Subject: [NEXTEL-1] Thomas Weisel Partners on Nextel

From: Marcel <[email-masked]>
Date: Wed, 18 Dec 2002 20:53:32 -0500

Nextel Communications (NXTL; $12.82; Cap $12.7bn; Buy) - Hosts Technology Day in FL;
Successfully demonstrates
National Direct Connect and new capacity-enhancing Vocoder; Reiterate Buy.

• We attended the Nextel Communications analyst meeting yesterday at Motorola's
Plantation, FL technology center. The
primary purpose of the day was a top to bottom review of the iDEN technology and highlight
the progress Motorola and
Nextel have made in stretching its life of iDEN.

• While no earthshattering information came out, in short, the company illustrated that a)
voice capacity could grow to
around 4x current levels, implementing a series of incremental technology improvements
over a multi-year period, b) data
speeds are likely to increase with the implementation of new WiDEN technology in 2003-2004
(comparable to current
2.5G and 2.75G protocols), and c) working with one primary vendor (Motorola) has become
much less a disadvantage
than was commonly believed and in fact, offers advantages in time to market that are
largely an offset.

• Going into the day, we thought the emphasis of this meeting would be to highlight
Nextel's ability to use cost-effective,
incremental technology improvements to grow its subscriber base - and that was the clear
takeaway. For example,
Nextel's capex per incremental minute dropped to $.08 in 2002e from $.21 in 2000. that
figure is comparable to Sprint's
efficient CDMA network technology and about 50% better than than AWE's $.14 level in 2002.

• At present, we think there is little appetite among top wireless managers to move
further along the 3G-migration path
given investor demand for free cash flow,more restricted access to capital, and nascent
demand. Thus, we think
additional GPRS, EDGE, 1x-EVDO, and 1x-EVDV upgrades may be delayed and that in the
meanwhile, other, potentially
superior technologies could emerge that would challenge speeds/economics for the current
conventional 3G wisdom.

• Because of that delay in moving to 3G, Nextel can wait for demand wireless broadband
demand to materialize in a more
meaningful way and then choose among the best solutions without fear of being left behind.
Given the relative capabilities
of each network, we do not believe Nextel is disadvantaged from a technology perspective,
nor is likely to be for as far as
we can see (2-3 years).

• The company successfully demonstrated national push to talk as well as the new vocoder
during the meeting Tuesday.
Conversations using PTT with Nextel employs in McLean, VA were very good with no
discernible delay. The 6:1 vocoder
also worked well though we did not a modest difference in voice quality as compared to a
3:1 call - slightly more "watery" in sound. It is a reasonable price relative to the pick
up in voice capacity, in our view.

• Nextel is trading at about 7.5x our 2002 EBITDA estimate and 6.4x our 2003 EBITDA
estimate, in line with the national
service provider average. On a P/E basis, Nextel (estimated to grow EPS at 26.9%
compounded beginning in 2003) is
trading at 14.4x our 2003 estimate of $0.84 and 9.5x 2004 estimated EPS of $1.28. In our
view, Nextel continues to have
the best operating momentum of the standalone providers, which is not likely to change
given its differentiated product.
Though the stock has moved substantially, Nextel Communications is still our best idea in
telecom services at this time
given what we view as its reasonable valuation, emergence as a free cash flow/EPS story,
and potential for further
upward estimate revisions. We reiterate our BUY recommendation on the shares of Nextel
Communications at current
levels.

Estimates: Dec'02 Net Adds 1,878,000, Rev. $8.7 bn, EBITDA $3.2 bn, EPS $0.29; Dec'03 Net
Adds 1,625,000, Rev. $9.9bn, EBITDA $3.8 bn, EPS $0.84