Subject: [NEXTEL-1] Merrill Lynch On Nextel

From: Marcel <[email-masked]>
Date: Thu, 20 Feb 2003 12:41:31 -0500

Merrill Lynch On Nextel

• For 4Q 02, NXTL reported a solid set of results and retired an
additional $588 million of debt and preferreds for approximately 28 million
shares and $154 million in cash. Furthermore, NXTL's outlook for 2003E
is in line with our estimates with regard to subscribers, EBITDA, capex and
free cash flow, and slightly better than our estimate with regard to EPS as
NXTL continues to delever its balance sheet.

• Nextel reported net additions of 503,000 during 4Q 02, versus
our estimate of 447,000 net additions. Churn of 2.1% was in line with our estimate.

• Average revenue per unit (ARPU) was $69, slightly below our
estimate of $70. We believe that this was due mainly to lower overage, as minutes
of use (MOU) were 640 during 4Q 02, versus 650 minutes during 3Q 02.

• EBITDA was $886 million, for a 40.6% service margin during 4Q
02.  This was just slightly (1.6%) below our estimate of $900 million, largely
as a result of the higher than expected net and gross addition results.

• Regarding 2003, NXTL provided its outlook, which calls for net
additions of 1.7 million or more, EBITDA of $3.8 billion or more, capex of $1.8
billion or less, free cash flow of $500 million or more, and EPS of at least
$0.75.

• This compares to our estimates of 1.75 million net additions,
EBITDA of approximately $3.82 billion (for an increase of 20.3% year-over-year
and a 40.4% service margin), free cash flow of $544 million (assuming $300
million of spectrum acquisitions), and EPS of approximately $0.64. The EPS
upside relative to our estimate is due to the fact that Nextel has been
deleveraging faster than we had anticipated.

• NXTL's continues to demonstrate the ability to maintain its
low churn rate and manage costs, while continuing to grow in certain subscriber
segments. Looking forward, we think that potential catalysts include the
outcome of the public safety spectrum proceeding, that we expect to play out
over the next several months, and the timing, performance, positioning, and
pricing of a competitive push to talk product by the CDMA operators.

• We maintain our Neutral rating on the shares.

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