Subject: [NEXTEL-1] 09/09/03: "BusinessWeek" CEO Conference With Nextel CEO Timmmy Donahue

From: [email-masked]
Date: Tue, 09 Sep 2003 23:46:25 -0400

http://nbr.com/transcript.html#story3

09/09/03: "BusinessWeek" CEO Conference With Nextel CEO Timmmy Donahue 

SUSIE GHARIB: Leadership in uncertain times is easy to talk about 
but how do you achieve it and profit from it? That was the theme of 
the recent "BusinessWeek" CEO Conference where Darren Gersh spoke 
with Nextel CEO Tim Donahue. Donahue says the key is to focus on 
setting a strategy and sticking to it. 

TIMMY DONAHUE, CEO, NEXTEL COMMUNICATIONS: We want to make sure 
that we understand market segmentation, who are our customers? How 
do we attract them and how do we keep them? And who are the most 
profitable among those groups? And clearly it was the business 
customer. And so from day one we have stayed laser-like focused on 
the business customer, developing products and services that others 
can't provide or they can't provide the quality that we do. And as a 
result we have been very successful. And even in the downturn, even 
when we saw in the 2000-2001 time frame some very significant 
economic downturns in businesses, we did well. And we did well 
because we have a product that really adds to productivity, most 
especially Direct Connect, and its instantaneous nature. 

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Verizon (VZ) 
has just rolled out its version of Direct Connect two-way service, 
Sprint (PCS) is not far behind. Everybody is getting into this game. 
So how much is that going to drive down the prices that Nextel can 
charge for its Direct Connect service? 

DONAHUE: Well, I think we have to distinguish between the Nextel 
Direct Connect products and other look-alikes that are coming. The 
look-alikes that are coming really can't stand up to the Nextel 
product in one very, very important area and that's called latency. 
And the problem is that the problems is that the products that 
they're putting on the market today are extremely latent, meaning it 
takes a long time, once you put the button to get a connection and 
talk to the other party. And I can tell you we have 12 million 
customers across the country. And they need the instantaneous nature 
of Nextel. So we like to call the Verizon product "push to wait" 
versus "push to talk" because it takes so much time for it to get 
through and for the call to be completed. So we're not particularly 
concerned at this point in time about those products as it relates 
to our customer base, business customers. 

GERSH: Well, you mentioned the advantage that you have in terms of 
latency, but obviously your competitors aren't going to stand still. 
They're going to try to improve their service. How long will your 
advantage last? 

DONAHUE: From a technology perspective, it is very a difficult issue 
to fix. So we think for the foreseeable future we're going to have a 
significant advantage. The other thing is you have 12 million 
customers who all can talk to each other. One of the issues you have 
to think about with Direct Connect is who are you going to talk to? 
So we have this huge embedded base that is used to pushing the big 
button and talking to each other. The competitors of course have to 
start to build that base. And that's not an easy thing to do. 

GERSH: I'm just wondering, you know, an IT manager who is going to 
look out at all their costs is probably going to say, hey, I can 
save $5 a month if I go to one of these competitors. They wait a 
couple more seconds, big deal. 

DONAHUE: I think the IT manager could very well say that, but I 
think the response from his customers is going to be, you have to 
give me a product that's instantaneous, that performs the way the 
Nextel product performs. And there is no product on the market today 
that can meet that. So for the $5, trust me, the customer is not 
going to be particularly pleased. 

GERSH: Well, look ahead five years and you can kind of see a world 
where handset costs have come way down. They're very cheap. You have 
a lot of flat pricing plans. And I'm wondering, you know, isn't 
this - isn't wireless communications going to be a tough place to 
make a buck going forward? 

DONAHUE: Well, here's what I would say to you. I've never seen more 
momentum for wireless than I'm looking at today. This country has a 
long way to go in terms of penetration and so I believe that 
wireless is going to be the dominant service in telecommunications, 
in telecom. A more important point that you might want to make is 
can the industry survive with six national players? That's really 
the issue. And to me the answer is probably no. And I don't think 
this industry will have six players in five years. I think it might 
have three or four players because I do think consolidation will 
take place. And I think once that consolidation starts, and I don't 
see anything on today's horizon, but I would say in 12 to 18 months 
you'll see that. Then what happens is you take an enormous amount of 
pressure off the price side of the business because you don't have 
six people fighting for a single customer. 

GERSH: Tim Donahue, CEO, Nextel Communications, thank you. 

DONAHUE: Thank you, Darren.

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