respond to your second question.

Juan R. Figuereo

Sure. Chris, I'll answer your question on the provisions for doubtful accounts. For the full year, consolidated was 4% of net revenue, and this was entirely driven by the cleanup of the base in Brazil that we talked about. For Brazil specifically, it was 6%. So in terms of what the outlook is, the base is cleaned up, is done, so it should be back to historical levels. If you look back to last year, it was in the 2% range. We should be in that range in the future.

Operator

Your next question comes from the line of Rick Prentiss representing Raymond James.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

A couple of questions. First, Steve, you mentioned headquarters' costs -- or headquarter cuts about 1/3. As you look at Chilean headquarters together, a lot of us have tried to figure out what's the burn rate in Chile then? So maybe you can identify for us or ballpark it, how much is the Chile burn? Then headquarter cuts, just move it out of headquarters and into the regions, or is it true cuts?

Juan R. Figuereo

Rick, this is Juan. Let me -- I'll take a stab and see if I will add anything you will like. So first, in the headquarters, we're, in the outlook, we're cutting it by about 1/3, so that's just a little north of $100 million. And the number headquarters in Chile combined, the EBITDA impact of Chile for 2012 is just a little north of $170 million negative. And so, it's a significant burn coming down significantly in the outlook. We have teared down to a minimum as we focus our investment dollars in Mexico and Brazil. That's what is built into the outlook.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Makes sense. The item about focusing on the network deployment, I think we've got pretty clear bogeys as far as where those POPs hit. The handset lineup, you touched on that a couple of times, too. Obviously, the customers want to see the network out there but the handset be a broader array. Can you walk us through the roadmap of what it looks like as far as smartphones and availability and diversity of the handset lineup for 3g as we look into '13 and '14?

Gokul V. Hemmady

Sure. So Rick, this is Gokul. So first of all, we have about 10 handsets on our 3G network that we have today that we do allow. We also have 5 smart devices. We've rolled out our Blackberry, which is important for many of our customers in Mexico. So we've rolled that out and hope to see good traction on that. As I've said, we've rolled out a dual-mode handset, which works on iDEN as well as 3G, and that's important for us as we move towards more iDEN coverage parity in Mexico by the end of the third quarter and it will be important in Brazil as we roll out the 3250s [ph] in São Paulo and get to more fuller coverage by the end of the year both in São Paulo, as well as in Rio. In addition to that, we are working with Motorola, Huawei as well as some others to come up with a newer handset lineup that we will roll out in the fourth quarter, as well as going into 2014. So I think we'll have more than 5 smart devices in 2013, and hope to increase that lineup as we go into 2014.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

So you say you have 10 today -- do you have 5 smartphones today or you'll have 5 smartphones in '13?

Gokul V. Hemmady

No, we have 5 smartphones today. We will add to that lineup as we go towards the end of '13 and as we go into '14.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Makes sense. And one follow-up, just on Peru, very impressive 3G adds there, 55,000, I think you said of the 3G handsets if I understood it correctly, and 130,000 were data cards. Why the disparity between so many more data cards versus handsets in the Peru area? And what's the difference in the ARPU between a data-only and a 3G handset under service plans?

Gokul V. Hemmady

Well, I think as we've said on some of our past, I think one last call, we are getting about 10% premium in ARPU on our handsets, on our 3G handsets, so I think that's playing out really well. We are able to go after certain segments that we've not been able to go after, and we are able to add the data package. As Steve said, we've been operating with one hand behind -- tied behind our back, which we don't have now, and so we are able to get that ARPU uplift in Peru, and we are seeing that in the early stages in Mexico, too. I think the disparity on the data cards side is that we had a promotion on the data cards side and we sold many more. I don't think you should expect to see that kind of promotion going forward. So I think it's something that we did over the last 2 or 3 quarters, you shouldn't expect to see that going forward. In terms of our -- the difference between the ARPU, I think you asked, from the data cards versus the 3G handsets, the 3G handset's ARPU is roughly in that high $20s, close to $30 range. And I would say that the data card's substantially lower than that. It's less than half of that number.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Okay. And the headquarter cuts, are they going into the regions or they just flat out coming out of the costs?

Juan R. Figuereo

The headquarter costs are coming out of the costs, but there's a, what I would call, cost redeployment, because obviously you don't see it flowing to the -- you don't see it flowing to the bottom line in the outlook. So what we're doing is just putting the cost reduction back into the 3G build. We have similar cost plans across most of the business including Brazil.

Operator

Your next question comes from the line of James Breen representing William Blair.

James D. Breen - William Blair & Company L.L.C., Research Division

Can you just talk about sort of where you stand right now in terms of your liquidity position? Maybe what you have available to you under bank lines and the vendor financing? And then sort of general thoughts on cash burn over the next 12 to 18 months, as well as anything you -- in terms of minimum cash balances or debt levels that you'd like to maintain?

Juan R. Figuereo

Sure. We are in a strong liquidity position. We got about $2.5 billion in cash and investments, and over $530 million available under vendor financing. We're still working on the tower deal and there are other things that we're working on. So I feel fairly strongly about where we are. We're obviously executing against the plan. My focus and of the treasury team is to ensure that we have enough liquidity to take us to the inflection point where the cash flow will turn positive. So that's what we're working towards. And at this point, I feel really comfortable about our ability to execute that.

James D. Breen - William Blair & Company L.L.C., Research Division

Is there any sort of cash balance you'd like to maintain or debt levels in terms of leverage levels that you don't want to exceed?

Juan R. Figuereo

We are focusing on liquidity. So leverage will go up, the focus is enough liquidity to complete the build. And then once we turn, the cash flow will begin to deleverage as fast as we can. In terms of minimum cash, our goal is about $1 billion give or take.

Operator

Your next question comes from the line of Kevin Smithen with Macquarie.

Kevin Smithen - Macquarie Research

You had strong net adds in Peru this quarter, can you talk about whether those -- what drove that and whether there's any read-throughs for Mexico or Brazil as you launch -- continue to roll out those markets on 3G?

Gokul V. Hemmady

Yes, Kevin, this is Gokul. So I think we did have strong gross adds both on the data card side, as well as on the 3G handset. It's very exciting for us. We've been waiting for this for a few quarters. I think it's beginning to pick up fairly well for us. I think it's all the things that Steve talked about. We've been operating without the tools that we needed on 3G. We now have those tools. We are using our brand, our strong brand, our differentiation when it comes to push-to-talk, our strong customer service, and all that is resulting in good adds. We are able to go after certain segments that we were not able to go after in the past, in addition to upselling to our existing base of customers. So it's both a combination of new segments, as well as existing base of customers that is resulting in that 55,000 net adds in Peru. Now, as far as Mexico goes and the learning from Peru, first -- number one, the first learning, very positive for us is this ARPU uplift and we are seeing that in Mexico. In Peru, it's 10% in the early stages in the first quarter, we are seeing ARPU uplift in excess of 10% in Mexico. So I think that's been really positive for us. In terms of other learnings, we've learned from Peru, as the first market where we built the network, and we've learned from that build out. We've applied that in Mexico. We will apply that -- we are applying that as we speak in Brazil, too. Next, I think one of the reinforcements for us in terms of learning is really that quality should be and must be a continued focus, and that we should never get away from making sure that when we launch 3G, whether it's in additional POPs in Mexico or as we launch 3G in São Paulo and Rio, that quality should be a continued focus for us, and being a differentiator, clear, as we battle day to day in the marketplace, that's important for us. The last learning, I think, is on devices. I think initially, we started the deployment in Peru with a much narrower set of devices. Now, we have 10-plus devices, many smartphones in that mix. We'll continue to get a wider range of devices and that's been a learning, I think we are well on our way there with a much wider range of devices for Mexico, as well as Brazil.

Kevin Smithen - Macquarie Research

And has that subscriber gross add momentum continued in Peru in Q1 or not?

Gokul V. Hemmady

I think we're seeing that momentum continue for Q1, as well as the balance of the year. So I think we are feeling good about where we stand there. But as I said...

Kevin Smithen - Macquarie Research

How would you categorize Peru strategically versus Chile in terms of core assets for the company going forward?

Steven M. Shindler

Kevin, this is Steve. So as we've said in our previous announcement and reiterated again today, we are focusing the majority of our time and our dollars into Mexico and into Brazil given the enormous amount of growth that we think that we can capture in those markets. The Peru and Argentina and Chile are important parts of our overall business. They've got -- they produce excellent results and we're going to continue to support those markets. But at the same time, as we've said, we're considering some strategic arrangements or alternatives for each of those markets, which might include some partnerships, other service arrangements as we move throughout the year. So it will remain a part of the portfolio but there won't be as much of an investment coming from us into any of those countries going forward.

Operator

Your next question comes from the line of Andres Coello representing Deutsche Bank.

Andres Coello - Scotiabank Global Banking and Markets, Research Division

This is Andres Coello with Scotiabank. I have a quick question. Are you exploring adapting for push-to-talk services mainstream devices like the Galaxy 3? Do you think that technology vendors will be willing to make modifications to those handsets, for example, include the push-to-talk button, or would you sell those devices as they are and ask an over-the-top solution for push-to-talk using the current buttons of the phone or a touchscreen or a touchscreen application? On the other hand, I would like to know if you guys are considering selling non push-to-talk devices? Again, like you have a fast network, for instance, here in Mexico, so I would like to know if you are planning to use that network to sell non push-to-talk devices like the Galaxy 3, or perhaps to lease your network for other operators that may have capacity constraints so that they use -- that they run your network so that they can offer better services, too?

Steven M. Shindler

Okay. So push-to-talk is a fundamental differentiator on how we compete and win customers in our markets, and we recognize that our customers want to choose from a wide variety of handsets that meet their needs. And one of the things that we're very excited about in getting our 3G networks completed is we can provide an incredible amount of incremental choice to our existing customer base, as well as new customers that we want to attract to become part of our community. We do have the flexibility to continue to customize devices and have the traditional button, PTT button on the side of every phone that we sell. But we also, through the data side of the network, we can put PTT on smartphones in the form of a client, download it like an app, that would be on the screen and allow for the same PTT capability to connect back to our core customer base. So this is something that we'll be rolling out this year. It rides on our network. It would have all the same advantages of instant communications and bring this community together. And it opens up the opportunity for -- if a customer wants a Galaxy device, if that's their #1 choice, we can provide them with that and become -- and still become a Nextel customer still having a PTT capability. So we're very focused on that. We recognize that PTT has more importance to some customers than others. And this will allow them to choose the device that they want and whether or not they want to download that client to become part of the PTT community.

Andres Coello - Scotiabank Global Banking and Markets, Research Division

And excuse me, the latency of that product will be the same as seen in a traditional push-to-talk device or your newest smartphones, that the latency will be just as good?

Steven M. Shindler

The latency on our high-performance push-to-talk that we have developed for our W-CDMA network and this application are not really discernible to -- the difference is not something that you can detect. Both are a fraction behind iDEN but close enough and that's what we've been working on, frankly, for the last couple of years is to make sure that experience was not something that would deteriorate from the standpoint of the customers we've been serving for a long time.

Andres Coello - Scotiabank Global Banking and Markets, Research Division

And are you exploring leasing your network to other operators in case you guys don't, for some reason, you don't achieve to grow additions? Suppose that's the scenario. You already built this network, which is very fast, would you consider leasing your network for other guys that may want to use this network to sell better services? For instance, here in Mexico, we know that the incumbent has a very saturated network, so I don't know if that could be the case here in Mexico.

Steven M. Shindler

Well, obviously, we don't want to ever rule out any possibility to bring in future revenue streams, but at this time, we don't have any intent to lease out our network. We intend to fill our network with good quality customer growth and get back to demonstrating that we can perform and grow not only the customer base but do it in a profitable way with the highest ARPU customers, and to the earlier question, with an increasing margin.

Operator

Your next question comes from the line of Michel Morin representing Morgan Stanley.

Michel Morin - Morgan Stanley, Research Division

I just wanted to follow up on your comments about the impact of the Sprint decommissioning. Is this something that only started to impact you in the fourth quarter? Because I think it's the first time that we hear you talk about it, so I was wondering to what extent there might have been an impact in previous quarters and whether or not this is a bit of a surprise for you. And then secondly, in terms of your OIBDA guidance, given where you ended the year at $128 million in the fourth quarter, you're clearly annualizing even below your guidance range. So just wondering, in terms of the timing of some of the cost cuts that you are targeting, how we should be thinking about the progression, kind of quarter-to-quarter, as we start 2013. How quickly can we look for some of those cost cuts to start helping that OIBDA line?

Gokul V. Hemmady

Michel, so on the Sprint decommissioning, we are expecting an impact, as we said in our remarks, on 2013 and that is included in our outlook for 2013. So it's not a surprise for us. We are starting to see -- we started to see some of that in our churn. So the impact is really less roaming revenues from Sprint customers roaming into Mexico, less International Direct Connect traffic and therefore, lower revenues there. And then in 2013, we probably expect to see lower growth and higher churn along the border. So that's the impact. We are starting to see some of it in our fourth quarter. We probably will see more as we move along this year. Now we are doing many things to offset all of those impacts. We are going to have coverage on iDEN along the border as quickly as we can. We are going to have it by the third quarter. The dual-mode device that I talked about, which operates on iDEN, as well as 3G, which is our IronRock device, will also be very helpful. We are -- we have roaming agreements with other wireless carriers in the U.S. And very importantly, we expect to launch an interoperable solution between our W-CDMA PTT solution and Sprint CDMA PTT later this year. So all of those things that I talked about will help us mitigate the impact of that -- off that decommissioning. So I think, important to note that we -- it's included in our outlook and it's not been a surprise. It's something that we've seen at low levels in the fourth quarter, but we expect it will pick up. But there are many things we are working on.

Juan R. Figuereo

This is Juan, just let me add a little bit more color from an outlook perspective. First on the timing of the cut costs, everything's going to happen in the first half of the year. So we are on track, and we feel confident about that. And the Sprint iDEN shut down is also in the outlook. It has a significant impact, anywhere from 10% to 15% of OIBDA. But I would like to emphasize that this is a temporary impact because as we put in place all of the measures that Gokul talked about, we should be able to offset most of this. However, in 2013, we'll have a significant impact and it's built into the outlook.

Michel Morin - Morgan Stanley, Research Division

And Juan, can you help us by giving us a sense of the magnitude of the International Direct Connect and of the roaming? How big are those as contributors to your top line?

Juan R. Figuereo

We prefer not to talk about that in detail. Just it is built into the outlook and we feel comfortable that this year, we'll be able to offset.

Operator

Your next question comes from the line of Kevin Roe representing Roe Equity Research.

Kevin M. Roe - Roe Equity Research, LLC

A couple of questions. First, Steve, the strategic review you mentioned of Chile, Peru and Argentina, where are you in that process? And on that list of potential alternatives is an outright divestiture of one or more of those assets on the list? And do you anticipate retaining bankers as part of that strategic review?

Steven M. Shindler

So the review, as with anything in the business, is ongoing. We are, first and foremost, running the businesses and we recognize the efforts of our employees and we have a great customer base there. So everything is business as usual and we're lucky to capture whatever growth that we can out of those markets. But from the specifics that we would consider, as I mentioned before, they could include partnerships. We could sell minority stakes. Would we consider an outright asset sale? We would, but it would have to be the right deal at the right price. And clearly, we'll take all of those things into consideration at the appropriate time.

Kevin M. Roe - Roe Equity Research, LLC

Got it. And any bankers retained or do you anticipate that?

Steven M. Shindler

If we felt we needed input from an adviser, we would certainly seek it.

Kevin M. Roe - Roe Equity Research, LLC

Okay. And just lastly, on Brazil, your search for a permanent CEO there, can you give us an update?

Steven M. Shindler

Yes. I'll take this one, but Gokul can add his comments. Gokul mentioned in his remarks that he spent time in Brazil, that was a bit of an understatement. He has been pretty much spending all of his time in Brazil since mid-November, and he has been wearing 2 hats for our company. Taking on the full responsibilities of Chief Operating Officer, but also as Acting President of our Brazil operation and has really brought a lot of discipline to the team in the process and everything that we need to get done this year. So for the time being, we're going to leave that arrangement in place and continue to let that momentum build. Obviously, we'll keep our eyes open for the right long-term leadership structure to have in place, but we're very comfortable with what we have right now.

Gokul V. Hemmady

Yes, the only thing I would add, Kevin is, Steve said everything that I could have wanted to say. But I am spending a lot of my time there and I'll leave this weekend again to be in São Paulo with the team. I feel very good that we've made really good progress over the last 3, 4 months, with the cleanup, with the increased ARPU. And we are doing well on getting to our deployment milestones. And so all of that is going well. Much more work needs to be done, of course, and there is much more excitement in terms of execution, as well as what the future brings for us there. So as I spend more and more time there, I will continue to assess what the right solution is between the talent that we have internally, my own time as to how I want to spend my own time between broader responsibilities with the Brazil focus, and I think we'll make the right recommendation to fill at that point.

Operator

Your next question comes from the line of Walter Piecyk representing BTIG.

Walter Piecyk - BTIG, LLC, Research Division

Just 2 questions. First on the QChat, is there -- can you just kind of talk about any deployment expenses, whether it's payments to QUALCOMM to get up to the right revision or server investments or what you have to pay, from Sprint's standpoint, if anything? And then secondly, the debt you raised, I think was over 11%. Can you talk about maybe options you look at on the equity side as far as putting some additional capital on the balance sheet?

Juan R. Figuereo

So this is Juan, I'll start with the second one. So as we were looking at the kind of the immediate priority of funding the build of the plan, we looked at all of the options including equity. I mean, because it would be obvious that we're living through a moment where our equity has a significant overhang. So we believe we are in a -- very close to an inflection point in our business. We believe what we need to do is complete the build of the network. And so, when we come out of that phase, we think it will be the right time to pause, take another look at the capital structure and then consider everything anew. But at this time, what we're executing against, with the high-yield debt, the tower -- potential tower transaction, we think is the right thing for us [indiscernible].

Walter Piecyk - BTIG, LLC, Research Division

So while you're going through this kind of improvement phase, which presumably is going to take a couple of quarters, we should assume that there won't be any equity or equity-type like a convert issued into the market, correct?

Juan R. Figuereo

We do not want to rule anything out. When we looked at it, the current course of action does not include equity.

Steven M. Shindler

Now, I'll just add a comment to that, Walt. We went out and did this capital raise largely because of my insistence in coming here because I didn't want to have any liquidity excuses or reasons why we couldn't push the accelerator down to the floor and get the build out completed. All the benefits we've talked about this morning of getting back to competitive levels that we need to be at in order to start to capture our fair share of the growth on 3G platforms. So that was the primary reason we went into the markets when we did, why we took down the amount that we did. Juan's responded with regard to what our intentions are, but I think between this capital we raised and our expectations of bringing in some proceeds from a tower sale, as well as other vendor financing, we still have available to draw down on, we're very comfortable with the liquidity position that we have to be able to make the investments and get this buildout behind us.

Walter Piecyk - BTIG, LLC, Research Division

Yes, Steve, I didn't meant to imply that. I thought you guys had a liquidity issue. I just looked at 11% debt. I know you don't like to have a lot of debt. It's a relatively high rate, and sometimes, if you see an opportunity to reduce your debt via equity even though it's expensive, historically, the company has taken an opportunity to do that type of stuff. So I guess in this case, that's not going to be the situation unless you see an improvement in equity?

Steven M. Shindler

Well, I think what we expect to do is to improve our operational performance. And in turn and in time, we would hope that's reflected in our share price and would give us more flexibility to consider those types of financing to reduce the leverage.

Gokul V. Hemmady

Walt, on your question on QChat, there is no additional payments on QChat. Of course, as we developed high performance push-to-talk, we've spent -- made investments that is coming through either OpEx and CapEx. It's included in our devices, as well as in our network. If your question was, are we spending anything additional as we think about interoperability solution with Sprint, no. The answer to that is no. I think we have everything that we need on our side to make that happen.

Operator

Your next question comes from the line of Rodrigo Villanueva representing Merrill Lynch.

Mauricio Fernandes - BofA Merrill Lynch, Research Division

This is actually Mauricio Fernandes. Gokul or Steve, a question. I think from the numbers that Nextel [ph] reported for net additions in January, it seems on a push-to-talk side, you've -- if I may call it push-to-talk, you've been able to add some mid-20,000 net additions in January, plus I think you got a couple of thousand in 3G. This is obviously a big improvement relative to what we saw in the fourth quarter. Just wanted to know whether this is already in the plan, this was ahead of expectations and what has driven that in January? If there was any extra push, if it’s more marketing activity that has increased? To my knowledge, that wasn't the case. But just wanted to get -- hear your thoughts about the performance in January.

Gokul V. Hemmady

Sure, Mauricio. So here's what -- one thing to think about. We executed the cleanup really well in the fourth quarter. That's behind us. That was an impact from all the right decisions we made on the credit policy on the retention side. We've seen ARPU go up. But we had a cleanup in the fourth quarter of about 290,000 subscribers. And part of what you are seeing in January is also an impact, a positive impact from the cleanup in January. We don't expect that, that will continue as we go into February and March. That said, as I said in my remarks, we are driving very hard towards our goal of getting to positive net adds in the first half. And we implemented 3G data cards, as well as our dual-mode IronRock in a few cities in Sao Paolo in January. We had a big system release as part of that, which touched all our existing 2G systems, as well as our new 3G systems. We are in the process right now as we speak, in stabilizing those systems. We feel that, that will take some time. And as I sit here today and think about where we stand, I think we've made really good progress, but much more work still needs to be done as we drive towards that goal of getting to positive net adds.

Mauricio Fernandes - BofA Merrill Lynch, Research Division

I see. And why would the cleanup help in positives -- in contributing to positive net adds in January?

Gokul V. Hemmady

What we've seen is we've cleaned up parts of our base in about 290,000 subscribers. And what we saw spilling into the first, maybe 2 weeks of January is some of the subscribers wanted to come back and pay us, in fact. And so that's how we've seen some of the positive momentum you've seen in January. So that's the only reason. But that won't go into February, that's limited to the first few weeks of January.

Tim Perrott

Operator, we have time for just one more question.

Operator

Your next question comes from the line of Soomit Datta representing New Street Research.

Soomit Datta - New Street Research LLP

Just a couple of quick questions at the end, please. Just first of all, on the revenue outlook, which is set to decline in 2013, is that largely explained by the Sprint decommissioning issue in the U.S.? And if not, I just wondered, I could see why you're a bit more cautious on the 3G growth in 2013, but I just wondered why there was an underlying expectation of revenue decline. And then the second question is just on the tax. I noticed you booked a reasonably high tax charge in Q4. I just wondered for 2013, do you anticipate in booking a tax charge? Would you be generating sufficient profit before tax to actually be paying tax in the coming year?

Juan R. Figuereo

So first, in the revenue outlook, the decline was driven mainly by ForEx. We said it's stable, but there's still devaluation versus the U.S. dollar. So ForEx. The Sprint items shutdown in the U.S. And then there's a little bit of other things. But those 2 are the majority of the drivers. In terms of tax charges, we have an annual position, a net loss position in the U.S., obviously, since we don't generate revenues in the U.S. And then in some of the markets, we do have cash taxes. They are coming down with the OIBDA, but there are cash taxes. Tax charges related to adjustments in our deferred tax assets or any other booked charges like that, they can happen, they're generally non-cash, and we have not assumed any significant ones in the outlook.

Tim Perrott

Great. Operator, that's it for our call today. Steve, any just final thoughts?

Steven M. Shindler

Thank you, all, for joining us today. As we've mentioned throughout the call, look to us for this year for a solid year of putting stability back in place, a strong execution and moving the company back on a growth path as we move throughout the year. We look forward to updating you on our progress on next quarter's call. Thank you.

Operator

This concludes the NII Holdings' Fourth Quarter Year-End 2012 Earnings Conference Call. Thank you for your participation. You may now disconnect and have a great day.

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