Subject: [NEXTEL-1] Goldman On The Nextehell

From: Marcel <[email-masked]>
Date: Thu, 09 Jan 2003 13:52:18 -0500

NXTL: Increasing Push Into Consumer Market is Risky, but Positive;
Maintain IL

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***********

* We see NXTL's (IL/N) new TV ad campaign featuring four actor *

* celebrities, announced yesterday, as another sign the company is
pushing *

* further into the consumer market. Given the highly competitive
state of *

* the US wireless market and the modified skill set needed to
address *

* consumers, we are cautious about NXTL moving outside of its core
niche *

* enterprise space, though we view positively its attempt to broaden
its *

* customer base by leveraging its differentiated offering. Wireless *

* pricing pressure has been so severe largely because most offerings
are *

* undifferentiated, but NXTL's unique product could offer it some *

* protection in this regard. We think some consumers may value
Direct *

* Connect over other offerings, such as family plans. But the key
will be *

* closely monitoring consumer response and adapting or ending the
move if *

* uptake is not favorable. *

====================== NOTE 3:04 PM January 08, 2003
=======================

Stk Cvg Latest 52 Week Mkt Cap YTD Pr Cur

Rtg View Close Range (mm) Change Yield

--- ---- ------ ------- -------- ------ -----

Nextel Communications IL N 13.74 14-3 13217.9 19% 0.0%

NXTL -----------------Earnings Per Share------------------

EPS* (US$) Mar Jun Sep Dec FY CY

2003 FY NA NA NA NA NA NA

2002 FY NA NA NA NA NA NA

2001 FY(A) NA NA NA NA NA NA

GSCOPE EPS* (US$) Mar Jun Sep Dec FY CY

2003 FY NA NA NA NA NA NA

2002 FY NA NA NA NA NA NA

2001 FY(A) NA NA NA NA NA NA

-Abs P/E on- -Rel P/E on- EV/NxtFY LT EPS

Cur Nxt Cur Nxt EBITDA Growth

------ ------ ------ ------ --------- -------

EPS* FY 3.47 NA

CY NA NA NA NA NA NA

GSCOPE EPS* FY NA NA

CY NA NA NA NA NA NA

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* may differ from U.S. GAAP

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* We see several key risks associated with NXTL's greater consumer

exposure. First, serving the consumer market requires a modified
skill

set for marketing, distribution and customer service, which NXTL may
not

be able to effectively develop in a reasonable amount of time.
Second,

if NXTL is successful selling push-to-talk to consumers it may
provide a

stronger incentive for other carriers more rapidly to develop their
own

push-to-talk products. Finally, the resources being used to open
retail

stores and broaden operations to serve consumers may be better spent

paying down debt or reinforcing aspects of the core business. That

said, our conversations with the company suggest management is being

disciplined about its approach to the consumer market and continues
to

place primary emphasis on the enterprise segment.

* NXTL has been moving slowly into the consumer space over the past
couple

of years. It bought 200 retail stores from Let's Talk Cellular in May

2001, and expanded its retail presence to 400 stores by the end of
2002.

NXTL has also been running TV and print adds featuring the NYPD Blue
TV

star Dennis Franz. We think the company may open approximately 200
more

retail stores in 2003, and is clearly expanding its consumer focused
TV

advertising with the ad campaign announced yesterday. The company
also

began working with Australian company Boost Mobile to offer a prepaid

service targeted at the youth market, which it launched in California

and Nevada a few months ago. We will look at the success or failure
of

Boost as one indication of how attractive Direct Connect may be to

consumers.

* Finally, we raise the point that a more aggressive move into the

consumer market may indicate demand in the core enterprise market is

weakening. While it is too early to draw firm conclusions in this

regard, we feel the company may not be choosing to face the risks and

costs associated with a move into the consumer space if the growth

outlook in its traditional segments continued to be very strong. Of

course, if this is the case, it may also make sense to try and
broaden

the target market.

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COVERAGE UNIVERSE: FRANK J. GOVERNALI, CFA

Rating/

Company Ticker Coverage View Latest Close

ALLTEL Corp. AT U/N US$54.95

Sprint PCS Group PCS U/N US$4.78

Sprint FON Group FON U/N US$16.72

Qwest Communications Intl. Q U/N US$5.93

Level 3 Communications, Inc. LVLT U/N US$4.94

AT&T Corp. T IL/N US$27.01

BellSouth Corp. BLS IL/N US$28.92

Nextel Communications NXTL IL/N US$13.74

Alaska Communications Sys. Gr. ALSK IL/N US$2.29

AT&T Wireless Group AWE IL/N US$7.10

Commonwealth Tel Enterprises CTCO IL/N US$37.49

CenturyTel Inc. CTL OP/N US$31.04

SBC Communications, Inc. SBC OP/N US$30.28

Verizon Communications VZ OP/N US$43.62

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GOLDMAN SACHS GLOBAL RATING DISTRIBUTION

Outperform In-Line Underperform

Global 25% 53% 22%

GOLDMAN SACHS INVESTMENT BANKING RELATIONSHIPS

Outperform In-Line Underperform

Global 79% 66% 63%

As of 12/3/02 Goldman Sachs Global Investment Research had
investment ratings on

1,856 equity securities.

Goldman Sachs uses three ratings - Outperform, In-Line, and
Underperform -

reflecting expected stock price performance relative to each
analyst's coverage

group, on an unweighted basis with regard to market capitalization
and with a

12-month time horizon. Each analyst also assigns a coverage view -
Attractive,

Neutral, or Cautious - representing the analyst's fundamental
outlook on the

coverage group. NASD/NYSE rules require a member to disclose the
percentage of

its rated securities to which the member would assign a buy, hold,
or sell

rating if such a system were used. Although relative ratings do not
correlate to

buy, hold, and sell ratings across all rated securities, for
purposes of the

NASD/NYSE rules, Goldman Sachs has determined the indicated
percentages by

assigning buy ratings to securities rated Outperform, hold ratings
to securities

rated In-Line, and sell ratings to securities rated Underperform,
without regard

to the coverage views of analysts.

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GOLDMAN SACHS RATING AND PRICE TARGET HISTORY

NXTL was rated RL as of 12/31/1999

New Rating/

Date Target Price Close

12/18/2002 NA US$13.23

12/18/2002 IL US$13.23

03/04/2002 MP US$4.90

01/11/2002 US$18.00 US$10.00

07/25/2001 US$27.00 US$16.75

as of 12/31/2002

The price targets shown should be considered in the context of all
prior

published Goldman Sachs research, which may or may not have included
price

targets, as well as developments relating to the company, its
industry and

financial markets.

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STOCK(S) MENTIONED IN THIS RESEARCH BY TICKER

For each stock, we display the share price and the relevant
disclosure code(s).

Disclosure code definitions follow.

NXTL :US$ 13.74; 1PC1, 1PC2, BC1, BC2, MM1, MM2

Codes for Disclosures

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1PC1: The Goldman Sachs Group Inc. beneficially owned 1% or more of
a class of

equity securities of the subject company as of the end of the month
immediately

preceding the publication date of this report.

1PC2: If the publication date is less than ten calendar days after
month end,

The Goldman Sachs Group, Inc. beneficially owned 1% or more of a
class of equity

securities of the subject company as of the end of the second most
recent month.

BC1: The Goldman Sachs Group, Inc. and/or its affiliates have
received during

the past 12 months compensation for investment banking services from
the

company, its parent, or its wholly owned or majority-owned
subsidiary.

BC2: The Goldman Sachs Group, Inc. and/or its affiliates expect to
receive or

intend to seek compensation for investment banking services in the
next three

months from the company, its parent, or its wholly owned or majority-
owned

subsidiary.

MM1: The Goldman Sachs Group, Inc. and/or its affiliates make a
market or are

the specialist in the securities of the company.

MM2: As such, the market maker or specialist may have an inventory
position,

either 'long' or 'short,' in the relevant security and may be on the
opposite

side of orders executed on the relevant exchange

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