June 28, 2018 / 6:57 PM / 19 days ago

UPDATE 1-NII Holdings puts Nextel Brazil up for sale -sources

(Adds share price moves)

By Gram Slattery and Tatiana Bautzer

SAO PAULO, June 28 (Reuters) - Mobile service company NII Holdings Inc has hired Rothschild & Co to sell control of its Nextel operations in Brazil, two people with knowledge of the matter said, opening the door to consolidation in the country's crowded telecommunications sector.

Rothschild was hired recently to organize the sale process of NII's 70 percent stake in Nextel Brazil and has yet to set dates for delivery of bids, according to one of the sources, who asked for anonymity because talks are still private.

Potential acquirers include Telefonica Brasil SA, the country's largest telecom company, and Access Industries, which already has a 30 percent stake in Nextel Brazil, the sources added.

If Access does not acquire NII's 70 percent stake, it may be 'dragged along' to sell its 30 percent stake if the acquirer wants the entirety of Nextel Brazil.

U.S.-listed shares in NII popped 19 percent on the news that it put its Nextel stake on the block, extending the day's gains to more than 20 percent. Shares in Telefonica Brasil jumped a more modest 0.4 percent.

NII Holdings, Access Industries and Rothschild & Co did not respond to requests for comment. Telefonica Brasil declined to comment.

A year ago, NII had agreed to sell a controlling stake in its Brazilian operations to Norway-based Ice Group Scandinavia Holdings AS. Ice Group injected $50 million into Nextel Brazil for a 30 percent stake and had an option to inject an additional $150 million to raise its stake to 60 percent.

However, Ice Group lost interest after the first phase of the transaction and let the option to acquire control of Nextel Brazil expire.

The Norwegian group said this month that it had agreed to sell the 30 percent stake to its controlling shareholder, Access Industries, founded by Ukrainian-born British-American investor Leonard Blavatnik.

Nextel operations in Brazil have 3 million subscribers, but earnings before interest, tax, depreciation and amortization (EBITDA) is close to zero, the first source said.

NII has less urgency to sell now than a year ago, the source added, after concluding a restructuring of 2.3 billion reais ($596 million) in debt owed to state-controlled lenders Banco do Brasil SA, Caixa Economica Federal and China Development Bank, cutting its short-term cash needs.

Banco do Brasil, Caixa Economica Federal and China Development Bank did not immediately respond to requests for comment.

Nextel Brazil is NII's last operation in Latin America after it exited operations in Peru, Chile and Mexico, where its unit was sold for $1.9 billion to AT&T Inc three years ago.

The Brazilian carrier could attract the interest of local rivals interested in its spectrum rights, which could be used to improve service and reduce investments in relatively wealthy states such as Sao Paulo and Rio de Janeiro, the sources said.

One significant roadblock to such consolidation, however, is a legal spectrum cap, which several major telecom companies are approaching in key regions. Industry regulator Anatel has eyed loosening those limits, which could accelerate a deal.

$1 = 3.86 reais Reporting by Gram Slattery and Tatiana Bautzer Editing by Brad Haynes and Susan Thomas

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