| NII HOLDINGS INC Item 1A Risk Factors Investors should be aware of various risks, including the risks described below |
| Our business, financial condition or results of operations could be materially adversely affected by any of these risks |
| The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of any investment |
| Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and included elsewhere |
| Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations |
| If we are not able to compete effectively in the highly competitive wireless communications industry, our future growth and operating results will suffer |
| Our success will depend on the ability of our operating companies to compete effectively with other telecommunications services providers, including wireline companies and other wireless telecommunications companies, in the markets in which they operate |
| Some of our competitors are financially stronger than we are, which may limit our ability to compete based on price |
| Because of their resources, and in some cases ownership by larger companies, some of our competitors may be able to offer services to customers at prices that are below the prices that our operating companies can offer for comparable services |
| If we cannot compete effectively based on the price of our service offerings, our results of operations may be adversely affected |
| For example, many of our competitors are well-established companies that have: • substantially greater financial and marketing resources; • larger customer bases; • better name recognition; • bundled service offerings; • larger spectrum positions; and • larger coverage areas than those of our operating companies |
| In addition, we anticipate that our operating companies will continue to face market pressure to reduce the prices charged for their products and services because of increased competition in our markets |
| Our operating companies may face disadvantages when competing against formerly government-owned incumbent wireline operators or wireless operators affiliated with them |
| In some markets, our operating companies may not be able to compete effectively against a formerly government-owned monopoly telecommunications operator, which today enjoys a near monopoly on the provision of wireline telecommunications services and may have a wireless affiliate or may be controlled by shareholders who also control a wireless operator |
| Our operating companies may be at a competitive disadvantage in these markets because formerly government-owned incumbents or affiliated competitors may have: • close ties with national regulatory authorities; • control over connections to local telephone lines; or • the ability to subsidize competitive services with revenues generated from services they provide on a monopoly or near-monopoly basis |
| 25 _________________________________________________________________ Our operating companies may encounter obstacles and setbacks if local governments adopt policies favoring these competitors or otherwise afford them preferential treatment |
| As a result, our operating companies may be at a competitive disadvantage to incumbent providers, particularly as our operating companies seek to offer new telecommunications services |
| Our coverage is not as extensive as those of other wireless service providers in our markets, which may limit our ability to attract and retain customers |
| Since our digital mobile networks do not offer nationwide coverage in the countries in which we operate and our technology limits our potential roaming partners, we may not be able to compete effectively with cellular and personal communications services providers in our markets |
| Many of the cellular and personal communications services providers in our markets have networks with substantially more extensive areas of service |
| Additionally, many of these providers have entered into roaming agreements with each other, which permit these providers to offer coverage to their subscribers in each other’s markets |
| The iDEN technology that we deploy is not compatible with other wireless technologies such as digital cellular or personal communications services technologies or with other iDEN networks not operating in the 800 MHz spectrum |
| As a result, with the exception of GSM 900 MHz systems, we cannot enter into roaming agreements with the operators of these other networks |
| Although the i2000 digital phone that we sell is compatible with both iDEN 800 MHz and GSM 900 MHz systems, our customers will not be able to roam on other iDEN 800 MHz or GSM 900 MHz systems where we do not have a roaming agreement |
| As a result, we will not be able to provide coverage to our subscribers outside of our currently operating digital markets until: • other operators deploy iDEN 800 MHz or GSM 900 MHz technology in markets outside of our coverage areas and we enter into roaming agreements with those operators; or • handsets that can be used on both iDEN 800 MHz and non-GSM 900 MHz wireless communications networks become available and we enter into roaming agreements with the operators of those networks |
| If we do not keep pace with rapid technological changes, we may not be able to attract and retain customers |
| The wireless telecommunications industry is experiencing significant technological change |
| Future technological advancements may enable other wireless technologies to equal or exceed our current level of service and render iDEN technology obsolete |
| If Motorola, the sole supplier of iDEN technology, is unable or unwilling to upgrade or improve iDEN technology or develop other technology to meet future advances in competing technologies on a timely basis, or at an acceptable cost, we will be less able to compete effectively and could lose customers to our competitors |
| In addition, competition among the differing wireless technologies could: • segment the user markets, which could reduce demand for our technology; and • reduce the resources devoted by third-party suppliers, including Motorola, which supplies all of our current digital mobile technology, to developing or improving the technology for our systems |
| If our wireless communications technology does not perform in a manner that meets customer expectations, we will be unable to attract and retain customers |
| Customer acceptance of the services we offer is and will continue to be affected by technology-based differences and by the operational performance and reliability of our digital mobile networks |
| We may have difficulty attracting and retaining customers if we are unable to address and resolve satisfactorily performance or other transmission quality issues as they arise or if these issues: • limit our ability to expand our network coverage or capacity as currently planned; or • place us at a competitive disadvantage to other wireless service providers in our markets |
| 26 _________________________________________________________________ Our equipment is more expensive than that of some competitors, which may affect our ability to establish and maintain a significant subscriber base |
| We currently market multi-function digital handsets, and Motorola is the sole supplier of all our handsets |
| The higher cost of our equipment may make it more difficult for us to attract customers |
| In addition, the higher cost of our handsets requires us to absorb a comparatively larger part of the cost of offering handsets to new and existing customers |
| These higher costs of handsets place us at a competitive disadvantage and may reduce our growth and profitability |
| We may lose a competitive advantage because our competitors are providing two-way radio dispatch and other services |
| Several of our competitors have introduced Push-To-Talk over Cellular service, which is a walkie-talkie type of service similar to our Direct Connect service |
| In addition, we do not have short messaging system (SMS) interoperability agreements in all our markets |
| Consequently, our competitive advantage may be impaired |
| Because we rely on one supplier to implement our digital mobile networks, any failure of that supplier to perform could adversely affect our operations |
| Motorola is currently our sole source for most of the digital network equipment and all of the handsets used throughout our markets |
| In addition, iDEN technology is a proprietary technology of Motorola, meaning that there are no other suppliers of this technology, and it is the only widespread, commercially available digital technology that operates on non-contiguous spectrum |
| Much of the spectrum that our operating companies hold in each of the markets we serve is non-contiguous |
| The non-contiguous nature of our spectrum may make it more difficult for us to migrate to a new technology if we choose to do so |
| Additionally, if Motorola fails to deliver system infrastructure equipment and handsets or enhancements on a timely, cost-effective basis, we may not be able to adequately service our existing customers or add new customers |
| Nextel Communications, a subsidiary of SprintNextel Corporation, is the largest customer of Motorola with respect to iDEN technology and provides significant support with respect to new product development |
| Nextel Communications and Sprint merged on August 12, 2005, and as a result, Nextel Communications became a subsidiary of Sprint Nextel |
| The new combined company had previously announced plans to migrate Nextel’s push-to-talk services to a next generation CDMA network platform |
| Nextel Communications had also announced an agreement with Motorola for a three-year extension of its iDEN infrastructure supply agreement and handset purchase agreement, with certain modifications |
| Any decrease by Nextel Communications in its use of iDEN technology could significantly increase our costs for equipment and new developments and could impact Motorola’s decision to continue to support iDEN technology |
| In the event Motorola determines not to continue manufacturing, supporting or enhancing our iDEN based infrastructure and handsets, because Nextel Communications decreases its use of iDEN technology or otherwise, we may be materially adversely affected |
| We expect to continue to rely principally on Motorola for the manufacture of a substantial portion of the equipment necessary to construct, enhance and maintain our digital mobile networks and for the manufacture of handsets for the next several years |
| We operate exclusively in foreign markets, and our assets, customers and cash flows are concentrated in Latin America, which presents risks to our operating and financing plans |
| We face political and economic risks in our markets, which may limit our ability to implement our strategy and our financial flexibility and may disrupt our operations |
| The countries in which we operate are considered to be emerging markets |
| Although political, economic and social conditions differ in each country in which we currently operate, political and economic developments in one country may affect our business as a whole, including our access to international capital markets |
| Negative developments or unstable conditions in the countries in which we operate or in other emerging market countries could have a material adverse effect on our financial condition and results of operations |
| In Peru, for example, there was significant terrorist activity in the 1980s and the early 1990s |
| During that time, anti-government groups escalated violence against the government, the private sector and 27 _________________________________________________________________ Peruvian residents |
| Incidents of terrorist activity continue to occur |
| Similar outbreaks of terrorism or political violence have occurred in Mexico and other countries in which we operate |
| In addition, in 2001, after prolonged periods of recession followed by political instability, the Argentine government announced it would not service its public debt |
| In order to address the worsening economic and social crisis, the Argentine government abandoned its decade-old fixed Argentine peso-US dollar exchange rate, allowing the currency to float to market levels |
| During 2006, there will be presidential elections held in three of our major markets |
| We are unable to predict the impact that presidential or other contested local or national elections and the associated transfer of power from incumbent officials or political parties to elected victors, may have on the local economy or the growth and development of the local telecommunications industry |
| Changes in leadership or in the ruling party in the countries in which we operate may affect the economic programs developed under the prior administration, which in turn, may adversely affect the economies in the countries in which we operate and our business operations and prospects in these countries |
| Due to our significant operations in Argentina and Brazil, our business is particularly exposed to risks associated with adverse economic and political conditions in those countries |
| In recent years, both Argentina and Brazil have been negatively affected by volatile economic and political conditions |
| These volatile conditions pose risks for our business |
| In particular, the volatility of the Argentine peso and the Brazilian real has affected our recent financial results |
| The depreciation of the currencies in Argentina and Brazil in 2002 had a material negative impact on our financial results |
| After a prolonged period of recession, followed by political instability, Argentina announced in December 2001 that it would impose tight restrictions on bank accounts, would not service its public sector debt and suspended foreign currency trading |
| In January 2002, the Argentine government abandoned its decade-old fixed Argentine peso-US dollar exchange rate |
| The resulting depreciation of the Argentine peso against the US dollar during the 2002 calendar year was 66prca |
| A depreciation of the Argentine peso generally affects our consolidated financial statements by generating a foreign currency transaction loss on US dollar-denominated debt |
| Until October 31, 2002, the liabilities of our Argentine operating company included US dollar-denominated secured debt, for which we recognized foreign currency transaction losses of dlra137dtta5 million for the ten months ended October 31, 2002 |
| A depreciation of the Argentine peso also affects our consolidated financial statements by reducing the translation rate of all Argentine peso-denominated balances |
| To the extent net income is generated by our Argentine operating company, the amount would be reduced by a depreciation of the Argentine peso |
| The Brazilian economy has been characterized by frequent and occasionally drastic intervention by the Brazilian government and by volatile economic cycles |
| The Brazilian government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Brazil’s economy |
| In early 1999, the Brazilian government allowed the Brazilian real to float freely, resulting in a 32prca depreciation against the US dollar that year |
| In 2002, the Brazilian real depreciated against the US dollar by 18prca |
| In addition, economic and market conditions in other emerging markets can influence the perception of Brazil’s economic and political situation |
| We are subject to fluctuations in currency exchange rates and limitations on the expatriation or conversion of currencies, which may result in significant financial charges, increased costs of operations or decreased demand for our products and services |
| Nearly all of our revenues are earned in non-US currencies, while a significant portion of our capital and operating expenditures, including imported network equipment and handsets, and substantially all of our outstanding debt, is priced in US dollars |
| In addition, we report our results of operations in US dollars |
| Accordingly, fluctuations in exchange rates relative to the US dollar could have a material adverse effect on our earnings or assets |
| For example, the 1999 and 2002 currency devaluations in Brazil resulted in significant charges against our earnings in 1999 and 2002 and negative adjustments to the carrying value of our assets in Brazil |
| The economic upheaval in Argentina in 2002 led to the unpegging of the Argentine peso to the US dollar exchange rate and the subsequent significant devaluation of the Argentine peso, which resulted in 28 _________________________________________________________________ charges against our earnings in 2002 and negative adjustments to the carrying values of our assets in Argentina |
| Any depreciation of local currencies in the countries in which our operating companies conduct business may result in increased costs to us for imported equipment and may, at the same time, decrease demand for our products and services in the affected markets |
| If our operating companies distribute dividends in local currencies in the future, the amount of cash we receive will also be affected by fluctuations in exchange rates and currency devaluations |
| In addition, some of the countries in which we have operations do or may restrict the expatriation or conversion of currency |
| Our operating companies are subject to fluctuating economic conditions in the local markets in which they operate, which could hurt their performance |
| Our operations depend on the economies of the markets in which our operating companies conduct business |
| These markets are in countries with economies in various stages of development or structural reform, some of which are subject to rapid fluctuations in terms of commodity prices, local consumer prices, employment levels, gross domestic product, interest rates and inflation rates |
| If these fluctuations have an effect on the ability of customers to pay for our products and services, our business may be adversely affected |
| As a result, our operating companies may experience lower demand for their products and services and a decline in the growth of their customer base and in revenues |
| Some of our operating companies conduct business in countries where the rate of inflation is significantly higher than in the United States |
| Any significant increase in the rate of inflation in any of these countries may not be completely or partially offset by corresponding price increases implemented by our operating companies, even over the long term |
| Our operating companies are subject to local laws and customs in the countries in which they operate, which could impact our financial results |
| Our operations are subject to local laws and customs in the countries in which we operate, which may differ from those in the US We could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations, which may be substantially different from those in the United States |
| In some foreign countries, particularly in those with developing economies, persons may engage in business practices that are prohibited by United States regulations applicable to us such as the Foreign Corrupt Practices Act |
| Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, consultants, contractors and agents will not take actions in violations of our policies |
| Any such violation, even if prohibited by our policies, could have a material adverse effect on our business |
| We pay significant import duties on our network equipment and handsets, and any increases could impact our financial results |
| Our operations are highly dependent upon the successful and cost-efficient importation of network equipment and handsets from North America and, to a lesser extent, from Europe and Asia |
| Any significant increase in import duties in the future could significantly increase our costs |
| To the extent we cannot pass these costs on to our customers, our financial results will be negatively impacted |
| In the countries in which our operating companies conduct business, network equipment and handsets may be subject to significant import duties and other taxes |
| We are subject to foreign taxes in the countries in which we operate, which may reduce amounts we receive from our operating companies or may increase our tax costs |
| Many of the foreign countries in which we operate have increasingly turned to new taxes, as well as aggressive interpretations of current taxes, as a method of increasing revenue |
| For instance, Brazil has a tax on financial transactions, certain provinces in Argentina adopted higher tax rates on telecommunications services in 2001, and Argentina adopted a federal universal services tax in 2001 |
| The provisions of new tax laws may attempt to prohibit us from passing these taxes on to our customers |
| These taxes may reduce the amount of earnings that we can generate from our services |
| 29 _________________________________________________________________ Distributions of earnings and other payments, including interest, received from our operating companies may be subject to withholding taxes imposed by some countries in which these entities operate |
| In general, a US corporation may claim a foreign tax credit against its Federal income tax expense for foreign withholding taxes and, under certain circumstances, for its share of foreign income taxes paid directly by foreign corporate entities in which the company owns 10prca or more of the voting stock |
| Our ability to claim foreign tax credits is, however, subject to numerous limitations, and we may incur incremental tax costs as a result of these limitations or because we do not have US Federal taxable income |
| We may also be required to include in our income for US Federal income tax purposes our proportionate share of specified earnings of our foreign corporate subsidiaries that are classified as controlled foreign corporations, without regard to whether distributions have been actually received from these subsidiaries |
| Nextel Brazil has received tax assessment notices from state and federal Brazilian tax authorities asserting deficiencies in tax payments related primarily to value added taxes, import duties and matters surrounding the definition and classification of equipment and services |
| Nextel Brazil has filed various petitions disputing these assessments |
| In some cases we have received favorable decisions, which are currently being appealed by the respective governmental authorities |
| In other cases, our petitions have been denied and we are currently appealing those decisions |
| We currently estimate the range of possible losses related to matters for which Nextel Brazil has not accrued liabilities, as they are not deemed probable, to be between dlra74dtta1 million and dlra78dtta1 million as of December 31, 2005 |
| We have entered into a number of agreements that are subject to enforcement in foreign countries, which may limit efficient dispute resolution |
| A number of the agreements that we and our operating companies enter into with third parties are governed by the laws of, and are subject to dispute resolution in the courts of or through arbitration proceedings in, the countries or regions in which the operations are located |
| We cannot accurately predict whether these forums will provide effective and efficient means of resolving disputes that may arise |
| Even if we are able to obtain a satisfactory decision through arbitration or a court proceeding, we could have difficulty enforcing any award or judgment on a timely basis |
| Our ability to obtain or enforce relief in the United States is also uncertain |
| Government regulations determine how we operate in various countries, which could limit our growth and strategic plans |
| In each market in which we operate, one or more regulatory entities regulate the licensing, construction, acquisition, ownership and operation of our wireless communications systems |
| Adoption of new regulations, changes in the current telecommunications laws or regulations or changes in the manner in which they are interpreted or applied could adversely affect our operations |
| Because of the uncertainty as to the interpretation of regulations in some countries in which we operate, we may not always be able to provide the services we have planned in each market |
| In some markets, we are unable, or have limitations on our ability, to offer some services, such as interconnection to other telecommunications networks and participation in calling party pays programs, which may increase our net costs |
| Further, the regulatory schemes in the countries in which we operate allow third parties, including our competitors, to challenge our actions |
| For instance, some of our competitors have challenged the validity of some of our licenses or the scope of services we provide under those licenses, in administrative or judicial proceedings, particularly in Chile |
| It is possible that, in the future, we may face additional regulatory prohibitions or limitations on our services |
| Inability to provide planned services could make it more difficult for us to compete in the affected markets |
| Further, some countries in which we conduct business impose foreign ownership limitations upon telecommunications companies |
| Finally, in some of our markets, local governments have adopted very stringent rules and regulations related to the placement and construction of wireless towers, which can significantly impede the planned expansion of our service coverage area, eliminate existing towers and impose new and onerous taxes and fees |
| These issues affect our ability to operate in each of our markets, and therefore impact our business strategies |
| In addition, local governments have placed embargoes on a number of our cell sites owned by our operating companies in 30 _________________________________________________________________ Argentina and Brazil |
| If we are not able to successfully overcome these embargoes, we may have to remove the cell sites and find a more acceptable location |
| See the “Regulatory and Legal Overview” discussion for each operating company under “Business — I Operating Companies |
| ” If our licenses to provide mobile services are not renewed, or are modified or revoked, our business may be restricted |
| Wireless communications licenses and spectrum allocations are subject to ongoing review and, in some cases, to modification or early termination for failure to comply with applicable regulations |
| If our operating companies fail to comply with the terms of their licenses and other regulatory requirements, including installation deadlines and minimum loading or service availability requirements, their licenses could be revoked |
| Further, compliance with these requirements is a condition for eligibility for license renewal |
| Most of our wireless communications licenses have fixed terms and are not renewed automatically |
| Because governmental authorities have discretion as to the grant or renewal of licenses, our licenses may not be renewed or, if renewed, renewal may not be on acceptable economic terms |
| For example, under existing regulations, our licenses in Brazil and Peru are renewable once, but no regulations presently exist regarding how or whether additional renewals will be granted |
| Any modification or termination of our license or roaming agreements with Nextel Communications could increase our costs |
| Nextel Communications has licensed to us the right to use “Nextel” and other of its trademarks on a perpetual royalty-free basis in Latin America |
| However, Nextel Communications may terminate the license on 60 days notice if we commit one of several specified defaults (namely, failure to maintain agreed quality controls or a change in control of NII Holdings) |
| If there is a change in control of one of our subsidiaries, upon 30 days notice, Nextel Communications may terminate the sublicense granted by us to the subsidiary with respect to the licensed marks |
| The loss of the use of the “Nextel” tradename could have a material adverse effect on our operations |
| We also depend upon our roaming agreements with Nextel Communications for access to its iDEN network in the United States |
| We have identified material weaknesses in our internal control over financial reporting |
| As required by Section 404 of the Sarbanes-Oxley Act of 2002, our management has conducted an assessment of our internal control over financial reporting |
| As defined under the rules implementing Section 404, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
| To evaluate the effectiveness of our internal control over financial reporting, management uses the criteria described in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission |
| In our 2004 annual report on Form 10-K and our quarterly reports on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005, we provided a detailed description of two material weaknesses over internal control over financial reporting we had identified at the time |
| In this 2005 annual report on Form 10-K, we continue to identify the existence of one material weakness in our internal controls over financial reporting |
| A material weakness is a significant deficiency or a combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected |
| Based on the material weaknesses we identified, and in accordance with the PCAOB standards, we concluded that our internal control over financial reporting was not effective as of the dates of the applicable quarterly and annual reports |
| We are in the process of developing and implementing remedial measures to address the material weakness in our internal control over financial reporting |
| We have extensive work remaining to test the remedial measures and to remedy this material weakness |
| There can be no assurance as to when the remediation plan will be implemented and successfully tested |
| Until our remedial efforts are completed, we 31 _________________________________________________________________ will continue to incur the expenses and management burdens associated with the additional resources and oversight required to prepare our consolidated financial statements |
| If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud |
| As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock |
| Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud |
| Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements |
| Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate |
| We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement |
| As initially discussed in our 2004 annual report on Form 10-K, we identified a material weakness related to the accounting for income taxes as a result of our assessment of internal controls over financial reporting in 2004 and in 2005 |
| We are continuing to work to improve our internal controls |
| We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future |
| Any failure to implement required new or improved controls or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations |
| Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock |
| Our debt limits our flexibility and increases our risk of default |
| Our debt could have important consequences to you, such as: • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete and increasing our vulnerability to general adverse economic and industry conditions; and • limiting our ability to obtain additional financing that we may need to fund future working capital, capital expenditures, product development, acquisitions or other corporate requirements |
| As of December 31, 2005, the book value of our long-term debt was dlra1cmam148dtta8 million, including dlra350dtta0 million of 2dtta75prca convertible notes due 2025, dlra300dtta0 million of 2dtta875prca convertible notes due 2034, dlra91dtta5 million of 3dtta5prca convertible notes due 2033, dlra232dtta4 million for a syndicated loan facility, dlra124dtta8 million in obligations associated with the sale and leaseback of communication towers, dlra42dtta5 million in capital lease obligations and dlra7dtta6 million in spectrum license financing in Brazil |
| Our ability to meet our debt obligations and to reduce our indebtedness will depend on our future performance |
| Our performance, to a certain extent, is subject to general economic conditions and financial, business, political and other factors that are beyond our control |
| We cannot assure you that we will continue to generate cash flow from operations at or above current levels, that we will be able to meet our cash interest payments on all of our debt or that the related assets currently owned by us can be sustained in the future |
| If our business plans change, including as a result of changes in technology, or if we decide to offer new communication services or expand into new markets or further in our existing markets, as a result of the construction of additional portions of our network or the acquisition of competitors or others, or if economic conditions in any of our markets generally, or competitive practices in the mobile wireless telecommunications industry change materially from those currently prevailing or from those now anticipated, or if other presently unexpected circumstances arise that have a material effect on the cash flow or profitability of our mobile wireless business, then the anticipated cash needs of our business as well as the conclusions presented herein as to the adequacy of the available sources of cash and timing on our ability to generate net income could change significantly |
| Any of these events or circumstances could involve significant additional funding needs in excess of the identified currently available sources, and could require us to raise additional capital to meet those needs |
| In addition, we continue to assess the opportunities to raise additional funding on attractive terms 32 _________________________________________________________________ and conditions and at times that do not involve any of these events or circumstances and may do so if the opportunity presents itself |
| However, our ability to seek additional capital, if necessary, is subject to a variety of additional factors that we cannot presently predict with certainty, including: • the commercial success of our operations; • the volatility and demand of the capital markets; and • the future market prices of our securities |
| If we are unable to generate cash flow from operations in the future to service our debt, we may try to refinance all or a portion of our debt |
| We cannot assure you that sufficient future borrowings will be available to pay or refinance our debt |
| Our financing agreements have had and may contain covenants that limit how we conduct our business, which may affect our ability to grow as planned |
| As a result of restrictions that have been contained in certain of our financing agreements and may be contained in future financing agreements, we may be unable to raise additional financing, compete effectively or take advantage of new business opportunities |
| This may affect our ability to generate revenues and profits |
| Our current financing agreements have, and any future financing agreements may contain, covenants that limit how we conduct business by restricting our ability to: • incur or guarantee additional indebtedness; • pay dividends and make other distributions; • prepay subordinated indebtedness; • make investments and other restricted payments; • enter into sale and leaseback transactions; • create liens; • sell assets; and • engage in transactions with affiliates |
| We have significant intangible assets that are not likely to generate adequate value to satisfy our obligations in the event of liquidation |
| If we were liquidated, the value of our assets likely would not be sufficient to satisfy our obligations |
| We have a significant amount of intangible assets, such as licenses |
| The value of these licenses will depend significantly upon the success of our digital mobile network business and the growth of the SMR and wireless communications industries in general |
| Moreover, the transfer of licenses in liquidation would be subject to governmental or regulatory approvals that may not be obtained or that may adversely impact the value of such licenses |
| Our net tangible book value was dlra727dtta8 million as of December 31, 2005 |
| Agreements with Motorola reduce our operational flexibility and may adversely affect our growth or operating results |
| We have entered into agreements with Motorola that impose limitations and conditions on our ability to use other technologies that would displace our existing iDEN digital mobile networks |
| These agreements may delay or prevent us from employing new or different technologies that perform better or are available at a lower cost because of the additional economic costs and other impediments to change arising under the Motorola agreements |
| For example, our infrastructure supply and installation services agreements with Motorola require that we must provide Motorola with notice of our determination that Motorola’s technology is no longer suited to our needs at least six months before publicly announcing or entering into a contract to purchase equipment utilizing an alternate technology |
| In addition, if Motorola manufactures, or elects to manufacture, the equipment utilizing the alternate technology that we elect to deploy, we must give Motorola the opportunity to supply 50prca of our infrastructure 33 _________________________________________________________________ requirements for the equipment utilizing the alternate technology for three years |
| This may limit our ability to negotiate with an alternate equipment supplier |
| We may not be able to finance a change of control offer |
| Upon the occurrence of certain kinds of change of control events, we may be required to repurchase the majority of the principal amount of all of our outstanding debt |
| Concerns about health risks associated with wireless equipment may reduce the demand for our services |
| Portable communications devices have been alleged to pose health risks, including cancer, due to radio frequency emissions from these devices |
| The actual or perceived risk of mobile communications devices could adversely affect us through increased costs of doing business, additional governmental regulation that sets emissions standards or otherwise limits or prohibits our devices from being marketed and sold, a reduction in subscribers, reduced network usage per subscriber or reduced financing available to the mobile communications industry |
| Further research and studies are ongoing, and we cannot be sure that these studies will not demonstrate a link between radio frequency emissions and health concerns |
| Our forward-looking statements are subject to a variety of factors that could cause actual results to differ materially from current beliefs |
| “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 |
| Certain statements made in this annual report on Form 10-K are not historical or current facts, but deal with potential future circumstances and developments |
| They can be identified by the use of forward-looking words such as “believes,” “expects,” “intends,” “plans,” “may,” “will,” “would,” “could,” “should” or “anticipates” or other comparable words, or by discussions of strategy that involve risks and uncertainties |
| We caution you that these forward-looking statements are only predictions, which are subject to risks and uncertainties, including technical uncertainties, financial variations, changes in the regulatory environment, industry growth and trend predictions |
| We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from our current expectations regarding the relevant matter or subject area |
| The operation and results of our wireless communications business also may be subject to the effects of other risks and uncertainties in addition to the other qualifying factors identified in this Item, including, but not limited to: • our ability to meet the operating goals established by our business plan; • general economic conditions in Latin America and in the market segments that we are targeting for our digital mobile services; • the political and social conditions in the countries in which we operate, including political instability, which may affect the economies of our markets and the regulatory schemes in these countries; • substantive terms of any international financial aid package that may be made available to any country in which our operating companies conduct business; • the impact of foreign exchange volatility in our markets as compared to the US dollar and related currency devaluations in countries in which our operating companies conduct business; • reasonable access to and the successful performance of the technology being deployed in our service areas, and improvements thereon, including technology deployed in connection with the introduction of digital two-way mobile data or Internet connectivity services in our markets; • the availability of adequate quantities of system infrastructure and subscriber equipment and components at reasonable pricing to meet our service deployment and marketing plans and customer demand; • the success of efforts to improve and satisfactorily address any issues relating to our digital mobile network performance; 34 _________________________________________________________________ • future legislation or regulatory actions relating to our SMR services, other wireless communication services or telecommunications generally; • the ability to achieve and maintain market penetration and average subscriber revenue levels sufficient to provide financial viability to our digital mobile network business; • the quality and price of similar or comparable wireless communications services offered or to be offered by our competitors, including providers of cellular services and personal communications services; • market acceptance of our new service offerings; • our ability to access sufficient debt or equity capital to meet any future operating and financial needs; and • other risks and uncertainties described in this annual report on Form 10-K and from time to time in our other reports filed with the Securities and Exchange Commission |