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Clarifications And Focus From NIHD Q1 Earning Transcript Highlighted

|Includes:NII Holdings, Inc. (NIHD)

We have to focus on what management pointed to in the call and not on the temporary negative cash flow spike in Q1 because it was higher but will be reversed in Q2 as Jennifer Fritzsche from Wells Fargo pointed out in her note which we reprint here:

NIHD: Addressing Cash Flow Concerns

Jennifer M. Fritzsche, Senior Analyst (312) 920­3548

Sector Rating: International Wireless Carriers, Overweight

We believe there has been a good amount of confusion / questions / concern regarding NIHD's cash burn in the quarter and

forward looking direction. Specifically, NIHD's net debt increased by ~ $490MM since year­end 2012. We believe there are

two important factors to highlight which impacted Q1 cash burn trends which should not be replicated in Q2 and beyond.

First, in Q1 the company upgraded its billing system in Brazil. This change delayed some the delivery of the invoices and thus

collections to / from customers. In the company's 10Q, it specifically called this issue out and indicated it expects the

collection of receivables in Brazil to decrease. We believe this issue impacted NIHD's cash burn by $200MM in Q1. According

to NIHD management, it expects to recoup most of this in Q2. Separately, also impacting NIHD's cash burn in Q1 was the

higher cash capx in the quarter. Specifically, cash capx was ~ $100MM higher than non­cash capx. This is typical of Q1 when

some of the capx not spent in Q4 and the spill­over impact is seen in Q1. We do not expect this trend to continue in the

remainder of 2013. In short, while NIHD has not offered guidance on cash burn for 2013, we continue to expect

improvement of a few hundred million from 2012 levels (or ~ $1.3B)

NII Holdings, Inc. (NIHD­NASDAQ)

Price as of 5/2/2013: $7.58

FY 13 EBITDA: $3.59

FY 14 EBITDA: $4.09

Shares Out.: 173.0 MM

Market Cap.: $1,311.34 MM

Also, its important to note that management was very forthcoming in telling shareholders that the tower sales are imminent which will add significant cash to the balance sheet, then Nextel Chile is on the block and the proceeds from the sale of Nextel Peru of $400 million is coming this year. So if the contemplated burn of $1 billion for the accelerated 3g implementation is enhancing system performance and customer satisfaction and more sub adds which then is offset by $400 million from sale of Peru and another say $800 million from tower sales, this more than offsets the negative from 3g capex and bad customer/debt cleansing and doesn't include what happens if Chile is sold. Here is a highlighted recap of the key parts of the earnings call from our perspective:

Steven M. Shindler

I also identified our goals for 2013, which include completing the planned coverage of our new networks in Brazil and

Mexico, improving our operational performance and realigning our business to provide the greatest returns over the

long-term.

During the first quarter, we made progress towards these goals while staying on track to achieve our financial goals for

the year.

First, we're on track with our network deployment plans in both Brazil and Mexico, driven by the process changes and

improvements that we've implemented. For example, in Brazil, we tripled the number of crews working on site

acquisition and optimization, increasing the pace and quality of our construction and integration of new sites for the

WCDMA network.

These and other actions have helped keep us on track to begin offering 3G services in São Paulo in the second quarter and in

Rio by year-end.

In Mexico, we've continued to expand the coverage of our new network, adding over 9 million POPs to our coverage in

the first quarter. We're on track to reach 3G coverage parity with our existing iDEN network by the end of the third

quarter. To put the magnitude of this effort in perspective, during the quarter, we added about 1,320 sites on our 3G

networks across our market. And we expect to add a total of 4,400 3G sites in 2013, representing nearly an 80%

increase in our 3G sites from 2012.

In Mexico, we began to see increased demand for our new services as customers experience our superior network

speeds and growing coverage. However, this demand was somewhat offset by higher churn levels for our iDEN

services, as we continued to be impacted by Sprint's planned shutdown of its iDEN network in the U.S.

But based on the trends we've seen and our assessment of the market, we're convinced that there's a significant growth

opportunity, which we'll pursue more aggressively after we reach coverage parity with our iDEN network. For now, I'm

happy to report that our 3G network in Mexico is performing well, with network speeds significantly higher than the

competition and that customer feedback has been excellent.

our past experience shows that it only makes sense to more aggressively drive growth when we're confident

that the coverage and quality of our network will meet our customers' expectations.

In Mexico, we expect to be in a position to push subscriber growth starting in the third quarter of this year.

Similarly, in Brazil, we expect to be in a position to drive 3G subscriber growth beginning at early 2014

Looking more broadly, we recently launched our first smartphone with the latest Android operating system and our

new push-to-talk service we call PRIP. This new service allows us to offer push-to-talk on a wider variety of

smartphones, giving our customers more choice, while still allowing them to communicate to the Nextel PTT

community. We expect to make the PRIP service available on more devices later this year. Also related to devices, we

recently extended our iDEN handset agreement with Motorola through 2016.

We've also made significant progress in our efforts to improve our cost structure by taking steps to reduce costs and

enhance efficiency in our markets and at our corporate headquarters. We remain on track to reduce our corporate

headquarters costs by approximately one-third this year. As we realize these cost reductions, we've begun to redeploy

some of the savings to further improve our execution and to support future growth. We're also taking actions to

improve the performance of our back office operations to enhance our ability to respond to competitive conditions.

For example, beginning this quarter, we're restructuring the nature of our relationships with Nokia Siemens Networks

and Hewlett-Packard by taking over many of the functions they had performed for us under our existing outsourcing

arrangements. We believe that this change will provide us with greater control over the performance and quality of

these key functions and provide a more agile back office as we make our transition to 3G.

Although we will incur additional costs as we make the transition to in-source these processes, we do not expect this

change to impact our adjusted OIBDA guidance for the year.

Gokul V. Hemmady

During the five months that I have been on the ground in Brazil, my focus has been to get the operations back on the path to growth. And I

think we are making good strides and moving in the right direction. We started by putting the right leaders in place in

several key areas to run and grow the business.

As you know, five months ago, we appointed Claudio Hidalgo as COO. And since then, Claudio and I have made

several changes, assembling a very strong supporting team, including key leaders in the areas of customer operations,

engineering and IT.

In customer operations, after cleaning up our base last quarter, we've improved our processes to return to being

best-in-class customer care organization. Our enhanced customer care approach is having a positive impact to our

metrics, resulting in improved voluntary and involuntary churn, bad debt and care costs.

In engineering, as Steve mentioned, we've righted the ship on our 3G network deployment. We met and, in some

instances, beat our goals on network optimization in the last two months and we are seeing improved quality in our 2G

network.

During the first quarter, we added about 750 sites to our new network, and now have a total of about 2,400 3G sites,

giving us more confidence than ever that we will complete our planned network coverage for the year in São Paulo and

Rio. We've already launched data services in several cities in São Paulo. We expect to begin providing services in and

around São Paulo in the second quarter, covering initially about 25 million POPs, with that number growing throughout

the year. We are also planning to begin offering services in Rio by year-end.

Operationally, we generated 38,000 net adds during the quarter, driven by our promotional data card offer in São Paulo,

designed to retain customers, while creating an opportunity for them to experience the capabilities of our new 3G

services. That offer drove about 60,000 data cards during the quarter.

We've also begun seeding the base with our new IRONROCK handset, a dual-SIM 3G and iDEN device. Early demand

for this device resulted in about 16,000 handset sales in Q1.

With our new team in place, we are creating a disciplined operating rhythm, focusing on key metrics, reports and

meetings where we talk openly about what's working and what isn't. There's still much work to do in each area, but

we've built the right foundation for value creation in Brazil and we are seeing early returns. I am very enthusiastic

about what we'll accomplish going forward.

Turning to Mexico, our first quarter results reflect the beginning of the ramp-up of services on our new network, offset

by the negative impact on our growth and churn as a result of Sprint's planned shutdown of its iDEN network in the

U.S.

During the quarter, we added 45,000 3G gross adds and migrated 85,000 of our existing iDEN customers to our new

network. In total, we now have 189,000 3G subscribers as of the end of the first quarter, which is about 5% of our

subscriber base.

ARPU for 3G subscribers in Mexico, with a combined voice and data package, was 15% to 20% higher than the ARPU

for subscribers under comparable iDEN service packages. As we continue to expand our coverage, we believe that we'll

be in a position to take a greater share of gross adds in the markets we serve in Mexico and expect that by year-end,

about one-third of our subscriber base will be using services on our new network.

Total net adds for Mexico were 16,000 during the period, reflecting the impact of slightly higher churn on iDEN and

lower gross add loading compared to the same period last year. We continue to expect that our subscriber growth and

churn in 2013 will be negatively impacted by Sprint's decision to shut down its iDEN network in the U.S., especially

markets near the border.

However, we expect this impact to be mitigated and that we will generate higher net adds in the second half of the year

as our 3G network expands and we more fully implement our cross-border PTT roaming solutions.

We believe that our planned coverage expansion will make our services much more competitive, helping us to drive

growth and stability in ARPU. Consistent with those plans, we added over 500 new sites, with coverage in 14 new

cities during the first quarter. Our new network covers a total of 48 cities at quarter-end and we are on track to extend

our coverage to reach parity with our iDEN network by the end of the third quarter of this year.

In Chile, we continue to explore strategic opportunities for our business, while managing our additional investments in

support of our operations. As a result, we have chosen not to pursue aggressive growth, as we focus on limiting our

investment.

In summary, we continue to improve our execution and we remain on track to deploy our new networks in Mexico and

Brazil, in line with our schedules. This will remain the top priority of our operating teams. After we have sufficient

coverage, our focus will shift to more aggressively adding profitable subscribers.

Juan R. Figuereo

During the quarter we recorded $42 million in non-cash charges to write-off certain prepaid expenses related to our

decision to restructure our services with NSN, as Steve described earlier. We also recorded $85 million in non-cash

charges related to our decision to discontinue the use of certain customer relationship management software. All of

these non-cash charges are excluded from adjusted OIBDA.

In terms of our outlook, as Steve previously indicated, we remain on target to meet our full year adjusted OIBDA

guidance. With that being said, it's important to note that we expect our adjusted OIBDA in the remaining quarters of

the year to be significantly lower than the amounts we reported in this first quarter, as we expect to recognize additional

expenses related to our continuing investments in the deployment of our 3G networks, incur costs associated with the

in-sourcing of engineering activities from NSN and spend more to accelerate migrations of iDEN customers to our new

our network in Mexico.

These initiatives which are consistent with our plans for the year will result in over $100 million in additional costs in

the second quarter making it our lowest quarter of adjusted OIBDA for the year.

Finally, we invested about $93 million in CapEx in Brazil during the quarter, as we continued to deploy our next

generation network. Our CapEx investment in Brazil will continue to increase as we extend the coverage of our

networks in São Paulo and Rio over the remainder of the year.

Nextel Mexico's financial performance reflects lower segment earnings as a result of the incremental costs associated

with the deployment of our new network. First quarter revenues of $514 million in Mexico were down 6% compared to

the first quarter of last year, as a result of a decline in local currency ARPU from increased competitive pressures,

partially offset by an improvement in local market exchange rates and growth in Nextel Mexico's subscriber base.

Nextel Mexico's segment earnings of $101 million for the first quarter were down 40% from the same period last year,

as a result of higher expenses associated with a significant increase in 3G cell site and incremental spectrum costs.

We invested about $52 million in CapEx in Mexico during the quarter, down from $94 million in the same period last

year, but we expect CapEx in Mexico to increase over the next several quarters as we continue to expand our 3G

network.

We're also moving forward with our plans to execute a tower sale-leaseback transaction relating to select sites in Brazil

and Mexico. We're currently negotiating with several parties and are targeting to reach agreement by the end of the

second quarter. The recent high-yield financing, the sale of Peru and the planned tower transaction, combined with the

continued availability of about $480 million under our existing equipment financing arrangements underpins our strong

liquidity position.

After completing the planned expansion of our 3G networks this year, we expect to be in a position to return to

more aggressive growth, adding more profitable subscribers to our base, generating positive free cash flow and

executing on opportunities to efficiently reduce our leverage.

.

Steven M. Shindler

Thanks, Juan. Summarizing my perspective for the quarter, I am pleased with the progress that we've made. We are

following through on our promises. We are on track to complete the construction of our new networks. We are gaining

traction on 3G subscriber growth in Mexico. And we are confident that the combination of our high quality networks;

our superior customer service; our high performance push-to-talk service, instantly connecting our community of

subscribers; our attractive new portfolio of handsets; and our high-speed data services all will enable us to successfully

capture a significant number of new profitable subscribers from our expanding target markets.

Through hard work and discipline, we're putting all the pieces in place to achieve our long-term profitable growth

objectives. We're not out of the woods yet. However, we're back on the right path, and we know the way.

<Q - Chris C. King>: Thanks for taking the questions, and Steve, congratulations on the removal of the interim tag.

<A - Steven M. Shindler>: Thank you, Chris.

<Q - Chris C. King>: Two main questions for me. First of all, I just was wondering if you could give us a little bit

more color on the OIBDA dynamics as we roll throughout the remainder of the year? I know, Juan, you talked about a

kind of $100 million incremental step-down in 2Q related to some of the 3G launches. Just was wondering if you could

talk about to how that trends, particularly in the second half, whether you guys are expecting a kind of a flattish third

quarter and fourth quarter off of that? Or whether we should expect to see a little bit of a ramp as we approach

year-end.

And then second question about gross add trends in Mexico, just was wondering, I know you guys talked about some of

the dynamics there related to the Sprint shutdown of iDEN and some of your border markets. But just was wondering

how you see that trending throughout the remainder of the year, as well, as you guys launch what appears to be a

significant number of markets there going forward over the next six months?

<A - Juan R. Figuereo>: Hi, Chris, this is Juan. I'll start with the question on the OIBDA. So first, there are basically

three drivers. As you've heard from Steve, we are increasing investments in the deployment of 3G sites. We're adding a

lot of sites. We're in-sourcing the engineering of NSN. This is improving the quality of our network play and there

should be a more normal level of bad debt to total company, but mostly driven by Brazil, in the remaining quarters of

the year.

In terms of orders of magnitude, we talk about $100 million impacting second quarter. But there's also an item that's

unique to the second quarter, which is we are making a concerted effort in Mexico to drive migration from iDEN to 3G

in the second quarter. That continues in the balance of the year, but the biggest effort is in the second quarter. That

could be as much as $40 million of impact on OIBDA.

<A - Gokul V. Hemmady>: Hi. Chris, it's Gokul. So on your question on Mexico, as you know, we did 45,000 gross

adds this quarter on 3G. We expect that as we expand our coverage, we will begin to see even more momentum. Even

in the first quarter, as I think about the month-to-month traction, I find that it is increasing month-to-month. As I think I

said in my remarks, we are currently at about 5% of our base on 3G and by year-end we expect that about 33% of our

subscribers will be on 3G. So as you can see from that metric, we are forecasting that we continue to see some really

good traction.

Now included in that, Chris, in addition to gross adds, we got good traction on migrations in the first quarter and those

migrations also on a month-to-month basis are increasing in a big way. Not only are the migrations increasing, we are

also finding that we are able to get very good uplift in ARPU about 15% to 20% on a like-to-like basis, comparing 3G

packages with the iDEN packages.

<Q - Ric H. Prentiss>: First, continuing on the Mexico theme. The 45,000 gross adds that were 3G in the quarter, can

you talk a little bit about what the ARPU you're seeing from those new-to-Nextel customers are? And what kind of

customer are they? What kind of segmentation is it?

<A - Gokul V. Hemmady>: So, Ric, I think we are seeing that similar kind of ARPU uplift on the new gross adds also.

So all around whether it's migrations or new gross adds, we are seeing very good uplift in ARPU. So I think we feel

good about that. As we move on and start getting more traction, we feel that our strategy and our pricing, our rate plans

and offers are pretty much in line and consistent with getting that premium on ARPU. And it's no different from what

we saw also when we launched some of these rate plans in Peru also.

<Q - Ric H. Prentiss>: So the, and what type of customer is this that you're getting now that you weren't getting

previously then?

<A - Gokul V. Hemmady>: So I think it's, we are getting, first of all, we are getting the similar kinds of customers

who we are targeting that initially. As we move along through the balance of the year, we will be looking at the

expansion of our addressable market as we maybe these are slightly lower usage customers, with maybe slightly lower

ARPUs, but also at a cost structure that is attractive, which is why we'll either maintain or increase our margins, as well

as have an attractive return on capital. But as we look at it right now, it's customers that are really high usage that also

are getting higher premiums on ARPU. So right now, it is similar to our existing base, I would say. But as we move

along, we'll be expanding that addressable market.

<Q - Ric H. Prentiss>: And if we think of Chile, what gives Chile from a value perspective, a Wall Street perspective,

from being almost a negative if there was negative EBITDA to a neutral to a positive? You've kind of hinted that there's

some strategic options out there, but is this a possibility of taking Chile from being negative EBITDA, in essence,

negative value in the Street, to being neutral to positive?

<A - Steven M. Shindler>: Well, Ric, this is Steve. We're approaching that as you would expect us to. We're

considering various strategic alternatives that can help us enhance that, whether it be partnerships, commercial

arrangements. As Juan mentioned, we're on track to bring down the cash impact related to that market. So we're

balancing the growth and additional investment accordingly, given the order of magnitude of investment that was made

a year ago, compared to where we would continue to see that market go on its own going forward.

So it's a balance for us and we're doing all the right things operationally and how we're focused on the market. It is

unique in that it's a very strong network with about 1,000 cell sites that we've deployed on 3G. We have 60 megahertz

of contiguous spectrum, very, very strong spectrum position in that market. And we've got a nice core group of

subscribers, relatively small compared to the other markets, but it's - it is a valuable asset. So as you correctly say, we

have to balance bringing down the level of investment while we continue our efforts to find the right strategic

alternative and we're very focused on that.

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

<Q - Kevin Smithen>: Thanks. We appreciate the additional disclosure on towers. I wondered if you could give us a

summary of your total iDEN towers by market? And then you've given us 3G towers, but total iDEN towers by market

would be very helpful.

<A - Juan R. Figuereo>: So I think we're looking for the number right now, I'm not sure that - okay, so total iDEN

towers, hang on a second. We've got 9,300 towers total. That's of Q1. And most of those towers, of course, are...

<Q - Kevin Smithen>: Those are operational towers? Or how many - I mean, what percentage of those are owned?

<A - Juan R. Figuereo>: These would be operational tower, all except about just a little north of 1,000 towers are

owned. And about 4,500 of those are in Brazil, 3,000 in Mexico, the next largest is Argentina. The rest is between -

and the rest of the pack markets.

<Q - Kevin Smithen>: You've indicated that you're looking to sell only 4,500 towers. It sounds like you've excluded

1,000 in Chile from that number. Why wouldn't you try to bundle in Chile or sell all 8,000 plus towers? Is there any

reason that you're excluding say 3,500 towers from the sale?

<A - Steven M. Shindler>: Well, as far as Chile's concerned, we obviously can look at that. That's one of the items

that would be on our strategic list. But we're thinking about that market more holistically at the moment and don't want

to move forward with a single step if there's something broader that would make more sense for us.

With regard to the other towers, we think it's a healthy portion. We've kind of gone through the portfolio of what we

think is saleable. It's a lengthy process, as you know, and we've been working hard to get all the paper work in place to

be able to sell the 4,500 towers and do it in as expeditious manner as we can.

We're not interested at this point in expanding beyond Mexico and Brazil with a tower sale and we're picking what we

think is a reasonable number of towers that we could move forward with quickly and get an attractive deal.

<Q - Kevin Smithen>: But would you be open long-term, if tower valuation continued to climb, to sell the remaining

towers? Or do you think they're not saleable?

<A - Steven M. Shindler>: No, we would be open to it. We've done tower transactions in the past and we're obviously

always looking at the makeup of the assets that we have and we'll look to structure it in the most efficient manner we

can from a capital allocation point of view.

<Q - Jim D. Breen>: Thanks. Just a couple questions. One, have you seen competitively, where do you think you guys

fit in terms of the launch of 3G now relative to some of the competition? Mexico and Brazil, do you feel like you're sort

on track with other parts of the competition? And is there any sense of feedback that you've gotten as to how your 3G

and data products are working relative to the competition?

And then secondly, just any color on CapEx as we look throughout the rest of the year, specifically as you look

<A - Gokul V. Hemmady>: So on - first on the data cards, James, as you know, we sold 60,000 data cards in Brazil.

We sold it because the great retention tool is working well. We are finding that usage is quite healthy. And it is proving

out to be what it was intended to do, which is we sold it to our existing base of iDEN customers as a retention tool. It's

a - we find that the network is good. We are getting good feedback. It's early stages still, but we are getting good

feedback and it enables our customers to start experiencing our network, which we feel is good. Of course, it's an

empty network right now, but that's the intention to start that way.

Right now,

as you know, both - in Brazil especially, we've just launched data services in many of our markets in and around São

Paulo. But as you've heard us say, we are competing there right now with one hand tied behind our back. Of course,

network deployment is going really well. We plan and expect to deploy in São Paulo in the second quarter, and once

we deploy that market, we'll start with growth and then deploy Rio by the end of the year.

And going into 2014, with both of those markets deployed, we feel very good about the traction and if I then think

about those two markets relative to the kind of traction we are seeing in Mexico with 3G deployed in about 50 million

POPs and with expanding coverage. And the traction we are getting month-over-month on the gross adds, as well as

significant migration and uplift in ARPU, with all those factors put together, we feel good about the customer feedback,

our network performance, quality, et cetera.

<A - Steven M. Shindler>: And this is Steve. Thank you for that question because this is one of the key areas that's got

me so excited to be back here and here for the long-term with the company. The more we look at everything that we're

doing and how we're building the networks and the way we're positioning for our ability to compete and win in the

market over the long-term and the assessment that we've made of what our competitors have done, yes, they're certainly

further along in their deployment.

But the penetration rate of 3G across the board is still probably in the 30%, maybe up to 40% range, so there's a

significant opportunity for us to get into the market and aggressively look to grow. And we're going to continue to

leverage off all of the pillars of differentiation that we have utilized in the past, moving forward to make sure we've got

the highest quality network everywhere where we build out coverage, backing it up with tremendously high levels of

customer service, customer care.

Of course, the PTT differentiation will still be part of our offering. We have the aspirational brand, and we'll continue

to leverage that. And now we get to move into the marketplace with a very broad portfolio of smartphones and bring

high quality data services, with tremendous speeds into the marketplace.

So everything's lining up for us to be able to get in there, and compete, and go after a much more significant target

market than we've had in the past. And we are very much on target for where we wanted to be at this point in the year,

but ask you all to have a little bit more patience with us as we complete these build-outs.

We have another quarter's worth, a little more than a quarter's worth of investment to make in Mexico to get to parity

with our iDEN network and we're going to be working hard through the balance of this year to do the same on the

construction in Brazil.

As I mentioned in my comments, the growth you should expect from us in Mexico will be ramping up nicely through

the second half of this year. And we're going to be ready to do exactly the same thing in Brazil, as we move towards the

end of this year and wrap into the first quarter of next year.

So we're on track. We like the competitive landscape as it sits and we think we've put all the tools in place to go take

advantage of it.

<

Operator

Your next question comes from the line of Kevin Roe from Roe Equity Research. Please go ahead.

<Q - Kevin M. Roe>: Thank you. Good morning, gentlemen.

<A - Steven M. Shindler>: Morning.

<Q - Kevin M. Roe>: A couple questions. First, Steve, on Chile, when do you hope to conclude the strategic review?

And, generally, can you talk about the interest level for that asset? And secondly, on Mexico, you mentioned 3G

network parity coverage by end of Q3. But how should we think about subscriber ramp? Are you not going to put the

pedal down until after you reach parity, so that we don't see an acceleration until 4Q? Or could that happen earlier?

<A - Steven M. Shindler>: I think it's a continuous process in Mexico, where, as Gokul mentioned, we're gaining

traction each month. So we're adding our distribution, we're continuing to add more sites in more cities. And we're

gradually accelerating the growth. And as we get to parity, we will get the pedal all the way to the floor and go for as

great a ramp as we can possibly achieve. So you should look for steady improvements from us throughout the year. But

at the back half of the year, it will increase in terms of growth.

As far as Chile, there's no specific timetable. As I mentioned, we're doing everything possible to keep the markets

strong, but with a reduced level of investment, while we explore a number of discussions and a number of potential

paths. And the most important thing for us to do there is to get it right rather than have a specific timeframe that we

have to hit.

<Q - Kevin M. Roe>: And can you generally talk about interest level for that asset?

<A - Steven M. Shindler>: As I said, there's a lot of different types of things that we're going to explore from the

strategic standpoint. So we're in the midst of those discussions now.

<Q - Kevin M. Roe>: Very good. Thanks, Steve.

<Q - Michel Morin>: Yes. Good morning. Steve, I was wondering if you could give us a little bit more color around

the strategy for migrating to 3G? I think you said that you were going to be intensifying the efforts in the second

quarter. Maybe explain a little bit better what you've done so far? And in terms of how you've actually approached that,

what kind of offers you're providing your subscribers? And what will change in the second quarter? Thank you.

<A - Steven M. Shindler>: Well, the offers that we provide to customers are consistent with our overall pricing plan,

so it really depends on what kind of customer we have. Are they a high-usage customer? How much do they utilize

PTT? We're trying to introduce them now to the opportunity to be able to use data services and clearly, there's a

handset upgrade involved in the process because that's what the primary effort is to migrate someone over. We get

them to extend their contract with us in doing that, so we provide them with - we're offering a subsidy to encourage

them to move to that level. And as Gokul highlighted, we're getting a bump up - a nice bump up in the ARPU as we go

through that process.

What the Mexico team has done is very aggressively gone through all of their distribution channels and their care

centers to train everyone to be able to really understand the needs of each type of customer and what it is that is most

important to them. Are they a consistent roamer to the U.S.? Are they more reliant on International Direct Connect?

What are the usage patterns. So that when approach them and have the discussion about what kind of plan to upgrade to

or what kind of a handset, are they a candidate for our IRONROCK, which keeps them on iDEN for push-to-talk that

allows them the benefits of the high-speed data?

Our teams know exactly where to steer the customer based on the type of user that they are and where they tend to use

the phones. Or are they more a candidate for one of our newer feature phones that we've also brought into the market

based on those usage patterns?

So a lot of work went into this, anticipating where we're going to be as we move into the May, June timeframe, trying

to alleviate any confusion that might have otherwise gone into the minds of our customers as they hear more and more

about the shutdown of iDEN in the U.S.

So I think we've done a good job preparing for it. I think we've done everything we possibly can to mitigate against the

impacts that we've anticipated for some time. And I think we're in the best position we can be to weather that storm,

albeit as we've shared, it will have some impact on our results this year.

I think we'll use that momentum as we move into the second half to have a broader experience and a lot more

customers that are now on our 3G networks and enjoying the new services.

<Q - Michel Morin>: So in Q2, it's really just doing a little bit more of what you've started to do in Q1?

<A - Steven M. Shindler>: Yeah. I think you'll see a big lift in the effort on the migration front in the second quarter.

And that is one of the primary reasons that we pointed to the fact that there's a big increase in investment in Q2 on a

number of operational elements. The two biggest ones being that migration effort and obviously the large number of

incremental cell sites that are coming online.

<Q - Michel Morin>: And are you expecting that we're going to see your 3G net adds start to offset the iDEN losses?

So in other words, should we see net adds improve in Mexico?

<A - Steven M. Shindler>: Yeah. I think, yes, we'll see net adds improve. We'll see - we will see a gradual shift

throughout the year and a much bigger shift in the second half of the growth coming on the 3G side versus the iDEN

side.

Your next question comes from the line of Andre Baggio from JPMorgan. You may go ahead.

<Q - Andre Baggio>: Hi. Good morning, everyone.

<A - Steven M. Shindler>: Morning.

<Q - Andre Baggio>: Sure, I have two questions. One of them is like, say, can you compare the costs, which are more

regulatory costs, in Brazil, when you move from iDEN to 3G? I know that there's some, in Brazil, some costs related to

additions that may apply to 3G and so on. But the interconnection I remember is different. Can you elaborate a little bit

on that?

<A - Gokul V. Hemmady>: Sure, Andre, as you know, we have a significant advantage when it comes to mobile

termination rates in Brazil on 3G compared to iDEN. And that comes from really two areas. Number one, over the next

two, three years, as you know, mobile termination rates are going down from the R$0.33 currently to almost, I think,

R$0.15 to R$0.16 over the next two, three years. So that's one advantage. I think it will level the playing field. It will

give us a good competitive advantage, all to benefit the marketplace and the customers; that's one benefit.

Second, for a short period of time, i.e., over the next two, three years, there is an element of asymmetry that Anatel has

announced which is, starts off with an 80%/20% rule. And it's a relatively complex calculation from a mathematical

standpoint. It starts with an 80%/20% rule this year, goes into next year, and then the following year goes to 60%/40%.

And then in 2016, from April 2016 onwards, it's all moved to a cost basis, which we believe at that time will be very

competitive rates, compared to some of the global rates or what we see elsewhere in the region. And as you know, in

Mexico, mobile termination rates are at around $0.03 also in terms of U.S. cents.

So, in summary, all this means is that there is a significant advantage that we have in the next two, three years. And as

rates move to cost basis, that advantage we believe will continue help us get to a much more level playing field. So we

are excited about that as we build out our 3G networks, which is all on track and we hope to take advantage of all of

this in the second half of the year as we launch São Paulo and then by the end of the year as we launch Rio.

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