Subject: [NEXTEL-1] Irvine, Calif.-Based Telecom Firm Poised to Take Phones Nationwide

From: [email-masked]
Date: Wed, 10 Sep 2003 00:44:34 -0400

Irvine, Calif.-Based Telecom Firm Poised to Take Phones Nationwide

September 6, 2003 3:07am

Sep. 6--The O.C. wireless communications company that's sponsoring a 
pro-surfing contest at Trestles this weekend is facing a challenge 
of its own.

Boost Mobile, an Irvine company that markets prepaid cellular 
services to teenagers and twenty-somethings, is waiting to find out 
whether its majority investor, Nextel Communications Inc., will come 
up with cash it needs to expand beyond its test markets in 
California and Nevada.

Nextel, a wireless company that targets business customers, owns two-
thirds of Boost Mobile and says it will make a decision by the end 
of December.

The Reston, Va., company won't say how much it's already invested in 
Boost Mobile or how much it would cost to take the brand nationwide.

Boost Mobile signed up 80,000 customers during the second quarter of 
this year, more than doubling its total, to about 140,000.

The company -- which started selling phones that work over Nextel's 
network late last year and still operates at a loss -- markets 
itself as a "lifestyle brand" promoted by surfers, skateboarders and 
other extreme-sports athletes.

It sponsors events such as this weekend's surfing contest, which has 
a purse of $250,000, and a June skateboarding event in Las Vegas, 
which had a record $250,000 in prize money. One of Boost Mobile's TV 
commercials featured the rapper Fabolous and two elderly groupies.

That marketing formula, which includes putting Boost Mobile phones 
in the hands of surfers such as Shane Beschen and Kelly Slater, is 
helping Nextel get into the youth market -- an area that analysts 
say is the next frontier for wireless carriers looking to keep sales 
growing when the business and adult markets are approaching 
saturation.

The youth market is a territory where Nextel's name is virtually 
unknown.

"Your typical Huntington Beach surfer is not going to go sign up 
with Nextel," said Charles Golvin, an analyst with Forrester 
Research. "The phones aren't cool. There's just no allure there. 
It's a bad fit."

Boost Mobile's phones are cool-looking, have a walkie-talkie 
feature, text-messaging, cool ring-tones, and downloadable games. 
Like other prepaid cellular services, customers pay for the service 
in advance, rather than signing a monthly contract. Competitors 
include Virgin Mobile, which sells service on the Sprint PCS 
Network, FreeUp from Verizon Wireless, and KIC from Cingular 
Wireless.

Boost Mobile is the only one of those services that offers a walkie-
talkie feature, and its marketing has stood out from the rest.

"Their approach is very unique," said Dana Thorat, a youth-market 
analyst with IDC who attended the Boost Mobile skateboard 
championship in Las Vegas.

So far the company has been able to keep a higher percentage of its 
customers than other prepaid wireless services, and its average user 
spends "significantly" more a month than customers of competitors, 
according to Nextel Chief Operating Officer Thomas Kelly.

But that limited experience isn't enough for Nextel executives to 
justify investing millions more in Boost Mobile. They want more 
information about the habits of Boost Mobile's customers, and it 
will take a few more months to get that data, Kelly said.

"We've gone into this with the full expectation to succeed," Kelly 
said.

"But we're going to make a decision on the full rollout when we're 
comfortable."

Sometime before the end of this year, Nextel will decide whether to 
take the Boost Mobile brand nationwide, fund a more limited 
expansion, or hold off on expansion, Kelly said.

While he declined to provide specific numbers, Kelly said that 
Nextel's decision will be based on several criteria: How well the 
brand meets its goal of attracting a "core youth market" of 18- to 
25-year-olds and influencing customers as old as 35.

Whether Boost Mobile can keep charging a higher per-minute rate than 
customers pay for service sold under the Nextel brand.

Whether it can add customers at a lower cost than Nextel. Cell-phone 
companies generally sell handsets for less than their cost, figuring 
they'll make up the difference in future service. Boost Mobile needs 
to spend less subsidizing those phones than Nextel, according to 
Kelly.

Whether Boost Mobile can provide customer service at a lower cost 
than Nextel.

If Nextel decides to expand the brand, it could turn out to be a 
winner, said analyst Thorat.

"I have high hopes for them," she said.

http://www.hoovers.com/free/news/detail.xhtml?ArticleID=NR200309061180.3_e8aa00190d5a1555

------------------------ Yahoo! Groups Sponsor ---------------------~-->
Buy Ink Cartridges or Refill Kits for Your HP, Epson, Canon or Lexmark
Printer at Myinks.com. Free s/h on orders $50 or more to the US & Canada. http://www.c1tracking.com/l.asp?cid=5511
http://us.click.yahoo.com/l.m7sD/LIdGAA/qnsNAA/61FxlB/TM
---------------------------------------------------------------------~->

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/