UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2018~~2019
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37488

NII HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



Delaware		91-1671412
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
12110 Sunset Hills Road, Suite 600 Reston, Virginia (Address of principal executive offices)		20190 (Zip Code)

(703) 390-5100

(Registrant's telephone number, including area code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	NIHD	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o	Emerging growth company o
		~~(Do not check if a smaller reporting company)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



	Number of Shares Outstanding
Title of Class	on August ~~2, 2018~~1, 2019
Common Stock, $0.001 par value per share	~~100,470,158~~101,674,499

NII HOLDINGS, INC. AND SUBSIDIARES

INDEX



		Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets — As of June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
	Condensed Consolidated Statements of Comprehensive Loss — For the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	4
	Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders' Deficit — For the Three and Six Months Ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2015
Item 3. Quantitative and Qualitative Disclosures About Market Risk		3525
Item 4. Controls and Procedures		3525

Part II. Other Information		3627
Item 1. Legal Proceedings		36
~~Item 1A. Risk Factors~~		3627
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
~~Item 5. Other Information~~		3727
Item 6. Exhibits		3828

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par values) Unaudited	NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par values) Unaudited						NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par values) Unaudited

	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018

ASSETS
Current assets
Cash and cash equivalents	$	90,893		$	193,888		$	65,146		$	93,881
Short-term investments	29,687			16,711
Accounts receivable, net of allowance for doubtful accounts of $26,103 and $42,011	95,470			106,715
Handset and accessory inventory	3,479			3,163
Cash in escrow							103,422			106,089
Prepaid expenses and other	229,357			254,461			983			1,435
Assets held for sale							300,816			321,160
Total current assets	448,886			574,938			470,367			522,565
Property, plant and equipment, net	112,481			117,262
Intangible assets, net	170,885			194,694
Other assets	233,746			218,204			890			1,244
Assets held for sale							901,343			536,021
Total assets	$	965,998		$	1,105,098		$	1,372,600		$	1,059,830

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	39,097		$	42,284
Accrued expenses and other	273,451			308,129
Current portion of long-term debt	3,899			7,990
Accounts payable, accrued expenses and other							$	12,742		$	12,772
Liabilities held for sale							377,493			346,715
Total current liabilities	316,447			358,403			390,235			359,487
Long-term debt	584,439			647,717			75,533			72,264
Other long-term liabilities	224,472			220,925			400			33,977
Liabilities held for sale							1,123,625			775,671
Total liabilities	1,125,358			1,227,045			1,589,793			1,241,399
Contingencies (Note 8)
Commitments and contingencies (Note 1)
Stockholders’ deficit
Undesignated preferred stock, par value $0.001, 10,000 shares authorized, no shares issued or outstanding	—			—			—			—
Common stock, par value $0.001, 140,000 shares authorized, 100,456 shares issued and outstanding — 2018, 100,384 shares issued and outstanding — 2017	100			100
Common stock, par value $0.001, 140,000 shares authorized, 101,675 shares issued and outstanding — 2019, 101,323 shares issued and outstanding — 2018							102			101
Paid-in capital	2,140,741			2,139,299			2,138,857			2,143,240
Accumulated deficit	(2,204,516		)	(2,135,770		)	(2,257,878		)	(2,236,883		)
Accumulated other comprehensive loss	(8,836		)	(46,903		)	(10,653		)	(8,435		)
Total NII Holdings stockholders’ deficit	(72,511		)	(43,274		)	(129,572		)	(101,977		)
Noncontrolling interest	(86,849		)	(78,673		)	(87,621		)	(79,592		)
Total deficit	(159,360		)	(121,947		)	(217,193		)	(181,569		)
Total liabilities and stockholders’ deficit	$	965,998		$	1,105,098		$	1,372,600		$	1,059,830

The accompanying notes are an integral part of these condensed consolidated financial statements.

NII HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Operating revenues

Service and other revenues $ 150,809
$ 220,079
$ 326,781
$ 463,572
Handset and accessory revenues 5,201
5,055
10,242
12,517
156,010
225,134
337,023
476,089
Operating expenses

Cost of service (exclusive of depreciation and amortization included below) 69,939
87,842
158,863
190,550
Cost of handsets and accessories 7,015
13,041
16,080
21,707
Selling, general and administrative 79,269
129,612
170,155
264,078
Impairment, restructuring and other charges, net 11,722
54,235
9,897
126,174
Depreciation 4,463
5,717
9,296
14,603
Amortization 3,447
3,618
7,038
7,757
175,855
294,065
371,329
624,869
Operating loss (19,845 ) (68,931 ) (34,306 ) (148,780 )
Other (expense) income

Interest expense, net (28,010 ) (26,405 ) (54,616 ) (57,967 )
Interest income 1,593
7,808
6,979
16,944
Foreign currency transaction losses, net (46,666 ) (13,352 ) (47,854 ) (1,977 )
Other (expense) income, net (3,251 ) 7,635
(9,581 ) 5,860
(76,334 ) (24,314 ) (105,072 ) (37,140 )
Loss from continuing operations before income tax benefit (96,179 ) (93,245 ) (139,378 ) (185,920 )
Income tax benefit —
5,778
—
5,778
Net loss from continuing operations (96,179 ) (87,467 ) (139,378 ) (180,142 )
(Loss) income from discontinued operations, net of income taxes (2,662 ) 2,697
(2,783 ) 2,659
Net loss (98,841 ) (84,770 ) (142,161 ) (177,483 )
Net loss attributable to noncontrolling interest (27,709 ) —
(39,315 ) —
Net loss attributable to NII Holdings $ (71,132 ) $ (84,770 ) $ (102,846 ) $ (177,483 )

Net loss from continuing operations per common share, basic and diluted $ (0.96 ) $ (0.87 ) $ (1.39 ) $ (1.80 )
Net (loss) income from discontinued operations per common share, basic and diluted (0.03 ) 0.02
(0.03 ) 0.03
Net loss attributable to NII Holdings per common share, basic and diluted $ (0.99 ) $ (0.85 ) $ (1.42 ) $ (1.77 )

Weighted average number of common shares outstanding, basic and diluted 100,391
100,298
100,388
100,279

Comprehensive loss, net of income taxes
  Foreign currency translation adjustment $ 36,470
$ 12,386
$ 38,067
$ 4,818
  Other comprehensive income 36,470
12,386
38,067
4,818
  Net loss (71,132 ) (84,770 ) (102,846 ) (177,483 )
    Total comprehensive loss $ (34,662 ) $ (72,384 ) $ (64,779 ) $ (172,665 )

NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except per share amounts) Unaudited

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Operating expenses
Selling, general and administrative	$	4,551		$	3,889		$	8,951		$	8,150
Restructuring charges, net	—			31			—			352
	4,551			3,920			8,951			8,502
Operating loss	(4,551		)	(3,920		)	(8,951		)	(8,502		)
Other (expense) income
Interest expense	(2,902		)	—			(5,726		)	—
Other income, net	2,486			106			34,431			176
	(416		)	106			28,705			176
(Loss) income from continuing operations before income taxes	(4,967		)	(3,814		)	19,754			(8,326		)
Income taxes	—			—			—			—
Net (loss) income from continuing operations	(4,967		)	(3,814		)	19,754			(8,326		)
Loss from discontinued operations, net of income taxes	(12,151		)	(95,473		)	(37,730		)	(133,115		)
Net loss	(17,118		)	(99,287		)	(17,976		)	(141,441		)
Net loss attributable to noncontrolling interest	(3,608		)	(27,843		)	(9,371		)	(39,099		)
Net loss attributable to NII Holdings	$	(13,510	)	$	(71,444	)	$	(8,605	)	$	(102,342	)

Net (loss) income from continuing operations per common share, basic	$	(0.05	)	$	(0.04	)	$	0.19		$	(0.09	)
Net loss from discontinued operations per common share, basic	(0.12		)	(0.95		)	(0.37		)	(1.32		)
Net loss per common share, basic	$	(0.17	)	$	(0.99	)	$	(0.18	)	$	(1.41	)

Net (loss) income from continuing operations per common share, diluted	$	(0.05	)	$	(0.04	)	$	0.19		$	(0.09	)
Net loss from discontinued operations per common share, diluted	(0.12		)	(0.95		)	(0.37		)	(1.32		)
Net loss per common share, diluted	$	(0.17	)	$	(0.99	)	$	(0.18	)	$	(1.41	)

Weighted average number of common shares outstanding, basic	101,628			100,391			101,510			100,388

Weighted average number of common shares outstanding, diluted	101,628			100,391			102,806			100,388

Comprehensive loss, net of income taxes
Foreign currency translation adjustment	$	(3,419	)	$	34,569		$	(2,599	)	$	36,118
Other comprehensive (loss) income	(3,419		)	34,569			(2,599		)	36,118
Net loss attributable to NII Holdings	(13,510		)	(71,444		)	(8,605		)	(102,342		)
Total comprehensive loss	$	(16,929	)	$	(36,875	)	$	(11,204	)	$	(66,224	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NII HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(in thousands)
Unaudited

Common Stock Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total NII Holdings Stockholders’ Deficit Noncontrolling Interest Total Deficit
Shares Amount
Balance, December 31, 2017 100,384
$ 100
$ 2,139,299
$ (2,135,770 ) $ (46,903 ) $ (43,274 ) $ (78,673 ) $ (121,947 )
Net loss —
—
—
(102,846 ) —
(102,846 ) (39,315 ) (142,161 )
Other comprehensive income —
—
—
—
38,067
38,067
16,326
54,393
Share-based compensation activity 72
—
1,442
—
—
1,442
210
1,652
Implementation of revenue recognition accounting standard —
—
—
34,100
—
34,100
14,603
48,703
Balance, June 30, 2018 100,456
$ 100
$ 2,140,741
$ (2,204,516 ) $ (8,836 ) $ (72,511 ) $ (86,849 ) $ (159,360 )



NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (in thousands) Unaudited
	Common Stock			Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total NII Holdings Stockholders’ Deficit			Noncontrolling Interest			Total Deficit
	Shares	Amount		Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total NII Holdings Stockholders’ Deficit			Noncontrolling Interest			Total Deficit
Balance, December 31, 2018	101,323	$	101	$	2,143,240		$	(2,236,883	)	$	(8,435	)	$	(101,977	)	$	(79,592	)	$	(181,569	)
Implementation of lease accounting standard	—	—		—			(12,390		)	—			(12,390		)	(5,273		)	(17,663		)
Net income (loss)	—	—		—			4,905			—			4,905			(5,763		)	(858		)
Other comprehensive income	—	—		—			—			820			820			443			1,263
Share-based compensation activity	258	1		239			—			—			240			89			329
Balance, March 31, 2019	101,581	102		2,143,479			(2,244,368		)	(7,615		)	(108,402		)	(90,096		)	(198,498		)
Loss on dilution of noncontrolling interest	—	—		(5,096		)	—			381			(4,715		)	4,715			—
Noncontrolling interest investment	—	—		—			—			—			—			2,700			2,700
Net loss	—	—		—			(13,510		)	—			(13,510		)	(3,608		)	(17,118		)
Other comprehensive loss	—	—		—			—			(3,419		)	(3,419		)	(1,319		)	(4,738		)
Share-based compensation activity	94	—		474			—			—			474			(13		)	461
Balance, June 30, 2019	101,675	$	102	$	2,138,857		$	(2,257,878	)	$	(10,653	)	$	(129,572	)	$	(87,621	)	$	(217,193	)



	Common Stock			Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total NII Holdings Stockholders’ Deficit			Noncontrolling Interest			Total Deficit
	Shares	Amount		Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total NII Holdings Stockholders’ Deficit			Noncontrolling Interest			Total Deficit
Balance, December 31, 2017	100,384	$	100	$	2,139,299	$	(2,127,903	)	$	(47,239	)	$	(35,743	)	$	(75,445	)	$	(111,188	)
Implementation of revenue recognition accounting standard	—	—		—		34,100			—			34,100			14,603			48,703
Net loss	—	—		—		(30,896		)	—			(30,896		)	(11,256		)	(42,152		)
Other comprehensive income	—	—		—		—			1,549			1,549			676			2,225
Share-based compensation activity	1	—		586		—			—			586			109			695
Balance, March 31, 2018	100,385	100		2,139,885		(2,124,699		)	(45,690		)	(30,404		)	(71,313		)	(101,717		)
Net loss	—	—		—		(71,444		)	—			(71,444		)	(27,843		)	(99,287		)
Other comprehensive income	—	—		—		—			34,569			34,569			14,814			49,383
Share-based compensation activity	71	—		856		—			—			856			101			957
Balance, June 30, 2018	100,456	$	100	$	2,140,741	$	(2,196,143	)	$	(11,121	)	$	(66,423	)	$	(84,241	)	$	(150,664	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NII HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
Six Months Ended June 30, 2018 Six Months Ended June 30, 2017

Cash flows from operating activities:
Net loss $ (142,161 ) $ (177,483 )
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (income) from discontinued operations 2,783
(2,659 )
Amortization of debt discounts (premiums) and financing costs 332
(1,796 )
Depreciation and amortization 16,334
22,360
Provision for losses on accounts receivable 20,140
43,164
Foreign currency transaction losses, net 47,854
1,977
Impairment charges and losses on disposals of fixed assets 510
67,038
Share-based payment expense 1,610
2,781
Other, net 1,595
1,000
Change in assets and liabilities:
Accounts receivable (24,564 ) (29,714 )
Prepaid value-added taxes (842 ) 13,889
Handset and accessory inventory (1,042 ) 4,139
Prepaid expenses and other (23,187 ) (1,592 )
Other long-term assets (12,320 ) (16,902 )
Accrued value-added taxes 11,630
(210 )
Other long-term liabilities 23,334
52,978
Accounts payable, accrued expenses, deferred revenues and other (8,987 ) (25,407 )
Net cash used in operating activities (86,981 ) (46,437 )
Cash flows from investing activities:
Capital expenditures (24,277 ) (36,991 )
Purchases of investments (517,896 ) (454,223 )
Proceeds from sales of investments 500,237
466,680
Change in deposits, net 39,665
30,265
Other, net (2,729 ) (1,985 )
Total investing cash (used in) provided by continuing operations (5,000 ) 3,746
Total investing cash provided by (used in) discontinued operations 28
(132 )
Net cash (used in) provided by investing activities (4,972 ) 3,614
Cash flows from financing activities:
Repayments under equipment financing facility and local bank loans (1,009 ) (42,168 )
Repayments under capital leases and other (3,663 ) (2,119 )
Payments for costs related to debt amendments (4,130 ) —
Net cash used in financing activities (8,802 ) (44,287 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,740 ) 185
Net decrease in cash, cash equivalents and restricted cash (102,495 ) (86,925 )
Cash, cash equivalents and restricted cash, beginning of period 305,778
422,232
Cash, cash equivalents and restricted cash, end of period $ 203,283
$ 335,307

NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Unaudited

	Six Months Ended June 30,
	2019			2018

Cash flows from operating activities:
Net loss	$	(17,976	)	$	(141,441	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations	37,730			133,115
Amortization of debt discounts and financing costs	3,269			—
Share-based payment expense	870			935
Gain on derivative instrument	(33,577		)	—
Change in assets and liabilities:
Prepaid expenses and other long-term assets	793			650
Accounts payable, accrued expenses and other	1,483			697
Total operating cash used in continuing operations	(7,408		)	(6,044		)
Total operating cash used in discontinued operations	(39,231		)	(80,937		)
Net cash used in operating activities	(46,639		)	(86,981		)
Cash flows from investing activities:
Total investing cash used in continuing operations	—			—
Total investing cash used in discontinued operations	(23,599		)	(4,972		)
Net cash used in investing activities	(23,599		)	(4,972		)
Cash flows from financing activities:
Payments related to share-based compensation activity	(287		)	—
Total financing cash used in continuing operations	(287		)	—
Total financing cash used in discontinued operations	(262		)	(8,802		)
Net cash used in financing activities	(549		)	(8,802		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,713		)	(1,740		)
Net decrease in cash, cash equivalents and restricted cash	(72,500		)	(102,495		)
Cash, cash equivalents and restricted cash, beginning of period	250,739			305,778
Cash, cash equivalents and restricted cash, end of period	$	178,239		$	203,283

The accompanying notes are an integral part of these condensed consolidated financial statements.

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note 1.	Basis of Presentation

Overview.Unless the context requires otherwise, "NII Holdings, Inc.," "NII Holdings," "NII," "we," "our," "us" and "the Company" refer to the combined businesses of NII Holdings, Inc. and its consolidated subsidiaries. Our unaudited condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission, or the SEC. While these financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, they reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for interim periods. In addition, the year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. We ~~refer to~~conduct substantially all of our business through our majority-owned Brazilian operating company, Nextel Telecomunicações Ltda., as Nextel Brazil.

You should read these condensed consolidated financial statements in conjunction with the consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, ~~2017~~2018 and the condensed consolidated financial statements and notes contained in our quarterly report on Form 10-Q for the three months ended March 31, ~~2018.~~2019. You should not expect results of operations for interim periods to be an indication of the results for a full year.

On June 27, 2019, NII Holdings' stockholders approved the sale of Nextel Brazil. See discussion below for more information regarding this pending sale. In connection with this stockholder approval, we have reported Nextel Brazil as a discontinued operation in this quarterly report on Form 10-Q. Accordingly, we have reclassified Nextel Brazil's results of operations for all periods presented to reflect Nextel Brazil as a discontinued operation. Unless otherwise noted, amounts included in this quarterly report on Form 10-Q exclude amounts attributable to the discontinued operations of Nextel Brazil. Our consolidated results from continuing operations in this quarterly report on Form 10-Q solely include the results of operations of ~~Nextel Brazil and~~ our corporate headquarters.

~~Sources~~Pending Sale of ~~Funding.~~ Nextel Brazil.~~The accompanying consolidated financial statements have been prepared on~~On March 18, 2019, NII Holdings and NII International Holdings S.à r.l., or NIIH, a ~~going concern basis,~~wholly-owned subsidiary of NII Holdings, entered into a purchase agreement with América Móvil, S.A.B. de C.V., or AMX, and AI Brazil Holdings B.V., or AI Brazil Holdings, pursuant to which ~~contemplates~~NII Holdings and AI Brazil Holdings will sell their jointly-owned wireless operations in Brazil. Specifically, NIIH will sell all of the ~~realization~~issued and outstanding shares of ~~assets~~NII Brazil Holdings S.à r.l., or NIIBH, to AMX. We refer to this transaction as the Nextel Brazil transaction. Also pursuant to the purchase agreement, concurrent to, and as a condition of, the consummation of the Nextel Brazil transaction, AI Brazil Holdings will sell all of its interests in Nextel Holdings S.à r.l., or Nextel Holdings, to NIIBH. We refer to this transaction as the AI Brazil Holdings transaction. At the closing of the Nextel Brazil transaction and the ~~satisfaction~~AI Brazil Holdings transaction, AMX will indirectly own all of ~~liabilities~~the issued and outstanding shares of Nextel Brazil. On June 27, 2019, NII Holdings' stockholders approved the sale of Nextel Brazil. We currently expect that the pending sale of Nextel Brazil will close in the ~~normal course~~fourth quarter of ~~business.~~2019.

Under the terms of ~~June 30, 2018, our consolidated sources~~the purchase agreement, AMX will acquire all of ~~funding included $120.6~~the issued and outstanding shares of NIIBH for an aggregate purchase price of $905.0 million, less net debt and subject to certain adjustments at closing, including reimbursement for capital expenditures up to a budgeted amount from March 1, 2019 to closing, a working capital adjustment (subject, in ~~cash~~the case of an increase in net working capital, to a cap based on budgeted changes in working capital through the earlier of closing or December 31, 2019), and ~~short-term investments,~~a deduction for the amount, if any, by which certain budgeted selling and ~~$110.1~~marketing costs exceed actual spending on such costs from March 1, 2019 to closing. NII Holdings will receive its pro rata share of the net purchase price after deducting a preferred return due to AI Brazil Holdings and deducting certain transaction expenses and increases in accrued tax contingencies, if any. AMX will place $30.0 million ~~in cash held in~~of NII Holdings' portion of the net proceeds into an 18-month escrow account to secure ~~our~~NII Holdings’ indemnification obligations under the purchase agreement.

In addition, in connection with the Nextel Brazil transaction, NII Holdings and AI Brazil Holdings have entered into an agreement relating to the Nextel Brazil transaction that includes the resolution of a dispute regarding the investment of funds into Nextel Holdings from an escrow related to NII Holdings' sale of its operations in Mexico, or the Mexico escrow. Under this agreement, the parties have agreed that AI Brazil Holdings will receive, after the closing of the Nextel Brazil transaction, the first $10.0 million recovered from the Mexico escrow followed by 6% of the value of additional funds recovered from the Mexico escrow, in both cases, if and when funds are released. NII Holdings has also agreed to indemnify AI Brazil Holdings for damages that may arise from certain tax contingencies, transaction expenses, transaction-related litigation and other matters in connection with its participation in the Nextel Brazil transaction.

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The closing of the transactions contemplated by the purchase agreement are subject to the satisfaction of customary conditions, including the receipt of required regulatory and antitrust approvals and either an amendment eliminating certain successor obligations contemplated under, or an escrow agreement providing for a deposit in accordance with, NII Holdings’ indenture with respect to our 4.25% convertible senior notes due 2023.

The purchase agreement includes certain termination rights for each party and provides that, in specified circumstances, NII Holdings is required to pay a termination fee of $25.0 million.

The purchase agreement contains customary representations, warranties and covenants made by NII Holdings, NIIH, AMX and AI Brazil Holdings. Among other things, NIIH has agreed to conduct NIIBH’s and each of its subsidiaries’ business in the ordinary course, use reasonable best efforts to operate its business in accordance with its budget for the year 2019 and the year 2020, if applicable, and use commercially reasonable efforts to maintain and preserve its business organization and preserve certain business relations.

In connection with the pending sale of Nextel ~~Mexico. Based on our business~~Brazil, NII Holdings' Board of Directors has approved a plan ~~we believe our current sources~~to dissolve and wind up its operations following the completion of ~~funding described above will provide us with sufficient liquidity to fund our business through 2019.~~

~~Our business~~this transaction. On June 27, 2019, NII Holdings' stockholders approved this plan ~~is based on a number~~ of assumptions, including levels of subscriber turnover that are similar to those we experienced in the first half of 2018 and a decrease in certain costs compared to 2017. In addition, our business plan currently assumes that we will recover substantially all of the amount held in escrow in a timely manner. If our actual results of operations differ from our business plan and/or the ultimate amount recovered from our cash held in escrow does not meet our current forecasted amount or is delayed for a significant period of time, our business could be negatively impacted, and we would need to reevaluate our business plan, obtain additional funding, sell certain assets and/or significantly reduce our planned capital and operational spending to further preserve our liquidity. As a result, we are actively exploring options to obtain additional funding in order to, among other things, reduce our liquidity risk. See Note 5 for more information regarding the status of our recovery of cash held in escrow.dissolution.

~~Partnership Agreement.~~Minority Investment. On June 5, 2017, weNII Holdings and AINMT Holdings AB, or ice group, an international telecommunications company operating primarily in Norway under the "ice.net" brand, along with certain affiliates of ~~ours~~the Company and ice group, entered into an investment agreement and a shareholders agreement to partner in the ownership of Nextel Brazil. On July 20, 2017, ice group completed its initial investment of $50.0 million in Nextel Holdings, ~~S. à r.l., or Nextel Holdings,~~ a ~~newly formed~~ subsidiary of NII Holdings that indirectly owns Nextel Brazil, in exchange for 30% ownership in Nextel Holdings. In connection with the initial investment, ice group received 50.0 million shares of cumulative preferred voting stock in Nextel Holdings, and we received 116.6 million shares of common stock in this entity. The investment agreement also provided ice group with an option, exercisable on or before November 15, 2017, to invest an additional $150.0 million in Nextel Holdings for an additional 30% ownership. ice group did not exercise its option, and on February 27, 2018, we terminated the investment agreement. ~~Since we continue to have~~

~~New Accounting Pronouncements.~~ ~~In February 2016,~~30% ownership level. During the ~~Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, "Leases (Topic 842),"~~second quarter of 2019, NII Holdings contributed $15.3 million to Nextel Holdings, and AI Brazil Holdings contributed $2.7 million to Nextel Holdings, which ~~replaces existing leasing rules with a comprehensive lease measurement~~increased NII Holdings' ownership to 70.70% and ~~recognition standard and expanded disclosure requirements. ASU No 2016-02 will require lessees~~reduced AI Brazil Holdings' ownership from 30% to recognize most leases on their balance sheet as liabilities, with corresponding "right-of-use" assets, and is effective for interim and annual reporting periods beginning after December 15, 2018, subject to early adoption. The new standard allows us to make an accounting policy election not to recognize lease assets and liabilities on the balance sheet for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from previous guidance. In transition, lessees and lessors have the option to recognize and measure leases either at the beginning of the earliest period presented or at the beginning of the period of adoption using a modified retrospective approach. The modified retrospective approach includes a number of optional

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~practical expedients that we may elect to apply. We expect that we will record a material amount of lease liabilities as~~29.30%. As a result of ~~implementing~~ this ~~standard. We expect~~change in ownership, we reclassified $4.7 million of losses from noncontrolling interest to ~~utilize~~total NII Holdings' stockholders' deficit. In addition, in July 2019, NII Holdings contributed $23.0 million to Nextel Holdings, which increased NII Holdings' ownership to 72.34% and further reduced AI Brazil Holdings' ownership to 27.66%.

The investment agreement provided for, after ice group’s initial investment, the ~~modified retrospective approach and are currently evaluating~~Company's contribution of proceeds arising from the release of funds deposited in escrow in connection with the sale of our Mexican operations through a 115 account, which is a contribution without the issuance of additional ~~effects ASU No. 2016-02 will have on our condensed consolidated financial statements.~~

~~Recently Adopted Accounting Pronouncements.~~ In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” or Accounting Standards Codification 606, which we refer to as ASC 606. This new pronouncement provides us with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. We implemented ASC 606 on January 1, 2018 using the modified retrospective method. We did not retroactively adjust prior periods. In utilizing the modified retrospective method, we are recognizing the cumulative effect of applying the standard at the date of initial application, and we will continue to disclose the results under both the new and old standards for the remainder of the first year after adoption.equity. See Note 23 for more information ~~surrounding~~regarding escrowed funds. We do not believe that this requirement survives the ~~adoption~~termination of ~~ASC 606.~~the investment agreement and intend for all future contributions by NII Holdings to Nextel Holdings to be made through capital contributions with additional equity being issued to us. ice group and AI Brazil Holdings notified the Company that they believe future escrow proceeds received by NII Holdings from the escrow account must be contributed to Nextel Holdings through the 115 account without the issuance of equity, which would result in a portion of the disputed escrow being subject to AI Brazil Holdings' non-controlling interest. Although our aforementioned agreement with AI Brazil Holdings resolves this dispute, to the extent the Nextel Brazil transaction is not completed and the related settlement between us and AI Brazil Holdings is not consummated, AI Brazil Holdings’ non-controlling interest in future escrow proceeds received by NII Holdings would remain in dispute.

~~In November 2016, the FASB issued ASU No. 2016-18, “Statement~~Going Concern. As of ~~Cash Flows (Topic 230): Restricted Cash,” or ASU 2016-18, which provides guidance regarding cash flow statement classification and presentation~~June 30, 2019, our consolidated sources of ~~changes~~funding included $65.1 million in ~~restricted cash. We implemented this new standard on January 1, 2018. As required, we provided a reconciliation of~~ cash and cash equivalents, ~~as presented~~$103.4 million in cash held in escrow to secure our ~~condensed consolidated balance sheets to cash, cash equivalents and restricted cash as presented in our condensed consolidated statements of cash flows for all periods presented in Note 4.~~

~~Reclassifications.~~ ~~We have reclassified some prior period amounts in our condensed consolidated financial statements to conform to our current presentation.~~


~~Note 2.~~	~~Revenue Recognition~~

On January 1, 2018, we implemented ASC 606 using the modified retrospective method. The primary change to our revenue recognition policies relates to contracts with customers where the customer purchases a discounted handsetindemnification obligations in connection with entering into a contract for telecommunications services. In accordance with ASC 606, we allocate revenue between the handset and the service based on relative standalone selling price, or SSP. We recognize revenue when we satisfy a performance obligation by providing services or transferring control of promised handsets and accessories, which are distinct to a customer. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled for those performance obligations.

~~A description of the principal activities from which Nextel Brazil generates its revenue, as well as the associated policies that govern the way in which we recognize these revenues, is as follows:~~

~~Service and Other Revenues.~~ Nextel Brazil's wireless service revenues primarily consist of access charges for providing customers with voice, data or messaging services over the contract period. We recognize revenue related to access charges ratably over the contract period. The typical length of our service contracts is 12 months for individual customers and 24 months for corporate customers. We elected the practical expedient to record all revenue net of taxes collected from customers, which are subsequently remitted to governmental authorities.

~~Handset and Accessory Revenues.~~ We recognize handset and accessory revenue when a subscriber takes possession of a device. The transaction price of the handset sold, if any, is billed at the time of sale. Although more than 90% of our subscribers typically purchase services only and acquire a handset separately, the remainder of our subscriber base purchases a handset offered at a discounted price bundled with services. In these types of bundled sales, we allocate a portion of our future service billings to the handset and recognize revenue upon handset delivery at the inception of the contract, which results in a contract asset. We determined that contracts with terms longer than one year that involve the sale of ~~both a handset~~Nextel Mexico and ~~related services generally do not include a significant financing component.~~

~~Significant Judgments~~$35.6 million in cash and ~~Estimates.~~ ~~Nextel Brazil's subscribers generally enter into service contracts with a commitment period in exchange~~short-term investments held for discounts on handsets and/or service fees. The penalty applied upon early termination of a contract declines over time in proportion to the remaining commitment period. We concluded that the commitment period should be identical to the contract period since, at any point, the early termination penalty is significant relative to the remaining monthly service fees under the contract.sale.

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In cases where a contract includes both a handset and accessories, for which we recognize handset and accessory revenue at a point in time, and services, for which we recognize revenue ratably over time, judgment is required to determineWe currently expect that the ~~SSP for each distinct performance obligation in order to allocate consideration properly. We use a range of amounts to estimate SSP when we sell each of the products and services separately.~~

~~Remaining Performance Obligations.~~ As of June 30, 2018, we have $293.2 million of remaining performance obligations under open service contracts. For these service contracts, we expect to recognize $278.7 million in operating revenues in the period from July 1, 2018 through June 30, 2019 and $14.5 million thereafter.

~~Contract Assets and Liabilities.~~ Contract assets primarily relate to the remaining portion of Nextel Brazil's future service billings allocated to handsets and recognized into revenue upon handset delivery at the inception of the contract. As of June 30, 2018 and January 1, 2018, Nextel Brazil had $5.0 million and $5.5 million in total contract assets, respectively, $4.2 million and $4.5 million of which we classified as a component of prepaid expenses and other in our condensed consolidated balance sheets for these periods. We transfer contract assets to receivables when Nextel Brazil's right to bill becomes unconditional.

Contract liabilities primarily relate to upfront fees for wireless services for which the services have not yet been provided. As of June 30, 2018 and January 1, 2018, Nextel Brazil had $2.5 million and $1.7 million in total contract liabilities, respectively, substantially all of which we classified as a component of accrued expenses and other in our condensed consolidated balance sheet.

~~The changes to both the contract asset and contract liability balances during the period, which include opening balances amortized into revenue, were not significant.~~

~~Cost to Obtain Contracts with Customers.~~ ~~We recognize an asset for the incremental costs of obtaining a contract with a customer. These costs include commissions and related costs for sales employees~~pending sale of Nextel Brazil ~~and commissions payable to our third party distribution channel partners. We amortize these types~~described above will close in the fourth quarter of ~~costs ratably using~~2019. If the ~~portfolio approach over~~closing of the ~~estimated customer relationship period, which includes expected future contract renewals. Under the previous accounting standard, we expensed commissions as incurred. As~~sale of ~~June 30, 2018 and January 1, 2018,~~ Nextel Brazil ~~had $39.0 million and $42.8 million~~occurs by the first quarter of ~~deferred costs, respectively, related~~2020, we believe we have sufficient sources of liquidity to ~~expenses required~~fund our business. However, if the pending sale of Nextel Brazil is not ultimately completed or if the closing of the sale is delayed beyond the first quarter of 2020, we would need to alter our business plan to significantly reduce spending or obtain ~~a contract. Of these total deferred costs, as~~additional funding. To the extent the sale of ~~June 30, 2018 and January 1, 2018,~~Nextel Brazil does not close or if we ~~recorded $19.6 million and $16.3 million, respectively,~~do not recover sufficient cash from escrow prior to the end of the first quarter of 2020, substantial doubt exists about our ability to continue as a component of prepaid expenses and other and the remaining $19.4 million and $26.5 million, respectively, as a component of other assets in our condensed consolidated balance sheet. In addition, Nextel Brazil recorded $4.3 million and $8.4 million, respectively, in total commissions expense duringgoing concern.

Diluted Net (Loss) Income from Continuing Operations Per Common Share. As presented for the three and six months ended June 30, 2019 and 2018, ~~as a component~~our calculation of ~~selling, general~~diluted net (loss) income from continuing operations per common share is based on the weighted average number of common shares outstanding during those periods and ~~administrative expenses~~includes other potential common shares, including common shares resulting from the potential conversion of our convertible senior notes, common shares issuable upon the potential exercise of stock options under our stock-based employee compensation plans or restricted common shares issued under those plans when those shares are dilutive.

For the six months ended June 30, 2019, we did not include 18.5 million common shares related to the potential conversion of our convertible senior notes, 1.7 million stock options and 2.0 million restricted common shares in our ~~condensed consolidated statement~~calculation of ~~comprehensive loss.~~

~~Adoption Impact.~~ ~~Following is a comparison~~diluted net income from continuing operations per common share because their effect would have been antidilutive. For the three months ended June 30, 2019, we did not include 18.5 million common shares related to the potential conversion of our ~~reported results~~convertible senior notes, 2.8 million stock options and 2.0 million restricted common shares in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. In addition, for the three and six months ended June 30, 2018, ~~compared to amounts that~~ we ~~would have reported had we~~did not ~~adopted ASC 606 (in thousands):~~

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Three Months Ended June 30, 2018
As Reported With ASC 606 Without ASC 606 Impact
Operating revenues

Service and other revenues $ 150,809
$ 155,762
$ (4,953 )
Handset and accessory revenues 5,201
3,177
2,024
156,010
158,939
(2,929 )
Operating expenses

Cost of service (exclusive of depreciation and amortization included below) 69,939
69,939
—
Cost of handsets and accessories 7,015
7,015
—
Selling, general and administrative 79,269
83,133
(3,864 )
Impairment, restructuring and other charges, net 11,722
11,722
—
Depreciation 4,463
4,463
—
Amortization 3,447
3,447
—
175,855
179,719
(3,864 )
Operating loss $ (19,845 ) $ (20,780 ) $ 935
Net loss $ (98,841 ) $ (99,776 ) $ 935

Six Months Ended June 30, 2018
As Reported With ASC 606 Without ASC 606 Impact
Operating revenues

Service and other revenues $ 326,781
$ 336,562
$ (9,781 )
Handset and accessory revenues 10,242
7,862
2,380
337,023
344,424
(7,401 )
Operating expenses

Cost of service (exclusive of depreciation and amortization included below) 158,863
158,863
—
Cost of handsets and accessories 16,080
16,080
—
Selling, general and administrative 170,155
180,558
(10,403 )
Impairment, restructuring and other charges, net 9,897
9,897
—
Depreciation 9,296
9,296
—
Amortization 7,038
7,038
—
371,329
381,732
(10,403 )
Operating loss $ (34,306 ) $ (37,308 ) $ 3,002
Net loss $ (142,161 ) $ (145,163 ) $ 3,002

~~Without the adoption~~include 3.4 million stock options, as well as 0.5 million and 0.3 million restricted common shares, respectively, in our calculation of ~~ASC 606 on January 1, 2018, our basic and~~ diluted net loss from continuing operations per common share because their effect would have been ~~$0.01 and $0.03 lower for the three and six months ended June 30, 2018.~~antidilutive.

~~Components of Transition Adjustment.~~Cash, Cash Equivalents and Restricted Cash. As of January 1, 2018, the cumulative impact of the implementation of ASC 606 included the recognition of contract assets and liabilities, as well as the capitalization of costs to obtain contracts with customers. In total, these effects resulted in a cumulative adjustment on January 1, 2018 that was comprised of a $21.2 million increase to prepaid expenses and other, a $26.8 million increase to other assets, a $1.1 million increase to accrued expenses and other and a $1.8 million decrease to other long-term liabilities.

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


~~Note 3.~~	~~Impairment, Restructuring and Other Charges~~

~~Asset Impairments.~~

During the first quarter of 2017, we reviewed our Nextel Brazil segment for potential impairment and determined that, as a result of the continued decline in share price, the carrying value of this segment was not fully recoverable. As a result, we recorded a non-cash asset impairment charge of $66.0 million to reduce the carrying values of Nextel Brazil's long-lived assets to their respective fair values. We estimated the fair value of our Nextel Brazil segment using a market approach and allocated the impairment charges on a pro rata basis between property, plant and equipment and spectrum licenses.

~~Restructuring Charges.~~

During the three and six months ended June 30, 2018, Nextel Brazil recognized $11.9 million and $22.8 million in restructuring costs, respectively, the majority of which related to future lease costs for approximately 200 iDEN-related transmitter and receiver sites, and a change in the scope of Nextel Brazil's radio access network, or RAN, sharing implementation. During the three and six months ended June 30, 2017, Nextel Brazil recognized $49.3 million and $52.6 million in restructuring costs, respectively, the majority of which related to future lease costs for approximately 1,000 transmitter and receiver sites in low-usage areas in connection with Nextel Brazil's RAN sharing agreement. In addition, during the second quarter of 2017, Nextel Brazil recognized $4.4 million in severance and other related costs resulting from the separation of certain executive level employees.

In an effort to further reduce costs, in the first quarter of 2018, Nextel Brazil entered into arrangements with certain of its tower lessors for the right to exchange approximately 600 unused transmitter and receiver sites for other sites. During the first quarter of 2018, we identified approximately 250 transmitter and receiver sites that we plan to exchange pursuant to these arrangements, 200 of which were completed during the second quarter of 2018. As a result, Nextel Brazil reversed $13.7 million in previously accrued restructuring charges.

~~Total impairment, restructuring and other charges, net for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands):~~

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Brazil $ 11,691
$ 53,938
$ 9,545
$ 125,631
Corporate 31
297
352
543
Total impairment, restructuring and other charges, net $ 11,722
$ 54,235
$ 9,897
$ 126,174

~~As of June 30, 2018, total accrued restructuring charges were as follows (in thousands):~~

Balance, December 31, 2017 $ 109,771
  Restructuring charges, net 9,413
  Cash payments and other (18,611 )
  Foreign currency translation adjustment (13,495 )
Balance, June 30, 2018 $ 87,078

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


~~Note 4.~~	~~Supplemental Financial Statement Information~~

~~Restricted Cash.~~

In November 2016, the FASB issued ASU 2016-18, which requires condensed consolidated statements of cash flows to explain the change in restricted cash and restricted cash equivalents, in addition to the change in cash and cash equivalents as previously required. We adopted this ASU on January 1, 2018. As a result of this adoption, the cash and cash equivalents balances in our condensed consolidated statements of cash flows now include restricted cash of $112.4 million as of June 30, 2018, $111.9 million as of December 31, 2017, $115.8 million as of June 30, 2017 and $164.9 million as of December 31, 2016. Our restricted cash ~~relates to~~represents cash held in escrow in connection with the sale of Nextel ~~Mexico~~Mexico. Cash held by discontinued operations relates to cash held by Nextel Brazil and certain judicial deposits of cash in Brazil related to litigation involving tax and other matters. A reconciliation from cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as reported in our condensed consolidated statements of cash flows is as follows:



	June 30,				December 31,
	2019		2018		2018		2017
	(in thousands)
Cash and cash equivalents	$	65,146	$	26,575	$	93,881	$	34,553
Cash in escrow	103,422		110,052		106,089		110,024
Cash and cash equivalents included in current assets held for sale	7,220		64,318		48,605		159,335
Restricted cash included in non-current assets held for sale	2,451		2,338		2,164		1,866
Cash, cash equivalents and restricted cash	$	178,239	$	203,283	$	250,739	$	305,778

Recently Adopted Accounting Standards. In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, "Leases," which we refer to as ASC 842. ASC 842 replaced existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. We implemented ASC 842 on January 1, 2019 using the modified retrospective method. We did not retroactively adjust prior periods. In utilizing the modified retrospective method, we recognized the cumulative effect of applying the standard at the date of initial application. See Note 2 for more information regarding the adoption of ASC 842.

Recently Issued Accounting Pronouncements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” which amends the scope and transition requirements of ASU 2016-13. The standard requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectibility of the reported amount. This standard will become effective beginning January 1, 2020 and will require a modified retrospective approach, which will result in a cumulative effect adjustment to accumulated deficit as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the impact this guidance will have on our condensed consolidated financial statements.

June 30,
2018 December 31,
2017
(in thousands)
Cash and cash equivalents $ 90,893
$ 193,888
Cash in escrow (included in prepaid expenses and other) 110,052
110,024
Other (included in other assets) 2,338
1,866
Cash, cash equivalents and restricted cash $ 203,283
$ 305,778

~~Prepaid Expenses and Other.~~

~~The components of our prepaid expenses and other current assets are as follows:~~

June 30,
2018 December 31,
2017
(in thousands)
Cash in escrow $ 110,052
$ 110,024
Brazil judicial deposits 51,297
43,648
Value-added taxes 25,332
27,635
Cash collateral related to performance bonds 618
50,340
Other prepaid expenses 30,661
14,231
Other current assets 11,397
8,583
$ 229,357
$ 254,461

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Property, Plant and Equipment, Net.~~

~~During the three and six months ended June 30, 2018 and 2017, we capitalized immaterial amounts of interest. The components of our property, plant and equipment, net are as follows:~~

June 30,
2018 December 31,
2017
(in thousands)
Land $ 419
$ 489
Building and leasehold improvements 739
935
Network equipment, communication towers and network software 81,604
82,493
Software, office equipment, furniture and fixtures and other 25,190
22,498
Less: Accumulated depreciation and amortization (18,144 ) (11,461 )
89,808
94,954
Construction in progress 22,673
22,308
$ 112,481
$ 117,262

~~Intangible Assets, Net.~~

~~Our intangible assets include the following:~~

June 30, 2018 December 31, 2017
Average Useful Life (Years)
Gross Carrying
Value

Accumulated
Amortization
��
Net Carrying
Value

Gross Carrying
Value

Accumulated
Amortization

Net Carrying
Value
(in thousands)
Amortizable intangible assets:

Licenses 26 $ 172,907
$ (7,856 ) $ 165,051
$ 189,920
$ (5,426 ) $ 184,494
Customer relationships 4 13,126
(7,292 ) 5,834
15,300
(5,100 ) 10,200
$ 186,033
$ (15,148 ) $ 170,885
$ 205,220
$ (10,526 ) $ 194,694

Based on the carrying amount of our intangible assets as of June 30, 2018 and current exchange rates, we estimate amortization expense for each of the next five years ending December 31 to be as follows (in thousands):

Years Estimated Amortization Expense
2018 $ 13,461
2019 9,929
2020 7,012
2021 7,012
2022 7,012

Actual amortization expense to be reported in future periods could differ from these estimates as a result of additional acquisitions of intangibles, as well as changes in foreign currency exchange rates and other relevant factors.

139

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Other Assets.~~Securities Litigation. On July 8, 2019, a purported stockholder class action was filed against the Company and the Company's directors in the Court of Chancery of the State of Delaware by Matis Nayman. The lawsuit is captioned Matis Nayman v. Kevin L. Beebe, James V. Continenza, Howard S. Hoffmann, Ricardo Knoepfelmacher, Christopher T. Rogers, Robert A. Schriesheim, Steven M. Shindler, and NII Holdings, Inc., C.A. No. 2019-0525-JTL. The complaint alleges, among other things, that the Company and its directors breached their fiduciary duties by failing to take steps to maximize the Company's value to its public stockholders and failing to disclose certain information in the proxy statement issued in connection with the Company's purchase agreement with AMX and AI Brazil Holdings and the Company's planned liquidation and dissolution. The relief the plaintiff seeks includes enjoining the sale of Nextel Brazil and the dissolution of NII Holdings, and the recovery of unspecified damages. The Company and the named individuals intend to vigorously defend themselves in this matter.

~~The components~~In addition, we are subject to other claims and legal actions that may arise in the ordinary course of business. We do not believe that any of these pending claims or legal actions will have a material effect on our ~~other long-term assets are as follows:~~business, financial condition, results of operations or cash flows.

Reclassifications. We have reclassified some prior period amounts in our condensed consolidated financial statements to conform to our current presentation.

June 30,
2018 December 31,
2017
(in thousands)
Brazil judicial deposits $ 114,756
$ 110,758
Cash collateral related to contingencies 54,455
55,027
Other 64,535
52,419
$ 233,746
$ 218,204

~~Accrued Expenses and Other.~~

~~The components of our accrued expenses and other are as follows:~~

June 30,
2018 December 31,
2017
(in thousands)
Contingencies $ 72,445
$ 78,006
Network system and information technology expenses 53,176
48,702
Non-income based taxes 35,947
30,044
Payroll related items and commissions 20,326
32,613
Other 91,557
118,764
$ 273,451
$ 308,129


Note 2.	Leases

~~Other Long-Term Liabilities.~~

~~The components~~On January 1, 2019, we implemented ASC 842 using the modified retrospective method. We selected this adoption date as our date of ~~our other long-term~~initial application. As a result, we have not updated financial information related to, nor have we provided the disclosures required under ASC 842 for, periods prior to January 1, 2019. As of January 1, 2019, the cumulative impact of the implementation of ASC 842 included the recognition of lease liabilities ~~are~~and corresponding ROU assets for operating leases, as ~~follows:~~well as the derecognition of certain accrued liabilities related to lease exit costs and the remeasurement of finance leases due to the application of the hindsight practical expedient. These effects resulted in the following adoption impacts (in thousands):

June 30,
2018 December 31,
2017
(in thousands)
Non-current withholding taxes $ 74,061
$ 67,356
Accrued lease terminations and other restructuring charges 73,770
92,463
Other 76,641
61,106
$ 224,472
$ 220,925



	December 31, 2018			Impact of ASC 842 Adoption			January 1, 2019
Current assets held for sale	$	321,160		$	—		$	321,160
Other current assets	201,405			—			201,405
Non-current assets held for sale	536,021			375,917			911,938
Other non-current assets	1,244			—			1,244
Total assets	$	1,059,830		$	375,917		$	1,435,747

Current liabilities held for sale	$	346,715		$	44,784		$	391,499
Other current liabilities	12,772			—			12,772
Long-term liabilities held for sale	775,671			348,796			1,124,467
Other long-term liabilities	106,241			—			106,241
Total liabilities	1,241,399			393,580			1,634,979

Total deficit	(181,569		)	(17,663		)	(199,232		)
Total liabilities and stockholders' deficit	$	1,059,830		$	375,917		$	1,435,747

1410

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Accumulated Other Comprehensive Loss.~~ As of June 30, 2018 and December 31, 2017, the tax impact on our accumulated other comprehensive loss was not material. In addition, as of June 30, 2018 and December 31, 2017, all of our accumulated other comprehensive loss represented cumulative foreign currency translation adjustment.

~~Supplemental Cash Flow Information.~~

Six Months Ended June 30,
2018 2017
(in thousands)
Capital expenditures
Cash paid for capital expenditures, including capitalized interest on property, plant and equipment $ 24,277
$ 36,991
Change in capital expenditures accrued and unpaid or financed, including interest capitalized (1,172 ) (18,552 )
$ 23,105
$ 18,439

~~We did not have any significant non-cash investing or financing activities during the six months ended June 30, 2018 and 2017.~~

~~Revenue-Based Taxes.~~ Prior to the implementation of ASC 606, we recorded certain revenue-based taxes on a gross basis. For the three and six months ended June 30, 2017, we recognized $6.9 million and $17.0 million, respectively, in revenue-based taxes as a component of both service and other revenues and selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss. As a result of the adoption of ASC 606, we now record all revenue net of taxes collected from customers. If we had not implemented ASC 606 on January 1, 2018, we would have recognized an additional $4.0 million and $8.7 million, respectively, in revenue-based taxes as a component of both service and other revenues and selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss during the three and six months ended June 30, 2018.

~~Diluted Net Loss Per Common Share.~~ As presented for the three and six months ended June 30, 2018 and 2017, our calculation of diluted net loss from continuing operations per common share is based on the weighted average number of common shares outstanding during those periods and does not include other potential common shares, including shares issuable upon the potential exercise of stock options under our stock-based employee compensation plans or restricted common shares issued under those plans since their effect would have been antidilutive.

For the three and six months ended June 30, 2018, we did not include 3.4 million stock options in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. In addition, for the three and six months ended June 30, 2018, we did not include 0.5 million and 0.3 million restricted common shares, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. For both the three and six months ended June 30, 2017, we did not include 3.6 million and 3.5 million stock options, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. In addition, for the three and six months ended June 30, 2017, we did not include 0.3 million and 0.4 million restricted common shares, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive.

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


Note 5.3.	Discontinued Operations

Pending Sale of Nextel Brazil. On March 18, 2019, NII Holdings and NIIH, a wholly-owned subsidiary of NII Holdings, entered into a purchase agreement with AMX and AI Brazil Holdings, pursuant to which NII Holdings and AI Brazil Holdings will sell their jointly-owned wireless operations in Brazil. Specifically, NIIH will sell all of the issued and outstanding shares of NIIBH to AMX. Also pursuant to the purchase agreement, concurrent to, and as a condition of, the consummation of the Nextel Brazil transaction, AI Brazil Holdings will sell all of its interests in Nextel Holdings to NIIBH. At the closing of the Nextel Brazil transaction and the AI Brazil Holdings transaction, AMX will indirectly own all of the issued and outstanding shares of Nextel Brazil. On June 27, 2019, NII Holdings' stockholders approved both the sale of Nextel Brazil and the plan to dissolve and wind up NII Holdings' operations following the completion of the Nextel Brazil transaction. In connection with this stockholder approval, we have reported Nextel Brazil as a discontinued operation in this quarterly report on Form 10-Q. Accordingly, we have reclassified Nextel Brazil's results of operations for all periods presented to reflect Nextel Brazil as discontinued operations. Unless otherwise noted, amounts included in this quarterly report on Form 10-Q exclude amounts attributable to the discontinued operations of Nextel Brazil. Historically, Nextel Brazil was our only reportable operating segment. We evaluated performance and provided resources to Nextel Brazil based on operating income before depreciation, amortization and impairment, restructuring and other charges, net, which we refer to as segment earnings.

The major components of loss from discontinued operations, net of income taxes were as follows (in thousands):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Operating revenues	$	144,832		$	156,008		$	291,647		$	337,227
Cost of revenues and selling, general and administrative	(133,227		)	(153,363		)	(260,616		)	(333,540		)
Segment earnings	11,605			2,645			31,031			3,687
Impairment, restructuring and other charges, net	(3,028		)	(11,690		)	(8,819		)	(13,720		)
Depreciation and amortization	(7,193		)	(7,325		)	(15,549		)	(15,050		)
Operating income (loss)	1,384			(16,370		)	6,663			(25,083		)
Interest expense and other, net	(14,194		)	(76,441		)	(42,354		)	(105,249		)
Loss before income taxes	(12,810		)	(92,811		)	(35,691		)	(130,332		)
Income taxes	—			—			—			—
Loss from Nextel Brazil discontinued operations, net of income taxes	(12,810		)	(92,811		)	(35,691		)	(130,332		)
Gain (loss) on disposal of Nextel Mexico	659			(2,662		)	(2,039		)	(2,783		)
Loss from discontinued operations, net of income taxes	$	(12,151	)	$	(95,473	)	$	(37,730	)	$	(133,115	)

Loss from discontinued operations attributable to noncontrolling interest	$	(3,608	)	$	(27,843	)	$	(9,371	)	$	(39,099	)
Loss from discontinued operations attributable to NII Holdings	(8,543		)	(67,630		)	(28,359		)	(94,016		)
Loss from discontinued operations, net of income taxes	$	(12,151	)	$	(95,473	)	$	(37,730	)	$	(133,115	)

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of assets and liabilities held for sale as of June 30, 2019 and December 31, 2018, all of which are related to Nextel Brazil, are as follows (in thousands):



	June 30, 2019		December 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	7,220	$	48,605
Short-term investments	28,424		32,329
Accounts receivable, net of allowance for doubtful accounts of $27,856 and $19,637	105,321		99,867
Prepaid expenses and other	159,851		140,359
Total current assets	300,816		321,160
Property, plant and equipment, net	156,073		143,930
Intangible assets, net	158,740		162,156
Operating lease right-of-use assets	357,865		—
Other assets	228,665		229,935
Total assets	$	1,202,159	$	857,181

LIABILITIES
Current liabilities
Accounts payable, accrued expenses, operating lease liabilities and other	$	354,227	$	325,365
Current portion of long-term debt	23,266		21,350
Total current liabilities	377,493		346,715
Long-term debt	553,549		560,593
Long-term operating lease liabilities	365,842		—
Other long-term liabilities	204,234		215,078
Total liabilities	$	1,501,118	$	1,122,386

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Sale of Nextel Mexico. On April 30, 2015, ~~we,~~NII Holdings, together with our wholly-owned subsidiary NIU Holdings LLC, completed the sale of our Mexican operations to New Cingular Wireless, an indirect subsidiary of AT&T. The transaction was structured as a sale of all of the outstanding stock of the parent company of Comunicaciones Nextel de Mexico, S.A. de C.V., or Nextel Mexico, for a purchase price of $1.875 billion, including $187.5 million deposited in escrow to satisfy potential indemnification claims. In 2016, we paid $4.0 million, plus interest, out of escrow to settle an indemnification ~~claim.~~claim, and in July 2018, we utilized $4.0 million of cash held in escrow to settle tax audits for the years 2010 and 2011 discussed below. Additionally, in June 2019, we utilized $2.7 million of cash held in escrow to settle a tax audit for the year 2012 discussed below. As of June 30, ~~2018,~~2019, $73.5 million of the cash held in escrow has been released to us and ~~$110.1~~$103.4 million, which includes interest, remains deposited in escrow related to certain potential tax indemnity claims made by New Cingular Wireless. While we are required to continue to indemnify New Cingular Wireless for any valid claims that arise in the future, New Cingular Wireless is not permitted to make any additional claims against the escrow account.

The potential tax indemnity claims submitted by New Cingular Wireless against the escrow account purport to relate to various ongoing tax audits by the Mexican tax authorities for Nextel Mexico and several of its entities for the years 2010 through 2014. Of the total potential tax claims asserted against the escrow account, $12.2 million relates to actual assessments that Nextel Mexico has received. Although we appealed these assessments, in April 2019, our appeals were denied. We initiated a judicial process to protect our interests against these assessments. The remaining amounts relate to unassessed matters. New Cingular Wireless' claims include $35.5 million related to the tax audit of Nextel Mexico’s income tax return for 2010 and $36.9 million related to the tax audit of Nextel Mexico's income tax return for 2011. The remaining $37.6 million of potential tax claims asserted against the escrow account, including the $12.2 million in assessments, relates primarily to non-income tax-based audits for the years 2011 through 2014. As of June 30, 2019, we had accrued $3.9 million for probable losses associated with these audits.

~~During~~In July 2018, the tax audits related to Nextel Mexico's main operating company's income tax returns for the years 2010 and 2011 were finalized, and we filed amended tax returns. We settled the tax liabilities associated with these tax audits utilizing existing tax credits, with the exception of $4.0 million that we paid utilizing cash held in escrow. In March 2019, the tax audit related to Nextel Mexico's main operating company's income tax return for the year 2013 was finalized, and we filed an amended tax return. There was no cash outlay related to the finalization of the tax audit for the year 2013. The tax audit for the year 2013 represented $1.1 million of the total claims outstanding. In June 2019, the tax audit related to Nextel Mexico's main operating company's income tax return for the year 2012 was finalized, and we filed an amended tax return. We settled the tax liabilities associated with this tax audit utilizing $2.7 million in cash held in escrow. As a result, of the $72.4 million in combined claims relating to the tax audits of the years 2010, 2011 and ~~2011,~~2012 for Nextel Mexico's main operating company, we have requested that New Cingular Wireless agree to the ~~immediate~~ release of ~~$68.3~~$65.8 million from ~~escrow.~~escrow and expect to request the release of $1.1 million in the near future. New Cingular Wireless has disagreed with our interpretation of the escrow and purchase agreements related to the timing of release requirements for escrowed funds.

On February 11, 2019, our subsidiary NIU Holdings initiated review of this matter by the United States Bankruptcy Court for the Southern District of New York, which we refer to as the Bankruptcy Court, that approved the transaction with New Cingular Wireless in connection with our emergence from Chapter 11 bankruptcy, and on March 25, 2019, we filed a claim against New Cingular Wireless to recoup the $68.3 million (now revised to $65.8 million) from escrow in a lawsuit captioned NIU Holdings LLC v. AT&T Mobility Holdings, B.V.; New Cingular Wireless Services, Inc.; Nextel International (Uruguay) LLC; and Comunicaciones Nextel de Mexico S.A. de C.V., Case No. 15-10155, Adv. Pro. No. 19-01099 (SCC). On July 22, 2019, we filed a motion supporting our request for summary judgment, and on the same day, New Cingular Wireless filed a motion supporting its request for a judgment on the pleadings. New Cingular Wireless' deadline to file an objection to our motion and our deadline to file an objection to New Cingular Wireless' motion is August 14, 2019. Replies will be due on August 22, 2019. A hearing on these matters is scheduled for September 5, 2019. This difference of interpretation ~~could result in a~~of the relevant agreements has delayed and will continue to delay of the release of the remaining amount of cash in escrow. We are continuing to work with the Mexican tax authorities to settle the open non-income tax-based audits and accelerate the release of the remaining escrow.

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition, on May 7, 2019, we received a letter from New Cingular Wireless formally notifying us of pending tax audits for pre-closing periods that were not included in the tax indemnity claims notices previously submitted by New Cingular Wireless against the Mexico escrow account. We were already aware of the tax audits referenced in the letter, had assumed their defense, and will continue to work with the Mexican tax authorities to resolve them as expeditiously as possible. While we are required to indemnify New Cingular Wireless for any actual cash payments made to resolve any tax claims that may be asserted by the Mexican tax authorities from these audits, our position remains that New Cingular Wireless may not make a claim against the Mexico escrow account for any tax claims that may arise from these audits. In addition, New Cingular Wireless has indicated that it may continue to make additional claims for indemnification related to open audits in the future.

There can be no assurance as to the outcome of the foregoing tax audits or indemnity ~~claims.~~claims or as to the ultimate timing of the release of the remaining escrow.


Note 6.4.	Debt and Fair Value Measurements

Convertible Senior Notes. In August 2018, we privately placed $100.0 million aggregate principal amount of 4.25% convertible senior notes due 2023, which we refer to as the convertible senior notes. We also granted the initial purchaser an option to purchase up to an additional $15.0 million principal amount of convertible senior notes, which was exercised in full. As a result, we issued a total of $115.0 million principal amount of convertible senior notes at par for total gross proceeds of $115.0 million. The convertible senior notes bear interest at a rate of 4.25% per year on the principal amount of the notes, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2019. The convertible senior notes mature on August 15, 2023, unless earlier converted or repurchased, when the entire principal balance of $115.0 million will be due. In addition, and subject to specified exceptions, upon the occurrence of a fundamental change, the noteholders have the right to require us to repurchase the notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. The convertible senior notes are convertible into shares of our common stock at an initial conversion rate of 160.9658 shares per $1,000 principal amount of notes, or 18,511,067 aggregate common shares, representing an initial conversion price of $6.21 per share, subject to adjustment in certain situations. The convertible senior notes are convertible, subject to adjustment, prior to the close of business on the business day immediately preceding February 15, 2023 only under certain circumstances. On or after February 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, noteholders may convert their notes at any time, regardless of the aforementioned circumstances. For the fiscal quarter ended June 30, 2019, the closing sale price of our common stock did not exceed 130% of the conversion price of $6.21 per share for at least 20 trading days in the 30 consecutive trading days ending on June 30, 2019. As a result, the conversion contingency was not met as of June 30, 2019. We have the option to satisfy the conversion of the convertible senior notes in shares of our common stock, in cash or a combination of both. As of June 30, 2019 and December 31, 2018, we had $75.5 million and $72.3 million in long-term debt related to our convertible senior notes.

The ~~components~~conversion feature embedded in the convertible senior notes meets the criteria of an embedded derivative in accordance with the FASB's authoritative guidance for derivatives. As a result, we separated the value of the conversion feature from the notes and recorded the derivative liability at its fair value on our condensed consolidated balance sheet. As of June 30, 2019, the fair value of the derivative liability was zero. As of December 31, 2018, we recorded the $33.6 million fair value of the derivative liability as a component of other long-term liabilities in our condensed consolidated balance sheet.

Absent an amendment to the indenture to the convertible senior notes, at the closing of the sale of Nextel Brazil, AMX will place a portion of the net proceeds payable to us in an escrow account in an amount equal to the outstanding principal and unpaid interest due through maturity.

Fair Value of Convertible Senior Notes. As of June 30, 2019 and December 31, 2018, the fair value of our ~~debt are~~convertible senior notes was $117.2 million and $80.7 million, respectively. We estimated the fair value of our convertible senior notes utilizing inputs such as ~~follows:~~

June 30, 2018 December 31, 2017
(in thousands)
Brazil equipment financing facility $ 238,228
$ 242,883
Brazil bank loans 170,831
200,567
Brazil spectrum financing 104,578
122,044
Brazil capital lease and tower financing obligations 74,701
90,213
Total debt 588,338
655,707
Less: current portion (3,899 ) (7,990 )
$ 584,439
$ 647,717
U.S. Treasury security yield curves, prices of comparable bonds, U.S. Treasury bond rates and credit spreads on comparable publicly traded bonds. We consider this fair value measurement to be Level 3 in the fair value hierarchy.

1614

NII HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Amendments to Equipment Financing Facility and Bank Loans.~~Fair Value of Conversion Option. In October 2017, Nextel Brazil entered into an amended and restated equipment financing facility and sixth amendments to its two bank loans with Brazilian lenders. In January 2018, we received final approval forWe estimate the amended and restated equipment financing facility, at which point all of these amendments became effective. We accounted for these amendments as a non-substantial modification of debt and capitalized $6.1 million of financing costs that will be amortized over the new termfair value of the ~~loans. As~~conversion option embedded in the convertible senior notes using a ~~result~~binomial lattice model with daily nodes from the valuation date to the maturity date of the ~~amendments, the material financing terms in all three facilities were aligned. Among other~~convertible senior notes. This model considers stock price, risk-free rates, credit spreads, dividend yields and expected volatility. We record gains or losses related to changes loans under these agreements have a 48-month grace period from January 2018 for material repayments, a 50-month material repayment term that begins in January 2022 and a final maturity of January 2026 for Nextel Brazil's bank loans and February 2026 for Nextel Brazil's equipment financing facility. These amendments also provide for a holiday for certain financial covenant compliance, including the net debt financial covenant, until June 30, 2020. In connection with these amendments, Nextel Brazil granted additional security interests to each of its lenders in the ~~form~~fair value of preferential rights to amounts held in certain of Nextel Brazil's bank accounts and pledged incremental equipment and property to these lenders. In addition, Nextel Brazil will be subject to monthly minimum cash and minimum receivable requirements. Nextel Holdings and certain of its subsidiaries have agreed to make equity contributions to Nextel Brazil over the next 48 months. As of June 30, 2018, Nextel Brazil had $244.0 million in principal amount outstanding under its equipment financing facility and $170.5 million in principal amount outstanding under its bank loans.


~~Note 7.~~	~~Fair Value Measurements~~

~~Financial Instruments.~~

~~Available-for-Sale Securities.~~

As of June 30, 2018 and December 31, 2017, available-for-sale securities held by Nextel Brazil included $29.7 million and $16.7 million, respectively, in investment funds. These funds invest primarily in Brazilian government bonds and long-term bank certificates of deposit.conversion option derivative liability during the period. During the ~~three and~~ six months ended June 30, ~~2018 and 2017,~~2019, we ~~did not have any material unrealized gains or losses associated with these investments.~~

~~We account for our available-for-sale securities at fair value. The fair value of Nextel Brazil's investment funds is measured based on the funds' net asset value~~recorded a $33.6 million gain as a ~~practical expedient, which is excluded from~~component of other income (expense), net in our condensed consolidated statement of comprehensive loss related to the ~~fair value hierarchy.~~

~~Debt Instruments.~~

~~The carrying amounts and estimated fair values of our debt instruments are as follows:~~

June 30, 2018 December 31, 2017

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value
(in thousands)
Brazil equipment financing $ 238,228
$ 240,100
$ 242,883
$ 237,958
Brazil bank loans and other 170,831
115,492
200,567
144,312
Brazil spectrum financing 104,578
117,082
122,044
128,225
$ 513,637
$ 472,674
$ 565,494
$ 510,495

~~We estimated~~change in the fair value of Nextel Brazil's bank loans, equipment financing and spectrum financing utilizing inputs such as U.S. Treasury security yield curves, prices of comparable bonds, LIBOR, U.S. Treasury bond rates and credit spreads on comparable publicly traded bonds.the conversion option. We consider ~~these~~this fair value ~~measurements~~measurement to be Level 3 in the fair value hierarchy.

~~Other Financial Instruments.~~

The carrying values of cash and cash equivalents, accounts receivable and accounts payable contained in our condensed consolidated balance sheets approximate their fair values due to the short-term nature of these instruments.

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


Note 8.	~~Contingencies~~

~~Contingencies.~~

Nextel Brazil has received various assessment notices from municipal, state and federal Brazilian authorities asserting deficiencies in payments related primarily to value-added taxes and other non-income based taxes. Nextel Brazil has filed various administrative and legal petitions disputing these assessments. In some cases, Nextel Brazil has received favorable decisions, which are currently being appealed by the respective governmental authority. In other cases, Nextel Brazil's petitions have been denied, and Nextel Brazil is currently appealing those decisions. In connection with these petitions, Nextel Brazil is regularly required to make a judicial guarantee through a deposit of cash to cover the amount in dispute in order to file and/or appeal claims. As of June 30, 2018 and December 31, 2017, Nextel Brazil also had contingencies related to certain consumer, contract and labor-related matters, some of which are secured by judicial guarantees. Even in cases where there is no probable loss, Nextel Brazil may in the future be subject to litigation involving tax and other matters requiring material judicial deposits of cash that will not be released until the pending matter is resolved.

~~As of~~ ~~June 30, 2018~~ ~~and December 31,~~ ~~2017, Nextel Brazil had accrued liabilities of $84.5 million and~~ ~~$81.2 million~~, respectively, related to contingencies, of which $7.6 million and $7.4 million related to unasserted claims, respectively. We currently estimate the reasonably possible losses related to matters for which Nextel Brazil has not accrued liabilities, as they are not deemed probable, to be approximately $720.0 million as of ~~June 30, 2018~~. We continue to evaluate the likelihood of probable and reasonably possible losses, if any, related to all known contingencies. As a result, future increases or decreases to our accrued liabilities may be necessary and will be recorded in the period when such amounts are determined to be probable and reasonably estimable.

~~Legal Proceedings.~~

We are subject to claims and legal actions that may arise in the ordinary course of business. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows.


~~Note 9.~~5.	Income Taxes

The realization of deferred tax assets is dependent on the generation of future taxable income sufficient to realize our tax loss carryforwards and other tax deductions. Valuation allowances are required to be recognized on deferred tax assets unless it is determined that it is “more-likely-than-not” that the asset will be realized. ~~In 2017, w~~We ~~maintained~~maintain full valuation allowances on the deferred tax assets of ~~our foreign operating companies,~~ our U.S. parent company and subsidiaries and our foreign holding companies due to substantial negative evidence such as the recent history of cumulative losses and the projected losses for the remainder of ~~2018~~2019 and subsequent years. We ~~maintained this same valuation allowance position through the second quarter of 2018~~.


~~Note 10.~~	~~Segment Reporting~~

We have determined our reportable segment based on our method of internal reporting, which disaggregates our business by geographic location. We evaluate performance and provide resources to it based on operating income before depreciation, amortization and impairment, restructuring and other charges, which we refer to as segment earnings. Nextel Brazil is our only reportable operating segment.

1815

~~NII HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Nextel Brazil Corporate Consolidated
(in thousands)
Three Months Ended June 30, 2018

Operating revenues $ 156,009
$ 1
$ 156,010
Segment earnings (losses) $ 3,675
$ (3,888 ) $ (213 )
Less:

Impairment, restructuring and other charges, net (11,722 )
Depreciation and amortization

(7,910 )
Foreign currency transaction losses, net

(46,666 )
Interest expense and other, net

(29,668 )
Loss from continuing operations before income tax benefit

$ (96,179 )
Capital expenditures $ 14,814
$ —
$ 14,814

Three Months Ended June 30, 2017

Operating revenues $ 225,105
$ 29
$ 225,134
Segment earnings (losses) $ 3,080
$ (8,441 ) $ (5,361 )
Less:

Impairment, restructuring and other charges, net (54,235 )
Depreciation and amortization

(9,335 )
Foreign currency transaction losses, net

(13,352 )
Interest expense and other, net

(10,962 )
Loss from continuing operations before income tax benefit

$ (93,245 )
Capital expenditures $ 8,988
$ —
$ 8,988

Six Months Ended June 30, 2018

Operating revenues $ 337,001
$ 22
$ 337,023
Segment earnings (losses) $ 75
$ (8,150 ) $ (8,075 )
Less:

Impairment, restructuring and other charges, net (9,897 )
Depreciation and amortization

(16,334 )
Foreign currency transaction losses, net

(47,854 )
Interest expense and other, net

(57,218 )
Loss from continuing operations before income tax benefit

$ (139,378 )
Capital expenditures $ 23,105
$ —
$ 23,105

Six Months Ended June 30, 2017

Operating revenues $ 476,030
$ 59
$ 476,089
Segment earnings (losses) $ 15,453
$ (15,699 ) $ (246 )
Less:

Impairment, restructuring and other charges, net (126,174 )
Depreciation and amortization

(22,360 )
Foreign currency transaction losses, net

(1,977 )
Interest expense and other, net

(35,163 )
Loss from continuing operations before income tax benefit

$ (185,920 )
Capital expenditures $ 18,439
$ —
$ 18,439

June 30, 2018

Identifiable assets $ 827,023
$ 138,975
$ 965,998
December 31, 2017

Identifiable assets $ 957,495
$ 147,603
$ 1,105,098


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

INDEX TO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction	2117
~~Nextel Brazil Business~~Executive Overview	2117
Critical Accounting Policies and Estimates	2218
Results of Operations	23
~~a. Consolidated~~	24
~~b. Nextel Brazil~~	26
~~c. Corporate~~	3019
Liquidity and Capital Resources	3021
Future Capital Needs and Resources	3122
Effect of New and Recently Adopted Accounting Standards	3324
Forward-Looking and Cautionary Statements	3324

2016

Introduction

The following is a discussion and analysis of:

our consolidated financial condition as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 and our consolidated results of operations for the ~~three-~~three and ~~six-month periods~~six months ended June 30, ~~2018~~2019 and ~~2017;~~2018; and

significant factors that we believe could affect our prospective financial condition and results of operations.

You should read this discussion in conjunction with our ~~2017~~2018 annual report on Form 10-K and our quarterly report on Form 10-Q for the three months ended March 31, 2019, including, but not limited to, the discussion regarding our critical accounting policies and estimates, as described below. Historical results may not indicate future performance. See "Forward-Looking and Cautionary Statements" and "Item 1A. — Risk Factors" in our ~~2017~~2018 annual report on Form 10-K for risks and uncertainties that may impact our future performance. We refer to our ~~remaining~~majority-owned Brazilian operating company, Nextel Telecomunicações Ltda., as Nextel Brazil.

On June 27, 2019, NII Holdings' stockholders approved the sale of Nextel Brazil. See discussion below for more information regarding this pending sale. In connection with this stockholder approval, we have reported Nextel Brazil as a discontinued operation in this quarterly report on Form 10-Q. Accordingly, we have reclassified Nextel Brazil's results of operations for all periods presented to reflect Nextel Brazil as discontinued operations. Unless otherwise noted, amounts included herein exclude amounts attributable to the discontinued operations of Nextel Brazil. Our consolidated results from continuing operations in this quarterly report on Form 10-Q solely include the results of operations of our corporate headquarters.

Executive Overview

Pending Sale of Nextel Brazil. On March 18, 2019, NII Holdings and NII International Holdings S.à r.l., or NIIH, a wholly-owned subsidiary of NII Holdings, entered into a purchase agreement with América Móvil, S.A.B. de C.V., or AMX, and AI Brazil Holdings B.V., or AI Brazil Holdings, pursuant to which NII Holdings and AI Brazil Holdings will sell their jointly-owned wireless operations in Brazil. Specifically, NIIH will sell all of the issued and outstanding shares of NII Brazil Holdings S.à r.l., or NIIBH, to AMX. We refer to this transaction as the Nextel Brazil ~~Business Overview~~

~~We provide wireless communication services under~~transaction. Also pursuant to the ~~Nextel~~^TM ~~brand in Brazil with our principal operations located in major urban~~purchase agreement, concurrent to, and ~~suburban centers with high population densities and related transportation corridors~~as a condition of, ~~that country where there is a concentration~~the consummation of ~~Brazil’s population and economic activity, including primarily Rio de Janeiro and São Paulo.~~the Nextel Brazil operates a wideband code division multiple access, or WCDMA, network, which has been upgraded to offer long-term evolution, or LTE, services in certain areas. Nextel Brazil's network enables us to offer a wide range of products and services supported by that technology. We are also a party to a roaming agreement that allows us to offer our subscribers nationwide voice and data services outside of our network's footprint. Our target market is individual consumers who use our services to meet both professional and personal needs. Our target subscribers generally exhibit above average usage, revenue and loyalty characteristics. We believe our target market is attracted to the services and pricing plans we offer, as well as the quality of and data speeds provided by our network.

~~The services we currently offer include:~~

~~mobile telephone voice and wireless data services;~~

~~international voice and data roaming services;~~

~~application-based radio connection; and~~

~~value-added services, including sports, music and entertainment streaming capabilities; online education; and access to national and international WiFi hotspot networks.~~

~~In the last several years, Nextel~~transaction, AI Brazil has experienced iDEN subscriber losses and overall declines in its iDEN service revenue. In response to continued subscriber losses on its iDEN network, in September 2017, Nextel Brazil decided to wind down its iDEN operations with a target to cease all iDEN services by mid-2018. After migrating some customers to its WCDMA network, Nextel Brazil disconnectedHoldings will sell all of its ~~remaining iDEN subscribers at~~interests in Nextel Holdings S.à r.l., or Nextel Holdings, to NIIBH. We refer to this transaction as the ~~end~~AI Brazil Holdings transaction. At the closing of the ~~second~~Nextel Brazil transaction and the AI Brazil Holdings transaction, AMX will indirectly own all of the issued and outstanding shares of Nextel Brazil. On June 27, 2019, NII Holdings' stockholders approved the sale of Nextel Brazil. We currently expect that the pending sale of Nextel Brazil will close in the fourth quarter of ~~2018~~2019.

Under the terms of the purchase agreement, AMX will acquire all of the issued and outstanding shares of NIIBH for an aggregate purchase price of $905.0 million, less net debt and subject to certain adjustments at closing, including reimbursement for capital expenditures up to a budgeted amount from March 1, 2019 to closing, a working capital adjustment (subject, in the case of an increase in net working capital, to a cap based on budgeted changes in working capital through the earlier of closing or December 31, 2019), and a deduction for the amount, if any, by which certain budgeted selling and marketing costs exceed actual spending on such costs from March 1, 2019 to closing. NII Holdings will receive its pro rata share of the net purchase price after deducting a preferred return due to AI Brazil Holdings and deducting certain transaction expenses and increases in accrued tax contingencies, if any. AMX will place $30.0 million of NII Holdings' portion of the net proceeds into an 18-month escrow account to secure NII Holdings' indemnification obligations under the purchase agreement.

The ~~majority~~closing of the transactions contemplated by the purchase agreement are subject to the satisfaction of customary conditions, including the receipt of required regulatory and antitrust approvals and either an amendment eliminating certain successor obligations contemplated under, or an escrow agreement providing for a deposit in accordance with, NII Holdings' indenture with respect to our ~~subscribers purchase services from us by acquiring subscriber identity module, or SIM, cards from us separately,~~4.25% convertible senior notes due 2023. Among other things, NIIH has agreed to conduct NIIBH’s and ~~using these SIM cards in handsets that they acquire from other sources. As~~each of June 30, 2018, Nextel Brazil had about 3.121 million total subscriber units in commercial service, which we estimate to be about 4% of total postpaid mobile handsets and other devices in commercial service in Brazil. We refer to these subscriber units in commercial service collectively as our subscriber base.

Our goal is to grow our subscriber base and revenues by providing differentiated wireless communications services that are valued by our existing and potential subscribers. We are also striving to manage our capital and operating expendituresits subsidiaries’ business in the ~~near term~~ordinary course, use reasonable best efforts to operate its business in accordance with its budget for the year 2019 and ~~improve our profitability~~the year 2020, if applicable, and ~~cash flow over the long term. Our strategy for achieving these goals is based on several core principles, including:~~

~~offering a unique~~use commercially reasonable efforts to maintain and ~~superior customer-centric experience, including a reliable and high quality wireless network and rate plan flexibility;~~

~~continuing to implement cost reduction strategies and redesigning our network architecture in order to lower cash costs per user, outweigh scale disadvantages, create an agile~~preserve its business organization and ~~improve overall profitability;~~

~~focusing on higher value customer segments that generate higher ARPU and lower subscriber turnover; and~~

~~building on the strength of the unique positioning of the Nextel brand.~~preserve certain business relations.

2117

In ~~recent years, we have implemented changes in~~connection with the pending sale of Nextel Brazil, NII Holdings' Board of Directors has approved a plan to dissolve and wind up its operations following the completion of this transaction. On June 27, 2019, NII Holdings' stockholders approved this plan of dissolution.

The foregoing description of the purchase agreement and transactions is a summary. For more information, please see the purchase agreement filed as Exhibit 10.3 to our business to better align our organization and costs with our operational and financial results. These changes have included a transition to lower cost subscriber acquisition channels, initiatives to reduce operating costs, including headcount reductions, and projects designed to improve operational and capital expenditure efficiencies in Brazil, all of which were intended to reduce costs while maintainingquarterly report on Form 10-Q for the ~~support necessary to meet our subscribers' needs.~~

~~For the six~~three months ended ~~June 30, 2018,~~March 31, 2019 and our WCDMA subscriber turnover levels were lower than last year, resulting in positive net WCDMA subscriber additions. We expect that, if we can continue to maintain similar turnover levels and grow our WCDMA subscriber base, we will be able to generate higher revenues in the future. We will also continue to focusdefinitive proxy statement filed on ~~opportunities to reduce operating expenses through operational improvements and cost reductions to preserve our liquidity. See “Liquidity and Capital Resources” and “Future Capital Needs and Resources~~” for more information. While we are focused on effectively managing our business, we are also considering potential strategic alternatives with third parties involving Nextel Brazil. There can be no assurances that any such transaction will materialize or result in value to our stockholders at or above our current or future trading market value.May 6, 2019.

Additionally, effective in January 2018, we entered into amendments to Nextel Brazil's equipment financing facility and two bank loans, which aligned the material financing terms in all three facilities. Among other changes, these amendments provide for the deferral of substantially all principal payments for the first 48 months from the date of effectiveness, an extension of the loan maturity dates to 98 months from the date of effectiveness, and a holiday for certain financial covenant compliance, including the net debt financial covenant, until June 30, 2020.

~~Partnership Agreement.~~Minority Investment. On June 5, 2017, weNII Holdings and AINMT Holdings AB, or ice group, an international telecommunications company operating primarily in Norway under the ~~“ice.net”~~"ice.net" brand, along with certain affiliates of ~~ours~~the Company and ice group, entered into an investment agreement and a shareholders agreement to partner in the ownership of Nextel Brazil. On July 20, 2017, ice group completed its initial investment of $50.0 million in Nextel Holdings, ~~S.à r.l., or Nextel Holdings,~~ a ~~newly formed~~ subsidiary of NII Holdings that indirectly owns Nextel Brazil, in exchange for 30% ownership in Nextel Holdings. In connection with the initial investment, ice group received 50.0 million shares of cumulative preferred voting stock in Nextel Holdings, and we received 116.6 million shares of common stock in this entity. The investment agreement also provided ice group with an option, exercisable on or before November 15, 2017, to invest an additional $150.0 million in Nextel Holdings for an additional 30% ownership. ice group did not exercise its option, and on February 27, 2018, we terminated the investment agreement. ~~Since we continue to have~~

In September 2018, ice group completed a ~~controlling~~sale of its 30% ownership interest in Nextel Holdings by selling the shares of its intermediary holding company, AI Brazil Holdings, to AI Media Holdings (NMT) LLC (90%) and Bridford Music B.V. (10%). During 2018, AI Brazil Holdings made an additional $15.9 million investment in Nextel Holdings to maintain its 30% ownership level. During the second quarter of 2019, NII Holdings contributed $15.3 million to Nextel Holdings, and AI Brazil Holdings contributed $2.7 million to Nextel Holdings, which increased NII Holdings' ownership to 70.70% and reduced AI Brazil Holdings' ownership from 30% to 29.30%. In addition, in July 2019, NII Holdings contributed $23.0 million to Nextel Holdings, which increased NII Holdings' ownership to 72.34% and further reduced AI Brazil Holdings' ownership to 27.66%.

Nextel Brazil Business Overview. Nextel Brazil provides wireless communication services under the Nextel^TM brand in Brazil with its principal operations located in major urban and suburban centers with high population densities and related transportation corridors where there is a concentration of Brazil’s population and economic activity, including primarily Rio de Janeiro and São Paulo. Nextel Brazil operates a wideband code division multiple access, or WCDMA, network, which has been upgraded to offer long-term evolution, or LTE, services in certain areas. As of June 30, 2019, Nextel Brazil had about 3.503 million total subscriber units in commercial service, which we estimate to be about 4% of total postpaid mobile handsets and other devices in commercial service in Brazil.

Pending the completion of the sale of Nextel Brazil, we expect to continue to operate our business in the ordinary course. Our goal is to grow our subscriber base and revenues by providing differentiated wireless communications services that are valued by our existing and potential subscribers. We have ~~consolidated this entity~~also been taking actions to reduce costs in our business to lower our spending and ~~its subsidiaries.~~preserve our liquidity while improving our profitability and cash flow.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates ~~assumptions~~ and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in our condensed consolidated financial statements and accompanying notes. Although we believe that our estimates ~~assumptions~~ and judgments are reasonable, they are based on presently available information. Due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

~~As described in more detail in our 2017 annual report on Form 10-K under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” we~~We consider the following accounting policies to be the most important to our financial position and results of operations or policies that require us to exercise significant judgment and/or estimates:

~~revenue recognition;~~

~~allowance for doubtful accounts;~~

~~depreciation of property, plant and equipment;~~

~~amortization of intangible assets;~~

~~valuation of long-lived assets;~~

foreign currency;

~~loss contingencies;~~ and

income taxes.

The aforementioned critical accounting policies are described in more detail in our 2018 annual report on Form 10-K under “Management's Discussion and Analysis of Financial Condition and Results of Operations.” Certain accounting policies that were determined to be critical in our 2018 annual report on Form 10-K are no longer deemed critical as a result of the classification of Nextel Brazil as discontinued operations in the second quarter of 2019.

2219

~~Change to Revenue Recognition Accounting Policy.~~ As a result of the implementation of Accounting Standards Codification, or ASC, No. 606, or ASC 606, beginning January 1, 2018, we allocate revenue between the handset and the service based on relative standalone selling price, or SSP. We recognize revenue when we satisfy a performance obligation by providing services or transferring control of promised handsets and accessories, which are distinct to a customer. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled for those performance obligations.

We recognize revenue related to access charges ratably over the contract period and net of taxes collected from customers. We recognize handset and accessory revenue when a subscriber takes possession of a device. The transaction price of the handset sold, if any, is billed at the time of sale. Although more than 90% of our subscribers typically purchase services only and acquire a handset separately, the remainder of our subscriber base purchases a handset offered at a discounted price bundled with services. In these types of bundled sales, we allocate a portion of our future service billings to the handset and recognize revenue upon handset delivery at the inception of the contract. We determined that contracts with terms longer than one year that involve the sale of both a handset and related services generally do not include a significant financing component.

~~Other than these changes to our revenue recognition policy, there have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2018.~~

Results of Operations

In accordance with accounting principles generally accepted in the U.S., we translated the results of operations of our Brazilian operating segment into U.S. dollars using the average foreign currency exchange rates for the applicable period. The following table presents the average foreign currency exchange rates we used to translate Nextel Brazil's results of operations, as well as changes from the average foreign currency exchange rates utilized in the prior period.

Three Months Ended June 30, Actual Percent Change From Prior Year
2018 2017
Brazilian real 3.63
3.21
(13 )%



	June 30,						Actual Change from Previous Year
Three Months Ended	2019			2018			Dollars			B(W) Change
Operating expenses
Selling, general and administrative	$	(4,551	)	$	(3,889	)	$	(662	)	(17	)%
Restructuring charges, net	—			(31		)	31			100	%
	(4,551		)	(3,920		)	(631		)	(16	)%
Operating loss	(4,551		)	(3,920		)	(631		)	(16	)%
Other (expense) income
Interest expense	(2,902		)	—			(2,902		)	NM
Other income, net	2,486			106			2,380			NM
	(416		)	106			(522		)	NM
Loss from continuing operations before income taxes	(4,967		)	(3,814		)	(1,153		)	(30	)%
Income taxes	—			—			—			NM
Net loss from continuing operations	(4,967		)	(3,814		)	(1,153		)	(30	)%
Loss from discontinued operations, net of income taxes	(12,151		)	(95,473		)	83,322			87	%
Net loss	(17,118		)	(99,287		)	82,169			83	%
Net loss attributable to noncontrolling interest	(3,608		)	(27,843		)	24,235			87	%
Net loss attributable to NII Holdings	$	(13,510	)	$	(71,444	)	$	57,934		81	%

Six Months Ended
Operating expenses
Selling, general and administrative	$	(8,951	)	$	(8,150	)	$	(801	)	(10	)%
Restructuring charges, net	—			(352		)	352			100	%
	(8,951		)	(8,502		)	(449		)	(5	)%
Operating loss	(8,951		)	(8,502		)	(449		)	(5	)%
Other (expense) income
Interest expense	(5,726		)	—			(5,726		)	NM
Other income, net	34,431			176			34,255			NM
	28,705			176			28,529			NM
Income (loss) from continuing operations before income taxes	19,754			(8,326		)	28,080			NM
Income taxes	—			—			—			NM
Net income (loss) from continuing operations	19,754			(8,326		)	28,080			NM
Loss from discontinued operations, net of income taxes	(37,730		)	(133,115		)	95,385			72	%
Net loss	(17,976		)	(141,441		)	123,465			87	%
Net loss attributable to noncontrolling interest	(9,371		)	(39,099		)	29,728			76	%
Net loss attributable to NII Holdings	$	(8,605	)	$	(102,342	)	$	93,737		92	%

NM-Not Meaningful

Six Months Ended June 30, Actual Percent Change From Prior Year
2018 2017
Brazilian real 3.44
3.17
(9 )%
1. Interest expense, net

~~The following table presents the foreign currency exchange rates~~Interest expense, net, in ~~effect at the end of each of the quarters in 2017, as well as at the end of the first and second quarters of 2018.~~

2017 2018
March June September December March June
Brazilian real 3.13
3.31
3.17
3.31
3.32
3.86

The percentage amounts presented in the “Actual Change from Previous Year” and the “Constant Currency Change from Previous Year” columns in the tables below reflect the positive (better, or B,) or negative (worse, or W,) growth rates for each of the line items. In addition, to provide better transparency into Nextel Brazil's results of operations, we present the year-over-year percentage change in each of the line items presented on a consolidated basis and for Nextel Brazil on a constant currency basis in the "Constant Currency Change from Previous Year" columns in the tables below. The comparison of results for these line items on a constant currency basis shows the impact of changes in foreign currency exchange rates (i) by adjusting the relevant measures for the three and six months ended June 30, ~~2017~~2019 relates to ~~amounts that would have resulted if the average foreign currency exchange rate for~~interest expense incurred under our convertible senior notes.

2. Other income (expense), net

Other income, net, in the three and six months ended June 30, 2017 was the same as the average foreign currency exchange rate that was in effect for the three and six months ended June 30, 2018; and (ii) by comparing the constant currency financial measures for the three and six months ended June 30, 20172019 is primarily due to the ~~actual financial measures for the three~~$2.1 million and ~~six months ended June 30, 2018. This constant currency comparison applies consistent exchange rates~~$33.6 million gains, respectively, related to the ~~operating revenues earned in Brazilian reais and to the other components of segment earnings for the three and six months ended June 30, 2017. The constant currency information reflected~~change in the ~~tables below is not a measurement under accounting principles generally accepted in~~fair value of the ~~U.S. and should be considered in addition to, but not as a substitute for, the information contained~~conversion option included in our ~~results of operations.~~convertible senior notes.

3. Loss from discontinued operations, net of income taxes

~~a. Consolidated~~

June 30, 2018 June 30, 2017
Actual Change from
Previous Year
Constant Currency Change from Previous Year
Dollars B(W) Change B(W) Change
(dollars in thousands)
Three Months Ended
Brazil segment earnings 3,675
3,080
595
19 % 35 %
Corporate segment losses (3,888 ) (8,441 ) 4,553
54 % 54 %
Consolidated segment losses (213 ) (5,361 ) 5,148
96 % 96 %
Impairment, restructuring and other charges, net (11,722 ) (54,235 ) 42,513
78 % 76 %
Depreciation and amortization (7,910 ) (9,335 ) 1,425
15 % 4 %
Operating loss (19,845 ) (68,931 ) 49,086
71 % 70 %
Interest expense, net (28,010 ) (26,405 ) (1,605 ) (6 )% (31 )%
Interest income 1,593
7,808
(6,215 ) (80 )% (77 )%
Foreign currency transaction losses, net (46,666 ) (13,352 ) (33,314 ) (250 )% (296 )%
Other (expense) income, net (3,251 ) 7,635
(10,886 ) (143 )% (148 )%
Loss from continuing operations before income tax benefit (96,179 ) (93,245 ) (2,934 ) (3 )% (12 )%
Income tax benefit —
5,778
(5,778 ) (100 )% (100 )%
Net loss from continuing operations (96,179 ) (87,467 ) (8,712 ) (10 )% (20 )%
(Loss) income from discontinued operations, net of income taxes (2,662 ) 2,697
(5,359 ) (199 )% (199 )%
Net loss (98,841 ) (84,770 ) (14,071 ) (17 )% (27 )%
Net loss attributable to noncontrolling interest (27,709 ) —
(27,709 ) NM
NM
Net loss attributable to NII Holdings $ (71,132 ) $ (84,770 ) $ 13,638
16 % 8 %

Six Months Ended
Brazil segment earnings 75
15,453
(15,378 ) (100 )% (99 )%
Corporate segment losses (8,150 ) (15,699 ) 7,549
48 % 48 %
Consolidated segment losses (8,075 ) (246 ) (7,829 ) NM
NM
Impairment, restructuring and other charges, net (9,897 ) (126,174 ) 116,277
92 % 91 %
Depreciation and amortization (16,334 ) (22,360 ) 6,026
27 % 21 %
Operating loss (34,306 ) (148,780 ) 114,474
77 % 76 %
Interest expense, net (54,616 ) (57,967 ) 3,351
6 % (8 )%
Interest income 6,979
16,944
(9,965 ) (59 )% (55 )%
Foreign currency transaction losses, net (47,854 ) (1,977 ) (45,877 ) NM
NM
Other (expense) income, net (9,581 ) 5,860
(15,441 ) (263 )% (276 )%
Loss from continuing operations before income tax benefit (139,378 ) (185,920 ) 46,542
25 % 19 %
Income tax benefit —
5,778
(5,778 ) (100 )% (100 )%
Net loss from continuing operations (139,378 ) (180,142 ) 40,764
23 % 17 %
(Loss) income from discontinued operations, net of income taxes (2,783 ) 2,659
(5,442 ) (205 )% (205 )%
Net loss (142,161 ) (177,483 ) 35,322
20 % 14 %
Net loss attributable to noncontrolling interest (39,315 ) —
(39,315 ) NM
NM
Net loss attributable to NII Holdings $ (102,846 ) $ (177,483 ) $ 74,637
42 % 38 %

~~NM-Not Meaningful~~

~~We define segment losses as operating loss before depreciation, amortization~~Loss from discontinued operations, net of income taxes, decreased $83.3 million, or 87%, and ~~impairment, restructuring and other charges. We recognized consolidated segment losses of $0.2~~$95.4 million, ~~and $8.1 million during~~or 72%, from the three and six months ended June 30, 2018 ~~compared~~ to ~~consolidated segment losses of $5.4 million and $0.2 million during~~ the same periods in ~~2017. Our consolidated results include the results~~2019 largely as a result of ~~operations of our Brazil segment and our corporate operations in the sections that follow.~~


1.	~~Impairment, restructuring and other charges, net~~

Consolidated impairment, restructuring and other charges, net recognized during the three and six months ended June 30, 2018 primarily consisted of $11.9 million and $22.8 million, respectively, in restructuring costs, the majority of which related to future lease costs for approximately 200 iDEN-related transmitter and receiver sites, and a change in the scope of Nextel Brazil's radio access network, or RAN, sharing implementation. Consolidated impairment, restructuring and other charges, net for the six months ended June 30, 2018 were partially offset by the reversal of $13.7from $46.7 million in previously accrued restructuring charges that occurred in the first quarter of 2018 related to approximately 250 transmitter and receiver sites that Nextel Brazil has identified as sites that it plans to exchange with certain of its tower lessors.

~~Consolidated impairment, restructuring and other charges, net recognized in the three and six months ended June 30, 2017 included $49.3~~and$47.9 million ~~and $52.6 million~~ in restructuring costs, respectively, most of which related to future lease costs for certain transmitter and receiver sites that are no longer required in Nextel Brazil's business and $4.4 million in severance and other related costs resulting from the separation of certain executive level employees in Brazil. Consolidated impairment, restructuring and other charges, net recognized in the six months ended June 30, 2017 also included a $66.0 million non-cash asset impairment charge to reduce the carrying values of Nextel Brazil's long-lived assets to their respective fair values.


2.	~~Foreign currency transaction losses, net~~

~~Consolidated~~ foreign currency transaction losses, ~~of $46.7 million and $47.9 million recognized~~respectively, in the three and six months ended June 30, 2018 ~~were primarily the result of the impact of the depreciation~~to $5.5 million and $3.9 million in foreign currency transaction gains in the ~~value~~same periods in 2019. In addition, Nextel Brazil experienced $9.0 million and $27.3 million improvements in segment earnings, respectively, over the same periods and incurred $8.7 million fewer impairment, restructuring and other charges in the second quarter of ~~the Brazilian real relative~~2019 compared to the ~~U.S. dollar during those periods on Nextel Brazil's U.S. dollar-denominated net liabilities.~~second quarter of 2018.

b. Nextel ~~Brazil~~

June 30, 2018
% of
Nextel Brazil’s
Operating Revenues
June 30, 2017
% of
Nextel Brazil’s
Operating Revenues

Actual Change from
Previous Year
Constant Currency Change from Previous Year
Dollars B(W) Change B(W) Change
(dollars in thousands)
Three Months Ended
Service and other revenues $ 150,808
97 % $ 220,050
98 % $ (69,242 ) (31 )% (22 )%
Handset and accessory revenues 5,201
3 % 5,055
2 % 146
3 % 16 %
Cost of handsets and accessories (7,015 ) (4 )% (13,041 ) (6 )% 6,026
46 % 39 %
Handset and accessory net subsidy (1,814 ) (1 )% (7,986 ) (4 )% 6,172
77 % 74 %
Cost of service (exclusive of
depreciation and amortization)
(69,939 ) (45 )% (87,842 ) (39 )% 17,903
20 % 10 %
Selling and marketing expenses (18,679 ) (12 )% (23,384 ) (10 )% 4,705
20 % 10 %
General and administrative expenses (56,701 ) (37 )% (97,758 ) (44 )% 41,057
42 % 34 %
Segment earnings $ 3,675
2 % $ 3,080
1 % $ 595
19 % 35 %

Six Months Ended
Service and other revenues $ 326,759
97 % $ 463,513
97 % $ (136,754 ) (30 )% (23 )%
Handset and accessory revenues 10,242
3 % 12,517
3 % (2,275 ) (18 )% (11 )%
Cost of handsets and accessories (16,080 ) (5 )% (21,707 ) (5 )% 5,627
26 % 20 %
Handset and accessory net subsidy (5,838 ) (2 )% (9,190 ) (2 )% 3,352
36 % 31 %
Cost of service (exclusive of
depreciation and amortization)
(158,863 ) (47 )% (190,550 ) (40 )% 31,687
17 % 10 %
Selling and marketing expenses (39,910 ) (12 )% (50,568 ) (11 )% 10,658
21 % 14 %
General and administrative expenses (122,073 ) (36 )% (197,752 ) (41 )% 75,679
38 % 33 %
Segment earnings $ 75
—
$ 15,453
3 % $ (15,378 ) (100 )% (99 )%

~~The average value of the Brazilian real depreciated relative to the U.S. dollar during~~Brazil's segment earnings improved from the three and six months ~~ended June 30,~~in 2018 by 13% and 9% compared to the average value that prevailed during the three and six months ended June 30, 2017. As a result, the components of Nextel Brazil's results of operations for the three and six months ended June 30, 2018, after translation into U.S. dollars, reflect lower revenues and expenses in U.S. dollars than would have occurred if the Brazilian real had not depreciated relative to the U.S. dollar. To the extent the value of the Brazilian real depreciates further relative to the U.S. dollar, Nextel Brazil's future reported results of operations will be adversely affected.

We use the term "subscriber unit," which we also refer to as a subscriber, to represent an active SIM card, which is the level at which we track subscribers. The table below provides an overview of Nextel Brazil's subscriber units in commercial service on both its iDEN and WCDMA networks, as well as Nextel Brazil's subscriber turnover rates for each of the quarters in 2017 and for the first and second quarters of 2018. We calculate subscriber turnover by dividing subscriber deactivations for the period by the average number of subscriber units during that period.

Three Months Ended
March 31, 2017
June 30,
2017
September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
(subscribers in thousands)
iDEN subscriber units 822.7
686.3
563.3
449.7
349.6
230.4
WCDMA subscriber units 2,815.2
2,874.6
2,864.8
2,845.8
2,896.1
3,023.8
Total subscriber units in commercial service — beginning of period 3,637.9
3,560.9
3,428.1
3,295.5
3,245.7
3,254.2

iDEN net subscriber losses (115.4 ) (103.5 ) (100.3 ) (76.6 ) (84.4 ) (198.9 )
WCDMA net subscriber additions (losses) 38.4
(29.3 ) (32.3 ) 26.8
92.9
65.7
Total net subscriber (losses) additions (77.0 ) (132.8 ) (132.6 ) (49.8 ) 8.5
(133.2 )

Migrations from iDEN to WCDMA 21.0
19.5
13.3
23.5
34.8
31.5

iDEN subscriber units 686.3
563.3
449.7
349.6
230.4
—
WCDMA subscriber units 2,874.6
2,864.8
2,845.8
2,896.1
3,023.8
3,121.0
Total subscriber units in commercial service — end of period 3,560.9
3,428.1
3,295.5
3,245.7
3,254.2
3,121.0

Total subscriber turnover 3.71 % 3.95 % 4.47 % 3.83 % 3.02 % 4.68 %
iDEN subscriber turnover 5.52 % 5.88 % 6.89 % 6.36 % 9.67 % NM
WCDMA subscriber turnover 3.23 % 3.53 % 4.04 % 3.47 % 2.37 % 2.75 %

~~NM-Not Meaningful~~

During the second and third quarters of 2017, Nextel Brazil's WCDMA subscriber turnover increased as a result of the introduction of unlimited voice offerings by competitors and the tightening of certain credit and collections policies during the first three quarters of 2017. In addition, the increase in Nextel Brazil's WCDMA subscriber turnover in the third quarter of 2017 was partially caused by a significant number of customer contract expirations. In August 2017, Nextel Brazil began offering unlimited voice rate plans in response to the increasingly competitive environment. As a result of its efforts to migrate existing customers to these types of unlimited rate plans, as well as other targeted efforts to promote customer loyalty and improve collections, Nextel Brazil's WCDMA subscriber turnover began declining in the fourth quarter of 2017 and decreased further in the first quarter of 2018. While Nextel Brazil's WCDMA subscriber turnover has remained at lower levels compared to recent years, it increased slightly in the second quarter of 2018 due to the expected impact of the iDEN network shutdown on certain WCDMA subscribers that also maintained iDEN service, as well as an increase in involuntary subscriber turnover that we believe is temporary.

The following table represents Nextel Brazil's ARPU for subscribers on both its iDEN and WCDMA networks for each of the quarters in 2017, as well as for the first and second quarters of 2018, in both U.S. dollars (US$) and in Brazilian reais (BR). We calculate service ARPU by dividing service revenues per period by the weighted average number of subscriber units in commercial service during that period.

Three Months Ended
March 31, 2017
June 30,
2017
September 30, 2017 December 31, 2017 March 31, 2018
June 30,
2018
Total service ARPU (US$) 21
19
19
18
17
15
  WCDMA service ARPU (US$) 22
20
19
18
18
15
  iDEN service ARPU (US$) 17
15
15
14
12
8

Total service ARPU (BR) 65
62
59
57
56
54
  WCDMA service ARPU (BR) 68
65
61
58
58
55
  iDEN service ARPU (BR) 54
49
47
47
38
26

During the first half of 2017, Nextel Brazil's WCDMA service ARPU in Brazilian reais decreased as a result of a higher volume of discounts to retain existing customers and slightly lower loading ARPU in an effort to attract new customers. Nextel Brazil's WCDMA service ARPU in Brazilian reais continued to decrease in the second half of 2017 due primarily to price deterioration in the overall wireless market and new types of unlimited rate plans that were introduced in response to the competitive environment. These types of plans remove many of the usage-based fees that Nextel Brazil charged in previous quarters, which resulted in less revenue per customer. Nextel Brazil's WCDMA service ARPU temporarily stabilized in the first quarter of 2018 as a result of an increased focus on high value customer segments and the expansion of its addressable market. However, overall market pricing in Brazil has been declining over time and continued to put pressure on Nextel Brazil's WCDMA service ARPU in the second quarter of 2018. In addition, a higher proportion of new subscribers have recently been selecting entry level plans, resulting in a decrease in WCDMA service ARPU during the second quarter of 2018. Although Nextel Brazil intends to promote the migration of certain of its customers to upgraded rate plans in an effort to stabilize its WCDMA service ARPU, the trends Nextel Brazil has recently experienced could continue to apply pressure to WCDMA service ARPU in the future.

During the last several years, Nextel Brazil has experienced iDEN subscriber losses and overall declines in its iDEN service revenue. In response to continued subscriber losses on its iDEN network, in September 2017, Nextel Brazil decided to wind down its iDEN operations with a target to cease all iDEN services by mid-2018. After migrating some customers to its WCDMA network, Nextel Brazil disconnected all of its remaining iDEN subscribers at the end of the second quarter of 2018 when the iDEN network was shut down. Although Nextel Brazil did not have any significant non-recurring cash expenditures in the second quarter of 2018 associated with its iDEN network shutdown, Nextel Brazil will continue to incur rent expenses related to iDEN transmitter and receiver sites subsequent to their shutdown until these leases end.

~~Results Overview.~~

Recently, Brazil experienced one of the worst economic recessions in its history, characterized by years of negative real wage growth, a net loss of jobs, higher unemployment and lower consumer confidence. These economic conditions and trends resulted in a decline in the amount of consumer disposable income that is available to purchase telecommunications services and negatively impacted Nextel Brazil's results of operations for recent prior years. Although recent data indicates that Brazil's economy is beginning to recover, the growth is slow with gradual improvements.

Nextel Brazil's WCDMA operating revenues were $152.1 million and $321.4 million in the three and six months ended June 30, 2018, respectively, and $184.7 million and $381.2 million in the three and six months ended June 30, 2017, respectively. Nextel Brazil's iDEN operating revenues were $3.9 million and $15.6 million in the three and six months ended June 30, 2018, respectively, and $40.5 million and $94.9 million in the three and six months ended June 30, 2017, respectively. Nextel Brazil's segment earnings increased $0.6 million, or 19%, on a reported basis, and 35% on a constant currency basis, during the three months ended June 30, 2018 compared to the same ~~period~~periods in 2017. Nextel Brazil's segment earnings decreased $15.4 million, or 100%, on a reported basis, and 99% on a constant currency basis, during the six months ended June 30, 2018 compared to the same period in 20172019 primarily as a result of ~~a decline~~significant cost reductions, which resulted in decreases in operating ~~revenues,~~expenses, partially offset by lower ~~operating expenses, as follows:~~


1.	~~Service and other revenues~~

Service and other revenues decreased $69.2 million, or 31%, and $136.8 million, or 30%, on a reported basis, and 22% and 23% on a constant currency basis, during the three and six months ended June 30, 2018 compared to the same periods in 2017revenues. Nextel Brazil's segment earnings improved as a result ~~of the decline~~of:

decreases in Nextel Brazil's ~~iDEN~~operating expenses of $20.1 million, or 13%, and $72.9 million, or 22%, respectively, partially due to decreases in transmitter and receiver site and switch costs, lower mobile termination rates, decreases in interconnect costs, lower customer contingencies related to fewer claims in 2019 and the recognition of $5.1 million and $16.3 million in tax credits, respectively; partially offset by

increases in bad debt expense; and

despite an increase in Nextel Brazil's subscriber base ~~as well as the decrease in service ARPU discussed above.~~

~~Nextel Brazil's WCDMA subscriber base grew~~ from ~~2.9~~3.121 million subscribers as of the end of the second quarter of ~~2017~~2018 to ~~3.1~~3.503 million subscribers as of the end of the second quarter of ~~2018. Despite the overall growth~~2019, decreases in ~~its WCDMA subscriber base,~~ Nextel Brazil's ~~WCDMA-based~~WCDMA service ~~and other~~ revenues ~~decreased 18% and 16% on a reported basis and 8% and 9% on a constant currency basis~~resulting from ~~the three and six months ended June 30, 2017 to the same periods in 2018 due to~~ a decrease in WCDMA service ARPU in local currency ~~WCDMA service ARPU.~~

~~Nextel Brazil's iDEN-based service and other revenues decreased $36.6 million, or 90%, and $76.4 million, or 83%,~~ from ~~the three and six months ended June 30, 2017 to the same periods in 2018, or 89% and 81% on a constant currency basis, as a result of the completion of the shutdown of Nextel Brazil's iDEN network.~~

~~Service and other revenues would have been $5.0 million and $9.8 million higher in the three and six months ended June 30, 2018 without the implementation of ASC 606.~~


2.	~~Handset and accessory net subsidy~~

During the three and six months ended June 30, 2018, approximately 94% of Nextel Brazil's new WCDMA gross subscribers represented subscribers who utilized their existing handsets rather than purchasing a new handset from Nextel Brazil compared to 91% and 92%, respectively, during the three and six months ended June 30, 2017, resulting in relatively low levels of handset and accessory net subsidy.


3.	~~Cost of service~~

Cost of service decreased $17.9 million, or 20%, and $31.7 million, or 17%, on a reported basis during the three and six months ended June 30, 2018 compared to the same periods in 2017. On a constant currency basis, Nextel Brazil's cost of service decreased 10% over the same periods mainly due to lower transmitter and receiver site rent and maintenance costs, a reduction in the volume of calls on Nextel Brazil's iDEN network and lower mobile termination rates. The reductions in transmitter and receiver site rent costs over both periods were primarily caused by a $6.3 million non-recurring benefit related to the recognition of certain tax credits55 Brazilian reais in the second quarter of ~~2018.~~


4.	~~Selling and marketing expenses~~

Selling and marketing expenses decreased $4.7 million, or 20%, and $10.7 million, or 21%, on a reported basis, and 10% and 14% on a constant currency basis, during the three and six months ended June 30, 2018 ~~compared~~ to ~~the same periods~~53 Brazilian reais in ~~2017. These decreases were partially offset by $3.0 million and $6.9 million increases in advertising-related expenses from the three and six months ended June 30, 2017 to the same periods in 2018.~~

The adoption of ASC 606 resulted in the capitalization of both direct and indirect commissions beginning on January 1, 2018 compared to the expensing of these types of commissions during the three and six months ended June 30, 2017. If we had not implemented ASC 606 on January 1, 2018, we would have recognized an additional $1.7 million in selling and marketing expenses during the six months ended June 30, 2018. Selling and marketing expenses for the second quarter of ~~2018 would have been relatively the same without the implementation of ASC 606.~~


5.	~~General and administrative expenses~~

~~General and administrative expenses decreased $41.1 million, or 42%, and $75.7 million, or 38%, on a reported basis, and 34% and 33% on a constant~~2019. Nextel Brazil's WCMDA service ARPU in local currency ~~basis,~~remained stable at 53 Brazilian reais during the ~~three and six months ended June 30, 2018 compared to the same periods in 2017 primarily resulting from $15.1 million and $23.0 million decreases in bad debt expense resulting from lower overall levels~~first half of involuntary subscriber turnover compared to prior years and improvements in collections, as well as $10.4 million and $18.5 million decreases in customer care-related expenses and lower payroll-related expenses. In addition, in connection with the implementation of ASC 606, we recognized revenue-based taxes on a net basis in 2018 rather than on a gross basis in 2017. If we had not implemented ASC 606 on January 1, 2018, we would have recognized an additional $4.0 million and $8.7 million, respectively, in general and administrative expenses during the three and six months ended June 30, 2018.2019.

~~c. Corporate~~

June 30, 2018 June 30, 2017
Change from
Previous Year
Dollars B(W) Change
(dollars in thousands)
Three Months Ended
Service and other revenues $ 1
$ 29
$ (28 ) (97 )%
General and administrative expenses (3,889 ) (8,470 ) 4,581
54 %
Segment losses $ (3,888 ) $ (8,441 ) $ 4,553
54 %

Six Months Ended
Service and other revenues $ 22
$ 59
$ (37 ) (63 )%
General and administrative expenses (8,172 ) (15,758 ) 7,586
48 %
Segment losses $ (8,150 ) $ (15,699 ) $ 7,549
48 %

Segment losses decreased $4.6 million, or 54%, and $7.5 million, or 48%, in the three and six months ended June 30, 2018 compared to the same periods in 2017 primarily due to reductions in payroll costs resulting from fewer general and administrative personnel following reductions in force, as well as lower rent expense and decreases in professional fees.

Liquidity and Capital Resources

As of June 30, ~~2018,~~2019, excluding assets and liabilities held for sale, we had working capital of ~~$132.4~~$156.8 million, ~~an $84.1~~a $31.8 million decrease compared to working capital of ~~$216.5~~$188.6 million as of December 31, ~~2017, due to cash used in our operations.~~2018. Our working capital included ~~$90.9~~$65.1 million in cash and cash ~~equivalents, of which $1.7 million was held by Nextel Brazil in Brazilian reais, and $29.7 million in short-term investments, which was also held in Brazilian reais.~~equivalents. As of June 30, ~~2018,~~2019, we also had ~~$110.1~~$103.4 million in cash held in escrow in connection with the sale of Nextel Mexico ~~which we classified as a component of prepaid expenses~~ and ~~other~~$35.6 million in ~~our condensed consolidated balance sheet.~~

cash and short-term investments held for sale. A substantial portion of our U.S. dollar-denominated cash and cash equivalents ~~and short-term investments~~ is held in bank ~~deposits,~~deposits.

In July 2018, the tax audits related to Nextel Mexico's main operating company's income tax returns for the years 2010 and ~~our~~2011 were finalized, and we filed amended tax returns. We settled the tax liabilities associated with these tax audits utilizing existing tax credits, with the exception of $4.0 million that we paid utilizing cash ~~cash equivalents and short-term investments~~ held in ~~Brazilian reais are typically maintained~~escrow. In March 2019, the tax audit related to Nextel Mexico's main operating company's income tax return for the year 2013 was finalized, and we filed an amended tax return. There was no cash outlay related to the finalization of the tax audit for the year 2013. The tax audit for the year 2013 represented $1.1 million of the total claims outstanding. In June 2019, the tax audit related to Nextel Mexico's main operating company's income tax return for the year 2012 was finalized, and we filed an amended tax return. We settled the tax liabilities associated with this tax audit utilizing $2.7 million in ~~money market funds that have daily liquidity. The values of our~~ cash ~~cash equivalents and short-term investments that are~~ held in ~~Brazilian reais will fluctuate~~escrow. As a result, of the $72.4 million in ~~U.S. dollars based on changes~~combined claims relating to the tax audits of the years 2010, 2011 and 2012, we have requested that New Cingular Wireless agree to the release of $65.8 million from escrow and expect to request the release of $1.1 million in the ~~exchange rate~~near future. New Cingular Wireless has disagreed with our interpretation of the ~~Brazilian real relative~~escrow and purchase agreements related to the ~~U.S. dollar.~~timing of release requirements for escrowed funds. On February 11, 2019, our subsidiary NIU Holdings initiated review of this matter by the United States Bankruptcy Court for the Southern District of New York, which we refer to as the Bankruptcy Court, that approved the transaction with New Cingular Wireless in connection with our emergence from Chapter 11 bankruptcy, and on March 25, 2019, we filed a claim against New Cingular Wireless to recoup the $68.3 million (now revised to $65.8 million) from escrow. This difference of interpretation of the relevant agreements has delayed and will continue to delay the release of the remaining amount of cash in escrow. See Note 3 to our condensed consolidated financial statements for additional information.

Cash Flows


	Six Months Ended						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2019			June 30, 2018

Cash, cash equivalents and restricted cash, beginning of period	$	305,778		$	422,232		$	250,739		$	305,778
Net cash used in operating activities	(86,981		)	(46,437		)	(46,639		)	(86,981		)
Net cash (used in) provided by investing activities	(4,972		)	3,614
Net cash used in financing activities	(8,802		)	(44,287		)
Net cash used in investing activities							(23,599		)	(4,972		)
Net cash provided by (used in) financing activities							(549		)	(8,802		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,740		)	185			(1,713		)	(1,740		)
Cash, cash equivalents and restricted cash, end of period	$	203,283		$	335,307		$	178,239		$	203,283

The following is a discussion of the primary sources and uses of cash in our operating, investing and financing activities.

We used ~~$87.0~~$46.6 million and ~~$46.4~~$87.0 million of cash in our operating activities during the six months ended June 30, 2019 and 2018, of which $39.2 million and ~~2017~~$80.9 million, respectively, was cash used by our discontinued operation primarily to fund operating losses and working capital and to make interest payments under Nextel Brazil's equipment financing and bank loans.

We used $23.6 million and $5.0 million of cash in our investing activities during the six months ended June 30, 2019 and 2018 entirely due to cash used by our discontinued operation. The $23.6 million of investing cash used in our discontinued operation during the six months ended June 30, 2019 was primarily due to $27.7 million in cash capital expenditures, partially offset by $11.2 million in net proceeds from sales of short-term investments. The $5.0 million of investing cash used in our discontinued operation during the six months ended June 30, 2018 was primarily due to $17.7 million in net purchases of short-term investments ~~in Brazil~~ and $24.3 million in cash capital expenditures, partially offset by a $39.7 million net return of deposits, which included the release of substantially all of the cash securing certain performance bonds relating to our obligations to deploy spectrum in Brazil. ~~Our investing activities provided us with $3.6~~

We used $0.5 million of cash in our financing activities during the six months ended June 30, ~~2017~~2019 primarily as a result of cash used by our discontinued operation mainly due to ~~$33.5 million~~repayments of ~~net cash returned to us from the release of performance bonds~~finance leases and ~~$12.5 million in net proceeds received from maturities of our short-term investments in Brazil,~~other borrowings, partially offset by ~~$37.0~~a $2.7 million ~~in cash~~ capital ~~expenditures.~~

contribution from AI Brazil Holdings. We used $8.8 million of cash in our financing activities during the ~~three~~six months ended June 30, 2018 entirely due to cash used by our discontinued operation. The $8.8 million of financing cash used in our discontinued operation was primarily due to $4.1 million of financing costs incurred in connection with the amendments to Nextel Brazil's equipment financing facility and bank loans and $1.0 million in principal payments under Nextel Brazil's equipment financing facility and bank loans. We used $44.3 million of cash in our financing activities during the six months ended June 30, 2017 primarily due to a $24.6 million semi-annual principal payment under Nextel Brazil's equipment financing facility and $17.5 million in principal payments under its bank loans.

Future Capital Needs and Resources

Capital Resources. Our ongoing capital resources depend on a variety of factors, including our existing cash, cash equivalents and investment balances, cash ~~flows generated by our operating activities, cash~~ that we recover from the amounts held in escrow to secure our indemnification obligations in connection with the sale of Nextel Mexico, external financial sources, other financing arrangements and ~~the availability of~~anticipated cash proceeds from the pending sale of ~~assets.~~Nextel Brazil.

~~Our~~Nextel Brazil's ability to generate sufficient net cash from ~~our~~ operating activities in the future is dependent upon, among other things:

the amount of revenue ~~we are~~Nextel Brazil is able to generate and collect from ~~our~~its subscribers, including ~~our~~its ability to increase the size of ~~our~~its subscriber base;

the amount of operating expenses required to provide ~~our~~Nextel Brazil's services;

the cost of acquiring and retaining subscribers, including the subsidies ~~we incur~~Nextel Brazil incurs to provide handsets to both ~~our~~its new and existing subscribers; and

changes in foreign currency exchange rates.

Capital Needs and Contractual Obligations. We currently anticipate that our future capital needs will principally consist of ~~funds~~amounts required ~~for:~~

~~operating~~to fund Nextel Brazil prior to the closing of the sale and will include general corporate expenditures, wind down and dissolution costs, and expenses ~~and capital expenditures relating~~related to ~~our existing network and the continued deployment of LTE in São Paulo;~~

~~payments in connection with previous spectrum purchases and ongoing spectrum license fees;~~

debt service ~~requirements;~~

~~obligations relating to~~requirements under our ~~tower financing arrangements and capital lease obligations;~~

~~cash taxes; and~~

~~other general corporate expenditures.~~

convertible senior notes. There were no material changes to our total contractual obligations during the three and six months ended June 30, ~~2018~~2019 as described in our annual report on Form 10-K for the year ended December 31, ~~2017.~~

~~Capital Expenditures.~~2018. Our capital expenditures, including capitalized interest, were $23.1 million and $18.4 million for the six months ended June 30, 2018 and 2017, respectively. We expect our capital expenditures for 2018 to be similar to the levels experienced in 2017. In addition, we expect to continue our efforts to conserve our cash resources while simultaneously meeting the capacity needs of our network. Our capital spending and related expenses are expected to be driven by several factors, including:

~~the amount we spend to enhance our WCDMA network and deploy LTE in certain areas;~~

~~the extent to which we expand the coverage of our network in new or existing market areas;~~

the number of additional transmitter and receiver sites we build in order to increase system capacity, maintain system quality and meet our regulatory requirements, as well as the costs associated with the installation of network infrastructure and switching equipment; and

~~the costs we incur in connection with non-network related information technology projects.~~

~~Our future capital expenditures may also be affected by future technology improvements, technology choices and our available capital.~~

Future Outlook. As of June 30, ~~2018,~~2019, our consolidated sources of funding included ~~$120.6~~$65.1 million in cash and ~~short-term investments, and $110.1~~cash equivalents, $103.4 million in cash held in escrow to secure our indemnification obligations in connection with the sale of Nextel ~~Mexico. Based on the recent challenging competitive environment~~Mexico and $35.6 million in ~~Brazil that we anticipate will continue, as well as the loss of revenues associated with the shutdown of our iDEN business, we~~cash and short-term investments held for sale.

We currently expect that ~~our cash flow from operations will continue to be negative for~~ the ~~remainder~~pending sale of ~~2018.~~

~~In October 2017,~~ Nextel Brazil entered into an amended and restated equipment financing facility and sixth amendments to its two bank loans with Brazilian lenders. In January 2018, we received the final approval from the China Export and Credit Insurance Corporation, or Sinosure, for the amended and restated equipment financing facility, at which point all of these amendments became effective. As a result of the amendments, the material financing terms in all three facilities were aligned. Among other changes, these amendments provide for the deferral of substantially all principal payments for the first 48 months from the date of effectiveness, an extension of the loan maturity dates to 98 months from the date of effectiveness, and a holiday for certain financial covenant compliance, including the net debt financial covenant, until June 30, 2020.

~~As a result of these amendments, our liquidity forecast has substantially improved, and based on our business plan, we believe our current sources of funding~~ described above will ~~provide us~~close in the fourth quarter of 2019. Upon closing, we will begin the dissolution process with the objective of distributing our available cash to stockholders as quickly as possible. If the closing of the sale of Nextel Brazil occurs by the first quarter of 2020, we believe we have sufficient sources of liquidity to fund our ~~business through 2019. Our business plan~~business. However, if the pending sale of Nextel Brazil is ~~based on a number~~not ultimately completed or if the closing of ~~assumptions, including levels of subscriber turnover that are similar to those we experienced in~~the sale is delayed beyond the first ~~half~~quarter of 2018 and a decrease in certain costs compared to 2017. In addition, our business plan currently assumes that we will recover substantially all of the amount held in escrow in a timely manner. During July 2018, the tax audits related to Nextel Mexico's income tax returns for the years 2010 and 2011 were finalized, and we filed amended tax returns. As a result, we have requested that New Cingular Wireless agree to the immediate release of $68.3 million from escrow. New Cingular Wireless has disagreed with our interpretation of the escrow and purchase agreements related to the timing of release requirements for escrowed funds. This difference of interpretation could result in a delay of the release of the remaining amount of cash in escrow.

If our actual results of operations differ from our business plan and/or the ultimate amount recovered from our cash held in escrow does not meet our current forecasted amount or is delayed for a significant period of time, our business could be negatively impacted, and2020, we would need to ~~reevaluate~~alter our business plan to significantly reduce spending or obtain additional ~~funding, sell~~funding. To the extent the sale of Nextel Brazil does not close or if we do not recover sufficient cash from escrow prior to the end of the first quarter of 2020, substantial doubt exists about our ability to continue as a going concern.

In connection with the completion of the sale of Nextel Brazil, we will receive our pro rata share of the final net proceeds, subject to certain ~~assets and/or significantly reduce~~adjustments at closing, including reimbursement for capital expenditures and working capital investments made from March 1, 2019 to closing, after deducting a $2.0 million preferred share return due to AI Brazil Holdings and deducting certain transaction expenses and increases in accrued tax contingencies, if any. In addition, $30.0 million of our ~~planned capital~~portion of the net proceeds will be placed into an 18-month escrow account to secure NII Holdings' indemnification obligations under the purchase agreement. We expect we will incur significant cash expenditures related to the completion of the sale and ~~operational spending~~the dissolution of our remaining business subsequent to further preserve our liquidity. As a result, we are actively exploring options to obtain additional funding in order to, among other things, reduce our liquidity risk. Also, while we are focused on effectively managing our business, we are considering potential strategic alternatives with third parties involving Nextel Brazil. There can be no assurances that any such transaction will materialize or result in value to our stockholders at or above our current or future trading market value.the transaction.

In making the assessment of our funding needs and the adequacy of our current sources of funding, we have considered:

cash and cash equivalents on hand and short-term investments available to fund our operations;

restricted cash currently held in escrow to secure our indemnification obligations in connection with the sale of Nextel Mexico;

expected cash flows ~~from~~related to our ~~operations~~discontinued operation in ~~Brazil;~~

~~the timing of spectrum payments, including ongoing fees for spectrum use;~~

Brazil and expected cash expenditures at our ~~anticipated level of capital expenditures;~~corporate headquarters;

our scheduled debt service obligations; and

our other contractual ~~obligations; and~~

~~cash income and other taxes.~~obligations.

In addition to the factors described above, the anticipated cash needs of our business, as well as the conclusions presented herein regarding our liquidity needs, could change significantly:

3223

based on the continued development of our business plans and strategy;

if currency values in Brazil depreciate or appreciate relative to the U.S. dollar in a manner that is more significant than we currently expect and assume as part of our plans;

if economic conditions in Brazil do not improve or worsen;

if we are subject to litigation involving tax and other matters requiring material judicial deposits of cash that will not be released until the pending matter is resolved;

if competitive practices in the mobile wireless telecommunications industry in Brazil 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 business, such as contingencies.

Effect of New and Recently Adopted Accounting Standards

See Note 1 to our condensed consolidated financial statements for disclosures concerning new ~~accounting standards~~ and recently adopted accounting standards.

Forward-Looking and Cautionary Statements

This quarterly report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Statements regarding expectations, including forecasts regarding operating results, performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forward-looking statements. These forward-looking statements are generally identified by such words or phrases as “we expect,” “we believe,” “would be,” “will allow,” “expects to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions. These forward-looking statements involve risk and uncertainty, and a variety of facts could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. We do not have a policy of updating or revising forward-looking statements except as otherwise required by law.

While we provide forward-looking statements to assist in the understanding of our anticipated future financial performance, we caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date that we make them. Forward-looking statements are based on current expectations and assumptions that are subject to significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Except as otherwise required by law, we undertake no obligation to publicly release any updates to forward-looking statements to reflect events after the date of this quarterly report on Form 10-Q, including unforeseen events.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and results of our business include, but are not limited to:

our ability to attract and retain subscribers;

our ability to satisfy the requirements of our debt obligations;

our ability to access sufficient debt or equity capital to meet any future operating and financial needs;

our ability to meet established operating goals and generate cash flow;

the availability of other funding sources, including the timely resolution of claims and receipt of proceeds from the sale of Nextel Mexico held in escrow;

risks associated with our partnership with ~~ice group;~~AI Brazil Holdings;

general economic conditions in Brazil, including political instability, which may affect Brazil's economy and the regulatory environment there;

the impact of foreign currency exchange rate volatility in the local currency in Brazil when compared to the U.S. dollar and the impact of related currency depreciation in Brazil;

our having 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 digital two-way mobile data or internet connectivity services in Brazil;~~thereon;

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;

risks related to the operation and expansion of our network in Brazil, including the potential need for additional funding to support enhanced coverage and capacity, and the risk that we will not attract enough subscribers to support the related costs of deploying or operating the network;

our ability to successfully scale our billing, collection, customer care and similar back-office operations to keep pace with customer growth as necessary, increased system usage rates and growth or to successfully deploy new systems that support those functions;

future legislation or regulatory actions relating to our services, other wireless communications services or telecommunications generally and the costs and/or potential customer impacts of compliance with regulatory mandates;

the ability to achieve and maintain market penetration and average subscriber revenue levels sufficient to provide financial viability to our 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;

potential cash outlays related to certain reasonably possible losses related to matters for which Nextel Brazil has not accrued liabilities, some of which would be covered by judicial deposits of cash;

a requirement to provide material judicial deposits of cash that will not be released until the pending matter is resolved in order for litigation involving tax and other matters to be heard by the courts in Brazil;

equipment failure, natural disasters, terrorist acts or other breaches of network or information technology security;

the possibility that our significant indebtedness, or the incurrence of additional indebtedness, could affect our financial condition; and

other risks and uncertainties described in Part I, Item 1A. "Risk Factors," in our annual report on Form 10-K for the year ended December 31, ~~2017~~2018 and, from time to time, in our other reports filed with the SEC.

34These forward looking statements also include assumptions about the pending sale of Nextel Brazil and plan of dissolution, including the expected completion, timing and effects of that transaction and dissolution, as well as potential distributions to our stockholders upon our liquidation and dissolution. Risks and uncertainties related to the pending sale of Nextel Brazil and plan of dissolution include, among other things:

the satisfaction of the conditions to consummate the sale of Nextel Brazil, including regulatory approvals;

the occurrence of any event, change or other circumstance that could give rise to the termination of the purchase agreement;

the amount of the costs, fees, expenses and charges related to the sale of Nextel Brazil may be higher than we expect;

the effect the pending sale of Nextel Brazil will have on our management team, customer relationships, operating results and business generally, including the ability to retain key employees;

the cost and outcome of any legal proceedings that may be initiated against us and others following the announcement of the pending sale of Nextel Brazil; and

the timing and amount of cash and other assets available for distribution to our stockholders upon our ultimate windup and dissolution.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

During the three and six months ended June 30, ~~2018,~~2019, there were no material changes to our market risk policies or our market ~~risk~~ sensitive instruments and positions as described in our annual report on Form 10-K for the year ended December 31, ~~2017.~~2018.


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission, or the SEC, and that such information is accumulated and communicated to the Company's management, including our principal executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

As of June 30, ~~2018,~~2019, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out under the supervision and with the participation of our management teams in the United States and Brazil, including our principal executive officer and chief financial officer. Based on such evaluation, our principal executive officer and chief financial officer concluded that the design and operation of our disclosure controls and procedures were not effective due to a material weakness in the Company's internal control over financial reporting. This material weakness is fully described in "Item 9A. Controls and Procedures" of our annual report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Our remediation efforts related to this material weakness are ongoing. ~~During~~As a result of the ~~second quarter~~announcement of ~~2018, we hired several experienced accounting resources in~~the pending sale of Nextel Brazil, we have not been able to ~~assist with~~hire the ~~identification and evaluation of certain accounting transactions.~~necessary qualified resources to effectively remediate Nextel Brazil's material weakness. In addition, ~~although full automation~~we have experienced employee turnover and are delaying certain investments in our remediation efforts, which will likely delay the remediation of lease accounting is not expected to be completed until 2019, we strengthened our controls over lease accounting. Management remains committed to dedicating the resources necessary to ensure sustained effective control design and operation, and will continue to work to ensure we maintain sufficient experienced resources, automate processes such as lease accounting, and monitor risks related to new accounting requirements or changes that could place an unmanageable strain on our resources.Nextel Brazil's material weakness beyond 2019.

Changes in Internal Control over Financial Reporting

We have implemented certain controls related to our adoption of ASC 842 on January 1, 2019 and due to the aforementioned impacts of the pending sale of Nextel Brazil, the implementation of other controls related to this adoption has not yet been completed. Other than asthis change and those described above, there have been no changes in the Company's internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

3526

PART II - OTHER INFORMATION


Item 1.	Legal Proceedings

Securities Litigation. On July 8, 2019, a purported stockholder class action was filed against the Company and the Company's directors in the Court of Chancery of the State of Delaware by Matis Nayman. The lawsuit is captioned Matis Nayman v. Kevin L. Beebe, James V. Continenza, Howard S. Hoffmann, Ricardo Knoepfelmacher, Christopher T. Rogers, Robert A. Schriesheim, Steven M. Shindler, and NII Holdings, Inc., C.A. No. 2019-0525-JTL. The complaint alleges, among other things, that the Company and its directors breached their fiduciary duties by failing to take steps to maximize the Company's value to its public stockholders and failing to disclose certain information in the proxy statement issued in connection with the Company's purchase agreement with América Móvil, S.A.B. de C.V. and AI Brazil Holdings B.V. and the Company's planned liquidation and dissolution. The relief the plaintiff seeks includes enjoining the sale of Nextel Brazil and the dissolution of NII Holdings, and the recovery of unspecified damages. The Company and the named individuals intend to vigorously defend themselves in this matter.

In addition, we are subject to other claims and legal actions that may arise in the ordinary course of business. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows. ~~For information on our various loss contingencies, see Note 8 to our condensed consolidated financial statements above.~~


~~Item 1A.~~	~~Risk Factors~~

~~We own Nextel Brazil through a joint venture, and our interests and the interests of our stockholders may not align with the interests of our joint venture partner.~~

On June 5, 2017, we and ice group entered into an investment agreement to partner in the ownership of Nextel Brazil. On July 20, 2017, ice group completed its initial investment of $50.0 million in Nextel Holdings, which indirectly owns Nextel Brazil, in exchange for 30% ownership in Nextel Holdings. The investment agreement also provided ice group with an option, exercisable on or before November 15, 2017, to invest an additional $150.0 million in Nextel Holdings for an additional 30% ownership. ice group did not exercise its option, and on February 27, 2018, we terminated the investment agreement with ice group, which remains a minority investor in Nextel Brazil. The shareholders agreement remains in effect, and we intend to continue to meet all of our obligations in the shareholders agreement.

On May 31, 2018, ice group publicly announced its intention, subject to certain conditions, to sell its 30% ownership interest in Nextel Holdings to AI Media Holdings, or Access, an affiliate of ice group, in connection with the divestiture of its international operations.

ice group currently owns, and if and when its sale to Access is complete, Access will own, 30% of Nextel Holdings, which indirectly owns Nextel Brazil. Pursuant to our shareholders agreement with ice group, the Board of Managers of Nextel Holdings is comprised of five members, with three members appointed by us and, after regulatory approval and as long as ice group maintains at least a 30% stake in Nextel Holdings, two nominees and one observer from ice group. In addition, the shareholders agreement with ice group provides for certain minority protective rights relating to certain significant actions of Nextel Holdings and Nextel Brazil. Consequently, we and our stockholders have less influence on the management and policies of Nextel Brazil after ice group's initial investment than we previously had. ice group may at any time have economic or business interests or goals which are, or which become, inconsistent with the business interests or goals of us and our stockholders, and could attempt to influence or take actions that are contrary to our requests, policies or objectives.

~~In addition, our partnership with ice group carries additional risks, including the possibility that:~~

~~we may incur liabilities as a result of an action taken by ice group;~~

disputes between us and ice group could arise which could distract management from focusing time and efforts on our business, result in an impasse or ultimately in litigation or arbitration or otherwise have a negative influence on our partnership and our ability to successfully operate Nextel Brazil; and

the transfer restrictions, rights of first refusal, and “tag along” and “drag along” rights contained in our agreements with ice group could restrict our or ice group's ability to exit the joint venture if desired or discourage a third party transaction that might be in the best interests of stockholders.

If and when ice group's publicly announced sale of its interest in Nextel Holdings to Access is complete, Access will have certain rights and obligations, including those described above, with respect to the management and governance of Nextel Holdings. Access may have different economic or business interests than ice group, which could exacerbate any of the foregoing risks.

~~Any of the foregoing could have a material adverse effect on our stock price, business and cash flows, financial condition and results of operations.~~


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities. The following table presents information related to repurchases of our common stock during the three months ended June 30, ~~2018:~~2019:

Period Total Number of Shares Purchased Average Price Per Share Total Number of Shares Purchased as Part of Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2018 — April 30, 2018
681
⁽¹⁾
$ 2.04
681

May 1, 2018 — May 31, 2018
153
⁽¹⁾
2.87
153

June 1, 2018 — June 30, 2018
21,577
⁽¹⁾
3.39
21,577

Total 22,411
⁽¹⁾
3.34
22,411
$ —



Period	Total Number of Shares Purchased		Average Price Per Share		Total Number of Shares Purchased as Part of Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2019 — April 30, 2019	—	⁽¹⁾	$	—	—
May 1, 2019 — May 31, 2019	35,579	⁽¹⁾	1.94		35,579
June 1, 2019 — June 30, 2019	—	⁽¹⁾	—		—
Total	35,579	⁽¹⁾			35,579	$	—

(1) Pursuant to a general authorization, which was not publicly announced, whereby we are authorized to repurchase shares of our common stock to satisfy employee withholding tax obligations related to stock-based compensation.


~~Item 5.~~	~~Other Information~~

Our Board of Directors has approved a grant of restricted stock units valued at $7.9 million in total for members of the Board of Directors. The grant will be effective after this quarterly report on Form 10-Q is filed and other timing criteria is met. The restricted stock units will vest ratably over three years from the date of the grant and may be settled in cash or common stock, at our election. The Form of Restricted Stock Unit Agreement (Directors) has been filed as Exhibit 10.3 to this quarterly report on Form 10-Q.

3727

Item 6. Exhibits



Exhibit Number	Exhibit Description	Form	Exhibit	Incorporated by Reference Filing Date	Filed Herewith
~~10.1(+)~~	~~NII Holdings, Inc. Form of Restricted Stock Unit Agreement (Non-U.S. Employees - Brazil).~~				*
~~10.2(+)~~	~~NII Holdings, Inc. Form of Restricted Stock Unit Agreement (U.S. Employees).~~				*
~~10.3(+)~~	~~NII Holdings, Inc. Form of Restricted Stock Unit Agreement (Directors).~~				*
~~10.4(+)~~	~~Letter Agreement with Steven Shindler, dated July 30, 2018.~~	~~8-K~~	~~10.1~~	~~07/31/2018~~
31.1	Statement of Principal Executive Officer Pursuant to Rule 13a-14(a).				*
31.2	Statement of Chief Financial Officer Pursuant to Rule 13a-14(a).				*
32.1	Statement of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.				*
32.2	Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.				*
101	The following materials from the NII Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2018~~2019 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Deficit, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.				*


+	~~Indicates Management Compensatory Plan, Contract or Arrangement.~~

3828

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



By:		/s/ TIMOTHY M. MULIERI

		Timothy M. Mulieri
		Vice President, Corporate Controller
		(on behalf of the registrant and as Principal Accounting Officer)

Date: August ~~7, 2018~~6, 2019

3929

NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Unaudited

	Six Months Ended June 30, 2018			Six Months Ended June 30, 2017

Cash flows from operating activities:
Net loss	$	(142,161	)	$	(177,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (income) from discontinued operations	2,783			(2,659		)
Amortization of debt discounts (premiums) and financing costs	332			(1,796		)
Depreciation and amortization	16,334			22,360
Provision for losses on accounts receivable	20,140			43,164
Foreign currency transaction losses, net	47,854			1,977
Impairment charges and losses on disposals of fixed assets	510			67,038
Share-based payment expense	1,610			2,781
Other, net	1,595			1,000
Change in assets and liabilities:
Accounts receivable	(24,564		)	(29,714		)
Prepaid value-added taxes	(842		)	13,889
Handset and accessory inventory	(1,042		)	4,139
Prepaid expenses and other	(23,187		)	(1,592		)
Other long-term assets	(12,320		)	(16,902		)
Accrued value-added taxes	11,630			(210		)
Other long-term liabilities	23,334			52,978
Accounts payable, accrued expenses, deferred revenues and other	(8,987		)	(25,407		)
Net cash used in operating activities	(86,981		)	(46,437		)
Cash flows from investing activities:
Capital expenditures	(24,277		)	(36,991		)
Purchases of investments	(517,896		)	(454,223		)
Proceeds from sales of investments	500,237			466,680
Change in deposits, net	39,665			30,265
Other, net	(2,729		)	(1,985		)
Total investing cash (used in) provided by continuing operations	(5,000		)	3,746
Total investing cash provided by (used in) discontinued operations	28			(132		)
Net cash (used in) provided by investing activities	(4,972		)	3,614
Cash flows from financing activities:
Repayments under equipment financing facility and local bank loans	(1,009		)	(42,168		)
Repayments under capital leases and other	(3,663		)	(2,119		)
Payments for costs related to debt amendments	(4,130		)	—
Net cash used in financing activities	(8,802		)	(44,287		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,740		)	185
Net decrease in cash, cash equivalents and restricted cash	(102,495		)	(86,925		)
Cash, cash equivalents and restricted cash, beginning of period	305,778			422,232
Cash, cash equivalents and restricted cash, end of period	$	203,283		$	335,307



	Three Months Ended June 30, 2018
	As Reported With ASC 606			Without ASC 606			Impact
Operating revenues
Service and other revenues	$	150,809		$	155,762		$	(4,953	)
Handset and accessory revenues	5,201			3,177			2,024
	156,010			158,939			(2,929		)
Operating expenses
Cost of service (exclusive of depreciation and amortization included below)	69,939			69,939			—
Cost of handsets and accessories	7,015			7,015			—
Selling, general and administrative	79,269			83,133			(3,864		)
Impairment, restructuring and other charges, net	11,722			11,722			—
Depreciation	4,463			4,463			—
Amortization	3,447			3,447			—
	175,855			179,719			(3,864		)
Operating loss	$	(19,845	)	$	(20,780	)	$	935
Net loss	$	(98,841	)	$	(99,776	)	$	935



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Brazil	$	11,691	$	53,938	$	9,545	$	125,631
Corporate	31		297		352		543
Total impairment, restructuring and other charges, net	$	11,722	$	54,235	$	9,897	$	126,174



Balance, December 31, 2017	$	109,771
Restructuring charges, net	9,413
Cash payments and other	(18,611		)
Foreign currency translation adjustment	(13,495		)
Balance, June 30, 2018	$	87,078



	June 30, 2018		December 31, 2017
	(in thousands)
Cash and cash equivalents	$	90,893	$	193,888
Cash in escrow (included in prepaid expenses and other)	110,052		110,024
Other (included in other assets)	2,338		1,866
Cash, cash equivalents and restricted cash	$	203,283	$	305,778



		June 30, 2018								December 31, 2017
	Average Useful Life (Years)	Gross Carrying Value		Accumulated Amortization			��	Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
		(in thousands)
Amortizable intangible assets:
Licenses	26	$	172,907	$	(7,856	)		$	165,051	$	189,920	$	(5,426	)	$	184,494
Customer relationships	4	13,126		(7,292		)		5,834		15,300		(5,100		)	10,200
		$	186,033	$	(15,148	)		$	170,885	$	205,220	$	(10,526	)	$	194,694



Years	Estimated Amortization Expense
2018	$	13,461
2019	9,929
2020	7,012
2021	7,012
2022	7,012



	June 30, 2018				December 31, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in thousands)
Brazil equipment financing	$	238,228	$	240,100	$	242,883	$	237,958
Brazil bank loans and other	170,831		115,492		200,567		144,312
Brazil spectrum financing	104,578		117,082		122,044		128,225
	$	513,637	$	472,674	$	565,494	$	510,495



	Nextel Brazil		Corporate			Consolidated
	(in thousands)
Three Months Ended June 30, 2018
Operating revenues	$	156,009	$	1		$	156,010
Segment earnings (losses)	$	3,675	$	(3,888	)	$	(213	)
Less:
Impairment, restructuring and other charges, net						(11,722		)
Depreciation and amortization						(7,910		)
Foreign currency transaction losses, net						(46,666		)
Interest expense and other, net						(29,668		)
Loss from continuing operations before income tax benefit						$	(96,179	)
Capital expenditures	$	14,814	$	—		$	14,814

Three Months Ended June 30, 2017
Operating revenues	$	225,105	$	29		$	225,134
Segment earnings (losses)	$	3,080	$	(8,441	)	$	(5,361	)
Less:
Impairment, restructuring and other charges, net						(54,235		)
Depreciation and amortization						(9,335		)
Foreign currency transaction losses, net						(13,352		)
Interest expense and other, net						(10,962		)
Loss from continuing operations before income tax benefit						$	(93,245	)
Capital expenditures	$	8,988	$	—		$	8,988

Six Months Ended June 30, 2018
Operating revenues	$	337,001	$	22		$	337,023
Segment earnings (losses)	$	75	$	(8,150	)	$	(8,075	)
Less:
Impairment, restructuring and other charges, net						(9,897		)
Depreciation and amortization						(16,334		)
Foreign currency transaction losses, net						(47,854		)
Interest expense and other, net						(57,218		)
Loss from continuing operations before income tax benefit						$	(139,378	)
Capital expenditures	$	23,105	$	—		$	23,105

Six Months Ended June 30, 2017
Operating revenues	$	476,030	$	59		$	476,089
Segment earnings (losses)	$	15,453	$	(15,699	)	$	(246	)
Less:
Impairment, restructuring and other charges, net						(126,174		)
Depreciation and amortization						(22,360		)
Foreign currency transaction losses, net						(1,977		)
Interest expense and other, net						(35,163		)
Loss from continuing operations before income tax benefit						$	(185,920	)
Capital expenditures	$	18,439	$	—		$	18,439

June 30, 2018
Identifiable assets	$	827,023	$	138,975		$	965,998
December 31, 2017
Identifiable assets	$	957,495	$	147,603		$	1,105,098



	Three Months Ended June 30,		Actual Percent Change From Prior Year
	2018	2017	Actual Percent Change From Prior Year
Brazilian real	3.63	3.21	(13	)%



	2017				2018
	March	June	September	December	March	June
Brazilian real	3.13	3.31	3.17	3.31	3.32	3.86



	June 30, 2018			June 30, 2017			Actual Change from Previous Year					Constant Currency Change from Previous Year
	June 30, 2018			June 30, 2017			Dollars			B(W) Change		B(W) Change
	(dollars in thousands)
Three Months Ended
Brazil segment earnings	3,675			3,080			595			19	%	35	%
Corporate segment losses	(3,888		)	(8,441		)	4,553			54	%	54	%
Consolidated segment losses	(213		)	(5,361		)	5,148			96	%	96	%
Impairment, restructuring and other charges, net	(11,722		)	(54,235		)	42,513			78	%	76	%
Depreciation and amortization	(7,910		)	(9,335		)	1,425			15	%	4	%
Operating loss	(19,845		)	(68,931		)	49,086			71	%	70	%
Interest expense, net	(28,010		)	(26,405		)	(1,605		)	(6	)%	(31	)%
Interest income	1,593			7,808			(6,215		)	(80	)%	(77	)%
Foreign currency transaction losses, net	(46,666		)	(13,352		)	(33,314		)	(250	)%	(296	)%
Other (expense) income, net	(3,251		)	7,635			(10,886		)	(143	)%	(148	)%
Loss from continuing operations before income tax benefit	(96,179		)	(93,245		)	(2,934		)	(3	)%	(12	)%
Income tax benefit	—			5,778			(5,778		)	(100	)%	(100	)%
Net loss from continuing operations	(96,179		)	(87,467		)	(8,712		)	(10	)%	(20	)%
(Loss) income from discontinued operations, net of income taxes	(2,662		)	2,697			(5,359		)	(199	)%	(199	)%
Net loss	(98,841		)	(84,770		)	(14,071		)	(17	)%	(27	)%
Net loss attributable to noncontrolling interest	(27,709		)	—			(27,709		)	NM		NM
Net loss attributable to NII Holdings	$	(71,132	)	$	(84,770	)	$	13,638		16	%	8	%

Six Months Ended
Brazil segment earnings	75			15,453			(15,378		)	(100	)%	(99	)%
Corporate segment losses	(8,150		)	(15,699		)	7,549			48	%	48	%
Consolidated segment losses	(8,075		)	(246		)	(7,829		)	NM		NM
Impairment, restructuring and other charges, net	(9,897		)	(126,174		)	116,277			92	%	91	%
Depreciation and amortization	(16,334		)	(22,360		)	6,026			27	%	21	%
Operating loss	(34,306		)	(148,780		)	114,474			77	%	76	%
Interest expense, net	(54,616		)	(57,967		)	3,351			6	%	(8	)%
Interest income	6,979			16,944			(9,965		)	(59	)%	(55	)%
Foreign currency transaction losses, net	(47,854		)	(1,977		)	(45,877		)	NM		NM
Other (expense) income, net	(9,581		)	5,860			(15,441		)	(263	)%	(276	)%
Loss from continuing operations before income tax benefit	(139,378		)	(185,920		)	46,542			25	%	19	%
Income tax benefit	—			5,778			(5,778		)	(100	)%	(100	)%
Net loss from continuing operations	(139,378		)	(180,142		)	40,764			23	%	17	%
(Loss) income from discontinued operations, net of income taxes	(2,783		)	2,659			(5,442		)	(205	)%	(205	)%
Net loss	(142,161		)	(177,483		)	35,322			20	%	14	%
Net loss attributable to noncontrolling interest	(39,315		)	—			(39,315		)	NM		NM
Net loss attributable to NII Holdings	$	(102,846	)	$	(177,483	)	$	74,637		42	%	38	%



	June 30, 2018			% of Nextel Brazil’s Operating Revenues		June 30, 2017			% of Nextel Brazil’s Operating Revenues		Actual Change from Previous Year					Constant Currency Change from Previous Year
	June 30, 2018			% of Nextel Brazil’s Operating Revenues		June 30, 2017			% of Nextel Brazil’s Operating Revenues		Dollars			B(W) Change		B(W) Change
	(dollars in thousands)
Three Months Ended
Service and other revenues	$	150,808		97	%	$	220,050		98	%	$	(69,242	)	(31	)%	(22	)%
Handset and accessory revenues	5,201			3	%	5,055			2	%	146			3	%	16	%
Cost of handsets and accessories	(7,015		)	(4	)%	(13,041		)	(6	)%	6,026			46	%	39	%
Handset and accessory net subsidy	(1,814		)	(1	)%	(7,986		)	(4	)%	6,172			77	%	74	%
Cost of service (exclusive of depreciation and amortization)	(69,939		)	(45	)%	(87,842		)	(39	)%	17,903			20	%	10	%
Selling and marketing expenses	(18,679		)	(12	)%	(23,384		)	(10	)%	4,705			20	%	10	%
General and administrative expenses	(56,701		)	(37	)%	(97,758		)	(44	)%	41,057			42	%	34	%
Segment earnings	$	3,675		2	%	$	3,080		1	%	$	595		19	%	35	%

Six Months Ended
Service and other revenues	$	326,759		97	%	$	463,513		97	%	$	(136,754	)	(30	)%	(23	)%
Handset and accessory revenues	10,242			3	%	12,517			3	%	(2,275		)	(18	)%	(11	)%
Cost of handsets and accessories	(16,080		)	(5	)%	(21,707		)	(5	)%	5,627			26	%	20	%
Handset and accessory net subsidy	(5,838		)	(2	)%	(9,190		)	(2	)%	3,352			36	%	31	%
Cost of service (exclusive of depreciation and amortization)	(158,863		)	(47	)%	(190,550		)	(40	)%	31,687			17	%	10	%
Selling and marketing expenses	(39,910		)	(12	)%	(50,568		)	(11	)%	10,658			21	%	14	%
General and administrative expenses	(122,073		)	(36	)%	(197,752		)	(41	)%	75,679			38	%	33	%
Segment earnings	$	75		—		$	15,453		3	%	$	(15,378	)	(100	)%	(99	)%



	Three Months Ended
	March 31, 2017		June 30, 2017		September 30, 2017		December 31, 2017		March 31, 2018		June 30, 2018
	(subscribers in thousands)
iDEN subscriber units	822.7		686.3		563.3		449.7		349.6		230.4
WCDMA subscriber units	2,815.2		2,874.6		2,864.8		2,845.8		2,896.1		3,023.8
Total subscriber units in commercial service — beginning of period	3,637.9		3,560.9		3,428.1		3,295.5		3,245.7		3,254.2

iDEN net subscriber losses	(115.4	)	(103.5	)	(100.3	)	(76.6	)	(84.4	)	(198.9	)
WCDMA net subscriber additions (losses)	38.4		(29.3	)	(32.3	)	26.8		92.9		65.7
Total net subscriber (losses) additions	(77.0	)	(132.8	)	(132.6	)	(49.8	)	8.5		(133.2	)

Migrations from iDEN to WCDMA	21.0		19.5		13.3		23.5		34.8		31.5

iDEN subscriber units	686.3		563.3		449.7		349.6		230.4		—
WCDMA subscriber units	2,874.6		2,864.8		2,845.8		2,896.1		3,023.8		3,121.0
Total subscriber units in commercial service — end of period	3,560.9		3,428.1		3,295.5		3,245.7		3,254.2		3,121.0

Total subscriber turnover	3.71	%	3.95	%	4.47	%	3.83	%	3.02	%	4.68	%
iDEN subscriber turnover	5.52	%	5.88	%	6.89	%	6.36	%	9.67	%	NM
WCDMA subscriber turnover	3.23	%	3.53	%	4.04	%	3.47	%	2.37	%	2.75	%



	June 30, 2018			June 30, 2017			Change from Previous Year
	June 30, 2018			June 30, 2017			Dollars			B(W) Change
	(dollars in thousands)
Three Months Ended
Service and other revenues	$	1		$	29		$	(28	)	(97	)%
General and administrative expenses	(3,889		)	(8,470		)	4,581			54	%
Segment losses	$	(3,888	)	$	(8,441	)	$	4,553		54	%

Six Months Ended
Service and other revenues	$	22		$	59		$	(37	)	(63	)%
General and administrative expenses	(8,172		)	(15,758		)	7,586			48	%
Segment losses	$	(8,150	)	$	(15,699	)	$	7,549		48	%