Subject: [NEXTEL-1] Timmy On Nextel

From: [email-masked]
Date: Fri, 13 Dec 2002 18:30:32 -0500

http://biz.yahoo.com/ibd/021213/tech2_1.html

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Investor's Business Daily

Business Customers Buoy Nextel
Friday December 13, 10:37 am ET

By Reinhardt Krause

Name a U.S. phone carrier whose stock is up in 2002.
That's a short list. Make that a very short list. But contrary to what many pundits predicted, Nextel Communications Inc. (NasdaqNM:NXTL - News) is on it.

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Shares in Nextel are up to about 12 from 2.50 in June and 10.95 at the start of the year, while rivals AT&T Wireless Inc. and Sprint PCS have seen their market value plunge.
Just a year ago, many Wall Street analysts fretted about Nextel's debt burden. Now, they talk glowingly about Nextel's success focusing on business customers while other carriers engage in a nasty pricing battle for consumers.
Tim Donahue, Nextel's chief executive, spoke recently with IBD about the industry and Nextel's prospects.
IBD: What kind of year has it been for Nextel?
Donahue: We're taking more and more (market) share in terms of net additions every quarter. I think we have 9% to 9.5% of total customers now, 11%-plus of total revenue and we're taking 20% of all net new additions.
The Nextel product is really starting to catch on. We continue to grow our enterprise (corporate) business. Our fastest-growing areas are public services and public safety. As a result of what happened on 9-11, the need for interoperable voice and data networks among public safety officials has never been more obvious. We're in a position to deliver that because of Direct Connect and our packet-data network.
IBD: Nextel is the only wireless firm with a push-to-talk conferencing service. But rivals are said to be planning similar products to Direct Connect. Can Nextel keep its edge?
Donahue: Sprint has been talking about a push-to-talk product for two years. Every six months they push back their rollout date. The last thing said publicly by Sprint was that they'll decide by year-end whether they'll actually proceed with a product.
We know the company Verizon and Sprint are working with for a push-to-talk product. It's a good company, primarily a switching company. We also know that the product doesn't stand up to the rigors of Direct Connect as our customers know and love it. There are some serious (delay) issues associated with it.
Our average Direct Connect conversation is 40 seconds, with three to four call setups within that time. Ninety-four percent of our customers use Direct Connect.
We feel very comfortable that for the foreseeable future there isn't going to be a product that can compete truly with ours.
The last thing (Verizon CEO Ivan) Seidenberg said about Direct Connect is that they may not even use it as a product in which they'd attract business customers, but it might be more of a consumer play.
IBD: Some rivals claim they can pack retail stores with a wider array of mobile phones and devices than Nextel.
Donahue: I think the first thing customers look for, at least the ones we're trying to attract, is what the network looks like - how well is it performing and how wide is the footprint.
We score very well in those areas. And, of course, we have Direct Connect and we have our data products. Our customers buy the Nextel network more so than the handset.
That said, Nextel has one of the most sophisticated handsets on the market today. Motorola has done a superb job for us. Next year we'll have one to two new handsets every quarter. They'll be competitive in price, competitively sized and competitive in terms of weight. The feature functionality will be as rich as anything out there.
IBD: Nextel has delayed investing in next-generation wireless technology. Will that decision hurt the company in the long run?
Donahue: We solved our voice capacity needs with our new vocoder (compression technology). We'll be rolling that out the first quarter next year. It'll basically double capacity on our network.
In terms of data, we're running perfectly acceptable (network speeds) for the applications our customers are using.
If you ask me will Nextel eventually need a higher speed network, I'd say yes. But I'm not sure when. One thing we won't do is build a network in hopes that they (customers) will come.
We have the great luxury today of decreasing our capital spending while waiting to see what customer demand is for data. In the meantime, pricing (for new network technology) will come down.
IBD: Will the wireless industry see more mergers in 2003?
Donahue: I don't see a catalyst. I thought there was a glimmer of hope with a T-Mobile and Cingular deal, but I haven't heard much about that recently.
This industry may struggle with six (nearly nationwide) large carriers for a while, but consolidation will come. You probably have to wait 12 to 18, maybe 24, months. All of the deals speculated about are very difficult to do.
IBD: There's a lot of buzz about WiFi, a wireless Internet technology that works as a local area network in public spaces, apartment buildings and corporate campuses. How do you size up WiFi's future?
Donahue: We're big fans of WiFi. It's a complementary service to our current wireless offerings. We focus on the enterprise customer or the business customer. Many of them are building WiFi networks on their campuses. They want the ability to take that service off their campuses and into hot spots (airport lounges, hotel lobbies and the like). We're working with many companies looking at the hot spot strategy.
The issue is, how do you take applications that reside on desktops and bring them into the world of mobility? We have alliances with IBM, Electronic Data Systems and Sun Microsystems.
WiFi has some real legs, most especially in the enterprise space. I do question whether there's as much consumer demand for WiFi as some think.
IBD: Nextel has developed custom applications for wireless data in the corporate market. Describe how they work.
Donahue: In the enterprise space, customers will pay for an application that enhances productivity or drives profitability.
Take long-haul truckers. They'll pick up an application that has GPS (global positioning satellite) capabilities and, with a data modem, can push information down to the vehicle. So the driver gets information on new pickups, drop-offs or whatever.
In public safety, we've worked with the Memphis (Tenn.) Police Department. It has an application for pushing mug shots to mobile phones so that officers can spot criminals.
There are manufacturing facilities where supervisors carry around Nextel phones and are alerted if there's a problem on the assembly line.
Wireless data have been slow to evolve, but they will be a robust business in the future.
IBD: What has Nextel done to improve its capital structure?
Donahue: We've retired about $2.6 billion (in debt) this year. We're going to continue being opportunistic in deleveraging.
We've been using a blend of both cash and (new) equity. (Debt) was one of the significant overhangs on this company, and people are seeing us address the balance sheet. It's one of the reasons you've seen such a lift in our share price.

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