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Digging in: popular with big businesses, NII's push-to-talk wireless technology gains an edge among ordinary individuals.

By any normal measure of Latin American telecoms these days, NII Holdings should be losing its shirt. Formerly known as Nextel International, the small wireless company competes with behemoths such as Mexico's America Movil--part of the Carlos Slim empire--and Spain's Telefonica Moviles across the hemisphere.

Yet it's raking in revenues, US$1.28 billion in 2004, a 36% jump compared with 2003. Now in Canada, the United States, Mexico, Argentina, Peru and Brazil, NII's popular push-to-talk walkie-talkie service has typically been a favorite among corporate clients. That's especially true for NII's Mexican unit, Nextel Mexico, which accounts for 60% of the company's total revenue.

In Mexico, NII holds just 2% of the wireless telecommunications market, according to Pyramid Research. What it lacks in reach, it makes up for in richness. It charges a lot for its unique service there--average revenue per user at $85 per head is five times the market average of just over $17--and customers are lining up: Revenue in Mexico grew 34% in 2004 to $775.9 million. Nextel Mexico posts the highest average revenue per user for NII than any other region.

To tap markets outside of the traditional urban centers, Nextel Mexico recently broadened its spectrum of coverage in Mexico, where it now has the potential to serve 81% of the country's gross domestic product, and expects to keep on growing. While 70% of Nextel Mexico's customers are businesses, the remaining 30% are so-called independent professionals--individual consumers--the fastest growing segment. "We've tripled the individual subscriber base in the last two years," says Carlos Ortega, communications director of Nextel Mexico.

Those numbers have raised a few eyebrows at larger competitors such as America Movil, which has begun to dabble in push-to-talk service, although Nextel claims its technology is seven times faster than that of its competitors. Being first in the market, too, will make customers reluctant to jump ship to another provider, say executives. America Movil's entrance into push-to-talk technology will only make demand for the service--and Nextel's products--grow, they say.

Market watchers agree, for now. They cite Nextel's speedier technology. But deep-pocketed America Movil, which owns wireless provider Telcel and controls more than three-quarters of the wireless market, has the potential to become a player in the push-to-talk market down the road if it wants.

"Right now it's not so much of a threat but going forward as the technology improves, it's definitely something that should he on NII's radar screen," says Marc Einstein, an analyst at Pyramid Research. Whether other carriers gobble into Nextel's push-to-talk market remains to be seen. In the meantime, the company says that more and more individual subscribers will pump fresh revenues into company coffers. "The pie gets larger and the slices tend to be the same except for the residential sector," says Gustavo Cantu, vice president for business development and institutional relations at Nextel Mexico.

Part of the appeal of push-to-talk technology is cost savings. The company estimates that quick, walkie-talkie style conversations will nix the need to make costlier phone calls. In the Mexico City offices of the company, scores of executives walk the halls responding to the incessant beeps of their Nextel phones. "Our users obtain savings in telecommunications systems to the tune of 20% to 30% of their costs," says Cantu.

Don't expect to see Nextel's phones around every corner, though. The company's business model targets fewer but more deep-pocketed clients, be they large, medium or small businesses, or individuals. "We are always concerned about our margins and creating value for our investors," says Cantu.

Logistics. For 2005, Nextel Mexico has earmarked $100 million for capital expenditures. It plans to target rising trade in Mexico to further growth. The company already offers direct-connection calling across the region--popular with jet-setting executives--but its very first international push-to-talk phone call went the relatively short distance from Tijuana to San Diego.

Looking to grab a slice of a growing logistics business, Nextel Mexico plans further expansions along the U.S.-Mexican border. "Before the end of the year we are going to open Ciudad Juarez and El Paso, and Matamoros-McAllen-Brownsville," says Cantu.

FORREST JONES, MEXICO CITY
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Title Annotation:TELECOMS
Author:Jones, Forrest
Publication:Latin Trade
Date:Jul 1, 2005
Words:686
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