NII Holdings Case: Teaching Notes
I. Current Situation
A. Current performance
– The corporation has obtained high ARPU (average revenue per user rates)
($US 46) and low monthly churn rates (1.93% versus 2.0%).
B. Strategic Posture
Mission:
-be a top performing wireless company in Latin America by providing the right
service.
Objectives:
-provide shareholders with an attractive return
-growth to achieve financial and operational milestones in the following
categories:
-operating revenues
Strategies:
-quality customer-oriented service
Policies:
-use of local management teams to better understand market conditions, seize
opportunities, and navigate cultural, political, and regulatory issues to better
meet customer needs.
-dedication to customer service
-promote brand image to increase perceived quality
II. External Environment: Opportunities and Threats (SWOT)
A. Societal Environment
Economy
– Economy in Recession (T)
high prices (T)
– Higher competition=Lower Prices=Larger Market (more affordable to
people) (O)
– Overall increasing demand for mobile services in Latin America (O)
– Other Telecom giants sinking large amounts of funds into post-paid
Technology
– Competitors have newer technology (T)
Political/Legal
Socio-Cultural
preference has been built (O)
B. Task Environment (Industry)
1. Industry Forces
a. Threat of new entrants – Moderate to High
– Brand loyalty towards existing companies that already have big
market shares.
b. Bargaining power of buyers – Moderate to High
– Increasing number of subscribers which face a lot of competition so
they drive the price down
d. Bargaining power of suppliers – High
– The suppliers in this industry have a lot of power since they are the
them a high amount of power.
e. Rivalry among competing firms – High
– All existing companies are looking to penetrate the market in Latin
offer the most innovative equipment.
f. Relative power of unions, govts, special interest groups etc – High
-Governments have a lot of power because these companies have to
follow their regulations.
2. Key Environmental Factors
– Already well-established companies in Latin America such as America Movil,
Telefonica, Telecom Italia, and local competitors.
– Looking into penetrating the market further.
– Company is very dependent on suppliers such as Motorola’s IDEN
equipment.
III. Internal Environment: Strengths and Weaknesses (SWOT)
A. Corporate Structure
1. Present structure
a. Decision-making authority decentralized into many units
B. Corporate Resources
1. Marketing
a. Strategy to obtain highest ARPU (Avg Rate per user) in region it
i. Clearly stated promotion strategy (pg 5)
service).
b. Analysis Marketing and Market Position Mix: The marketing
should affect future performance
iv. Yes, Nii has a strong position in high end mobile devices in
regions where demand is increasing
Market Data and Trends:
toward postpaid (Nii’s strength)
Nii is positioned to meet demand for future
meeting demand for multi-service devices.
d. Yes, after the 2002 near-bankruptcy they targeted cities where
e. NA
2. Finance
a. Nii’s current “financial objectives are to provide shareholders with
b. Financial analysis
High ARPU (Avg Rate per user) compared to competitors
Low monthly Churn rates (1.9)
i. LTD/Equity Ratio dropped from 1.23 in 2008 to 0.96 which
$2.5B long term debt.
ii. The main thing to observe of past trending is that Nii Intl
drops YoY.
iii. Yes, they are meeting the milestones set out in the
reduce debt.
c. Nii has half the mobile customers as the regions leader (America
performance.
Telecom Italia – defined by large debt and slow
growth in 2008
All told, Nii is positioned well against competitors.
sustained growth (28% YoY)
3. Research and Development (R&D)
a. The strategy of Nii’s R&D organization is to develop mobile
explanation of product strategy
ii. Yes, this Strategy is consistent with Nii’s mission,
objectives, etc
iii. The role of technology is of vital importance. The
company’s primary advantage stems from their ability to
v. Yes, see iv above
b. Technological discontinuity is of high importance to any telecom
business. Niii is no exception, but they have been able to stay
c. Yes, in Peru Nii was able to adapt to the market needs such as the
pending 3G implementation and they became a niche provider of
postpaid mobile service in a country transitioning from prepay to
customer base.