Subject: [NEXTEL-1] CREDIT SUISSE FIRST BOSTON PTT Competition, Spectrum Swap, ICO

From: Marcel <[email-masked]>
Date: Wed, 30 Apr 2003 02:52:39 -0400

Highlights

PTT-

* Nextel estimated that the cost of motorola's v60p (Push-To-Talk)  in the neighbourhood
of $500-$700 after considering
   modifications and memory and software enhancements (Wrong).

* Nextel Lawyers admit to being confused on Qchat intellectual property related issues.

* Direct Connect lacks of interoperability between  and other PTT Technologies.

* Motorola's presence in the PTT market is viewed as a negative for Nextel.

Plan Scam-

* Mgmt Still Confident Regarding 800 MHz Spectrum Swap Nextel remains confident that after
multiple rounds
   of comments the proposal will be approved sometime over the next several months.

*  Some people have been growing impatient by the delays.

*  Incumbent must  providing substantial amount of  information to the FCC and an RCC
(Relocation
   Coordination). It is suspected Nextel will have an edge in eventually trying to migrate
these subscribers on its
    own network once priority is implemented.

*  "Of The $850 million to be spent over four years under the proposal, roughly $50-$75
million would be spent in the first 12
     months with another $200 to $250 million spent over the second year. "

ICO & Nextel

* Nextel & ICO (Craig McCaw) have been collaborating on filings for ICO.

* ICO plans to use satellite spectrum for terrestrial use. ICO has been working on a cell
site on wheels (COW) that
   interconnects to the PSTN.

* "Nextel continues to have first rights over any McCaw wireless vehicle in the U.S"

Lawsuit-

"The $1.55 surcharge has also come under question regarding a Missouri state lawsuit over
the charge's presentation on the billing statement ( as is a similar one by Sprint PCS).
We are less concerned about the charge than we are about its legitimate sustainability.
Nextel mentioned that it has spent everything it has received so far in connection with
the surcharge and implementation of regulatory required services."

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

28-Apr-03 Credit Suisse First Boston (Weinstein, Eric NXTL: Upbeat
Meeting With Management
CREDIT SUISSE FIRST BOSTON
Equity Research
Americas
Wireless Telecommunication Services

OUTPERFORM
Analyst's Coverage Universe: Wireless Telecommunications Services
Weighting: MARKET WEIGHT
Target Price: 16.50 (US$)
Nextel Communications (NXTL)
Upbeat Meeting with Management

Summary

On April 25th, we had the opportunity to host a meeting with members of Nextel's (NXTL,
$13.92, Outperform, TP $16.50) management team including Paul Saleh, Chief Financial
Officer; Tamara Casey, Vice President of Technology;
and, Paul Blalock, Director of Investor Relations.

With the company having reporting first quarter financial results on April 23rd, the focus
of the meeting centered around the company's mid- and long-term strategy such as the
evolution to next generations technologies, Nextel's ability to keep its competitive
advantage via its push-to-talk (PTT) product, Direct Connect, and the company's ability to
scale the business and improve margins.

While concerns continue to exist over Nextel's push-to-talk product, the company continues
to execute and deliver excellent results. It is becoming increasingly obvious why Nextel
remains our only Outperform rated wireless stock, largely because it remains the only
differentiated play in an otherwise commoditized sector.

We continue to believe that Nextel offers investors strong value with the company
currently trading at 5.5X `03 and 4.6X `04 EV/EBITDA, 8.0% '03 and 14.1% `04 free cash
flow yield (non-taxed) and 12.4X '03 and 8.6X '04 P/E multiple (again, non-taxed). With
the company having reported EPS of $0.21, ahead of consensus expectations of $0.16, Nextel
is developing into an earnings story faster than expected.

For a global perspective on the wireless industry, please dial-in to CSFB's Global Mobile
Conference Call being held on May 1 at 10:00 AM ET.  The dial-in number is 800-240-6709.
Slides accompanying the call can be viewed at

http://www.csfb.com/equity/global_mobile_quarterly/global_callQ203.pps.

A replay of the call can be accessed by dialing 800-405-2236, passcode 535915

Price        Target                     Mkt. Value 52-Week
24 Apr 03    (12mo.)  Div     Yield(%)  ($m)       Price Range
13.85($)     16.50($)                   13,732.08  14.57 - 2.78
             Annual   Prev.   Abs.      Rel.       EBITDA   EV/
             EPS($)   EPS     P/E(x)    P/E(%)     ($m) EBITDA(x)
12/04E       1.63             8.5       58.1       4,444.8  5.5
12/03E       1.10             12.6      74.8       3,945.7  6.2
12/02A       0.40             34.6      -178.7     3,168.5  7.7

             Q1       Q2      Q3        Q4
2004E
2003E        0.21     0.28    0.33      0.29
2002A        -0.77    -0.09   0.14      0.21
ROIC(12/02A %)                          8.3%
Net debt(12/02A $m)                     10,695.0
Net debt/Total cap.(12/02A %)
Book value/share(12/02A)                3.05
Number of Shares(m)                     991.49

1 On 04/24/03 the S&P 500 index closed at 911.43.
2 Economic profit trend.
Nextel Communications, Inc. provides a wide array of digital wireless communications
services within the US.

Investment Summary

On April 25th, we had the opportunity to host a meeting with members of Nextel's
management team including Paul Saleh, Chief Financial Officer; Tamara Casey, Vice
President of Technology; and, Paul Blalock, Director of Investor Relations.
With the company having reporting first quarter financial results on April 23rd, the focus
of the meeting centered around the company's mid- and long-term strategy such as the
evolution to next generations technologies, Nextel's ability to keep its competitive
advantage via its push-to-talk(PTT) product, Direct Connect, and the company's ability to
scale the business and improve margins. Below we discuss each of these issues in detail.

Technology Issues

While Nextel's differentiation strategy appears to be coming under attack from alternative
technologies planned for introduction by other carriers, we suspect that between
technological and commercialization challenges it will still be a minimum of 12-15 months
before Nextel finds its operating performance marginalized in any material fashion and
that is still some time away. In the past the company has focused on the technological
issues that exist in actual implementation of PTT, but during our meeting, Nextel
addressed some of the other issues that may delay or prevent other operators from
adequately rolling out PTT in the near future, if ever. Without a doubt, the
characteristics of Nextel's subscribers high ARPU and low churn business and government
usersmakes the likelihood that other operators will targets them very high, and with
carriers trying to replicate PTT, the offer may be even more tempting to switch.

But these same demographics make the likelihood of a switch occurring lower than for an
individual user.
Barriers to PTT Entry First, most users on Nextel are on multi-year contracts. The
contracts are usually held with business or government organizations and not individuals.
If an organization wanted to switch to a different carrier offering PTT, the company would
need to put a new handset in the hand of each employee that had a Nextel phone. This can
be costly in what is currently a tight corporate spending environment, especially when the
early versions of PTT handsets are thought to be extremely expensive. Nextel estimated
that the cost of phones associated with current literature being circulated by Motorola
(i.e., the v60p which can be viewed at www.phonescoop.com) was in the neighborhood of
$500-$700 after considering modifications and memory and software enhancements.

 While the literature does not address call set-up delays, it does mention that it takes
up to one minute after turning on the phone before a PTT conversation may begin.
Implications of Motorola acquiring Winphoria

This leads into the recent acquisition by Motorola of Winphoria, a softswitch developer
that is also thought to be working with Sprint PCS and Verizon Wireless on their PTT
deployments. Motorola has communicated to Nextel that the acquisition was largely designed
to accelerate Motorola's penetration of the softswitch market for 2.5G.

While this may be true, PTT and VoIP would be some of the natural applications for such a
platform. That there has been little coordination between the network element vendors and
the handset - providers for PTT, particularly for CDMA, would also work in Motorola's
favor.  Thus, it seems a natural that they will try to leverage the Winphoria
infrastructure and its trial customers with its PTT experience in order to broaden the
market. Here is where it gets complicated. Motorola is already involved in a venture with
Qualcomm and Nextel to develop a PTT version of CDMA that is backwardly interoperable with
Nextel's iDEN technology based on Qchat. Qchat is a Qualcomm technology developed in 1999
to go after the PTT market via CDMA.

Under the venture Qualcomm owns the patent(granted in 2002) and intellectual property
rights associated with the product but Nextel has the exclusive right to market the
technology in the U.S. and wherever else it operates. We have seen the patent granted
Qualcomm and it appears fairly broad, essentially the right to do any IP-based PTT
application. We find this intriguing given the other proposed IP-based PTT technologies
out there and wonder whether or not Qualcomm will defend its patent rights. Of course, it
could always cut licensing agreements but this would take time. This poses interesting
questions for Motorola, which developed PTT over iDEN and must have some patent
rights(IP-based or not) that would enable it to fix the latency issues with Winphoria's
solution.  Of course, the expertise cannot come from lessons learned with Qchat.

Even with a licensing agreement with Qualcomm(which cares more about selling CDMA phones
than it does about Nextel), there would still be the exclusive marketing rights held by
Nextel on any Qchat based technology. Much of this is speculation, however, as Nextel
refused to comment broadly on the intellectual property related issues in stating that
things were not even clear to its lawyers.  Nevertheless, we view the increased presence
by Motorola in the market as a negative for Nextel over the long-run, even though between
a potential re-tooling of Winphoria's Global Rendezvous PTT technology and IP-related
litigation instigated by either Qualcomm or Nextel could result delays in this year's
proposed roll-out.

Direct Connect is a Private Network Second, there is the issue of being able to keep the
same phone number when switching carriers. This is particularly important due to the
nature of Nextel's subscriber base and the implied productivity losses, although we expect
this obstacle to disappear with the likely implementation of wireless number portability
on November 24th of this year. Third, we cannot forget that unlike with
interconnect(cellular calls), Direct Connect occurs over what is essentially a private
network. As such, we do not expect Nextel to make this aspect of its service interoperable
with other carriers (notwithstanding technical obstacles). Thus, at a minimum a competing
carrier would have to go after an entire Nextel work group rather than individual
subscribers (for contract reasons as well.) To make things more complicated, we cannot
forget that users Direct Connect across different work groups. While we do not know ofthe
exact amount of traffic between work groups, Nextel used to report that roughly one-third
of its subscriber base were registered on Nextel's National Business Networks program.
This brings up another interesting point, particularly with respect to penetrating new
market segments in general. Because of the lack of interoperability between Direct Connect
and other PTT Technologies, the rollout of service by other carriers will be impacted by
the fact that there is just nobody else on their networks to engage with PTT. For example,
Verizon and Sprint PCS are thought to initially be targeting the consumer market when and
if they rollout PTT services later this
year. Nextel's experience with the consumer market to date has really been limited to its
experience with Boost, a prepaid offering targeting the youth market in California and
Nevada. Since the service was rolled out last  September on a trial basis, Nextel has so
far signed up 60,000 subscribers and this is with the ability to Direct Connect with
millions of other pre-existing Nextel  subscribers in the region.

Will Barriers to PTT Entry lead to Irrational Behavior?  Fourth, even if other operators
roll out PTT, many of Nextel's users currently integrate Direct Connect with other
applications, once again limiting the likelihood of switching to another carrier. Finally,
there are the issues of handsets and distribution. Nextel has spent a great deal of time
working on developing the right distribution strategy to target high-end users and most,
if not all, of the other operators do not currently have such a system in place.

Looking back historically, while Nextel began to rollout "reconfigured" iDEN across its
markets in October 1996, it wasn't until the beginning of 1998 when its operating metrics
really began to accelerate(although there is a more educated market today than existed
back then). In addition to having the correct distribution center, carriers will need to
have multiple handsets to offer users and at attractive price points. While none of these
issues individually may seem like a huge obstacle, when taken as a whole, we believe that
any attempt to steal customers away from Nextel in the near-term will be futile especially
since the new technology will be unproven and there will be limited advantages of
alternative products. Our concern is not of pricing competition off the bat, since
competing carriers will not look to devalue the service out of the gate.

Should carriers become frustrated in trying to develop a consumer market with questionable
pent-up demand and switch over to focusing on Nextel's core base as latency improves, we
are somewhat concerned that there will be some pricing pressure over the intermediate term
notwithstanding a superior product. 6:1 Vocoder Appears on Track for 2H03; 2003 Capex
Likely to be Lowered Additional technology issues that were discussed during the meeting
included the implementation of the 4-kilobyte, 6:1 vocoder, the spectrum swap and the
deployment of nationwide Direct Connect. With respect to the vocoder, everything appears
to be on track. Nextel currently expects to deploy four new handsets in the fourth quarter
that will not only have 6:1 but GPS capability and longer battery life. The new 6:1
handsets will give Nextel even more of an efficiency boost allowing the company to drop
its capex beyond the current guidance of $1.8 billion. In fact, Nextel stated that it will
most likely be updating its guidance in the second quarter and strongly suggested that it
could lower its capex estimate for 2003 as the company continues to get closer to its
target capex of around $1.2 billion for 2004(according to past statements), at which point
Nextel's capex cost per minute will be around $0.01 from the current $0.017.

Interestingly, Nextel stated that its capex estimates would not be significantly impacted
by the proposed frequency swap before the FCC to solve the 800 MHz band interference issue
with public safety operators. Of the $850 million to be spent over four years under the
proposal, roughly $50-$75 million would be spent in the first 12 months with another $200
to $250 million spent over the second year. However, while more spectrum would reduce
capex in theory, as we continue to envision a network overlay at PCS frequencies should
the swap go through(or at 800 MHz should it not) we continue to estimate $3 billion in
incremental capital spending between 2004 and 2006. There was no update on the decision
over whether to pursue a CDMA 1xEV-DO/V based upgrade or OFDM, though given the current
situation with Motorola we got a bit more comfortable that Nextel would not pursue OFDM
until the commercialization path was more developed and unless several vendors were
committed.

Mgmt Still Confident Regarding 800 MHz Spectrum Swap While the decision on the swap is
still pending, Nextel remains confident that after multiple rounds of comments the
proposal will be approved sometime over the next several months. While some people have
been growing impatient by the delays, Nextel pointed out that if a decision is reached in
the next few months that such a decision would have been reached in record time as many
swaps have taken up to 10 years to complete. One aspect of the proposal we had not focused
on that much requires all incumbent users of the frequencies to provide a substantial
amount of identification and background information to the FCC and an RCC(Relocation
Coordination Committee) within 45 days of the adoption of the proposal as an FCC Order.
The intent is to facilitate system relocation, and even though access to such information
is strictly for relocation purposes(noting that Nextel would have one the right to appoint
one of five representatives on the RCC) we suspect that Nextel will have an edge in
eventually trying to migrate these subscribers on its own network once priority access is
implemented across its network. This plays into Nextel's long-term strategy to penetrate
the multi-million subscriber public safety market opportunity.

Another PCS Spectrum Route?

We note that Nextel has also been working with ICO, another Craig McCaw vehicle, in
preparing its filings for access to satellite spectrum pursuant to an FCC rule change that
permits MSS(Mobile Satellite Services) operators to use 2GHz S-band frequencies(similar to
1.9 GHz PCS frequencies) for terrestrial use. While the company has so far been developing
a cell site on wheels(COW) that interconnects to the PSTN via satellite, we are more
interested in the company's ability to leverage the relationship for back-up access to PCS
frequencies.

Nextel continues to have first rights over any McCaw wireless vehicle in the U.S. through
early next year and the previous thought would be that they would try to lease the
frequencies from ICO in the U.S. ICO has been acquiring the rights of other MSS operators
to these frequencies, most recently winning approval to purchase the assets of Globalstar
out of bankruptcy last week.

What's uncertain is that use of the frequencies terrestrially under current rules must be
ancillary to satellite use, perhaps even requiring dual-mode handsets. Whether or not
there is a way around this to permit more conventional use remains uncertain, but a
situation we will closely monitor.

Mgmt Convinced of Strong Prospects for Direct Connect

While the swap and the vocoder should help the company on the cost side, nationwide direct
connect should help the company's top line. After surveying many of its subscribers, 40%
of those surveyed have stated that they have an immediate need to Direct Connect across
the United States and are willing to pay for this service(given Nextel's subscriber base,
that a high a take rate is not intuitive to us). Nextel hasn't determined pricing for
Nationwide Direct Connect, currently slated for introduction in August of this year, but
the company mentioned that it may charge separately for this service while continuing to
include regional Direct Connect with its buckets. The company also mentioned that for
users that do not have a constant need for the product, a pay-by-usage offering may also
be available. We do not have a sense for how wellTravel Direct Connect is doing, though
the company has mentioned in  the past that 80% of its subscribers have roamed at one
point or another (presumably just out of market).

Financial Issues

ARPUs did not Appear that Weak

With Nextel performing as well as it has over the past few quarters, investors have
searched for issues that may be inherent in the business and may have been overlooked at
first blush. During the first quarter, many investors pressured the stock over ARPU
concerns, specifically the impact that a $55 plan may have had on the top line as not only
new customers signed on for this plan, but existing customers re-rated. ARPU concerns were
overdone and the company delivered strong EBITDA. However, Nextel reported ARPU of $67
while many people, including us, were expecting $68. The reason that Nextel reported a $1
lower ARPU, but hit our top line estimate is a result of revenues that were generated by
the company yet not included in ARPU.

The "other" revenue included $24 million of late charges, surcharges and revenue from
Boost that in sum added $0.74 to a calculated ARPU taking ARPU to $67.87 compared to
$68.13 in the first quarter of 2002, or less than 1% lower. While admittedly the 2003 ARPU
included new charges such as an E911 and WNP charge of $1.55, Nextel is not alone in
charging such a fee yet was alone in terms of the noise that was created owing to ARPU. We
would also like to point out that simply looking at ARPU without taking others
measurements like churn into account is not very meaningful.

Nextel gave the example that it would rather have a $50 a month government employee as a
subscriber as opposed to a $70 per month individual user since a government employee's
churn is below 1% while Nextel's average churn is about 2% implying an extra $1500 in
revenues over the lifetime of the government user. Meanwhile, the current quarter's
promotion is running at $69.99.

Other Issues with the $1.55 Surcharge

The $1.55 surcharge has also come under question regarding a Missouri state lawsuit over
the charge's presentation on the billing statement(as is a similar one by Sprint PCS). We
are less concerned about the charge than we are about its legitimate sustainability.
Nextel mentioned that it has spent everything it has received so far in connection with
the surcharge and implementation of regulatory required services. Given the up-front costs
to ready the network for E911 and WNP services we are not surprised(WNP alone is thought
to cost national carriers $100 million to deploy, of which one-half is thought to already
have been spent). Variable costs are thought to be less, more on the order of $50 million
for WNP plus additional operating costs for E911 compliance (where the subsidies for
assisted GPS may count). While many of these maintenance costs are still unknown, it is
uncertain as to whether or not they will add up to the $200 million-plus that Nextel will
collect from its subscribers this year.

To the extent that the surcharge is for cost-recovery purposes only, there is some risk
that the surcharges may have to be rolled back at some point. This is an issue for Nextel
and other carriers, to the extent that these surcharges are effectively being used as
price increases around the edges to make up for pricing competition in the minute buckets.

With churn clearly impacting returns so much, Nextel has been extremely focused on
lowering its industry-leading churn even further and during the first quarter, its efforts
paid off with churn hitting 1.9%, the lowest level in four years. The strong churn
improvement is a result of the company's relentless focus on improving customer
satisfaction and the implementation of its "touch point" strategy. The touch point
strategy is based around improvement all aspects of the customers' contact with the
company so that the issues that a customer may have are proactively resolved before any
call would be placed to customer care.

While Nextel continues to invest in efforts to keep voluntary churn under control, the
company has also been extremely focused on making sure that its involuntary churn, and in
turn, bad debt and collections are improved upon.

During the quarter, Nextel improved its bad debt to 2.4% of revenues down from 4.8% one
year ago, or a $40 million difference by implementing tighter credit policies; terminating
relationships with certain national resellers that were experiencing heavy fraud; holding
its regions responsible for the overall economics of the subscriber not just the revenues
and; by making sure the company's employees don't simply overlook the policy. At the same
time, Nextel was able to reduce its DSOs to 38, down 7 days sequentially, and has
experienced an improvement of 40-50% in its collection processes.

The low churn and bad debt helped keep Nextel's costs under control and going forward the
company hopes to achieve further costs gains through customer life cycle management, which
will keep involuntary churn under control, and through strategic sourcing or supply chain
management. Nextel announced the first such deal on April 25 by outsourcing its site
acquisition to three vendors; General Dynamics, NorthStar Communications and Tetra Tech.
Nextel stated that the outsourcing of its site acquisition to these three vendors, down
from 500 vendors will provide a savings of 25% clearly demonstrating that the company has
more room to improve its margins.

To Refinance or Not to Refinance? Not Even A Question With respect to the recently filed
$5 billion "universal" shelf registration foiling, the company had little to add other
than that it may look to prudently tap the markets for capital as it has in the past
within the context that it is no longer a net user of capital. That is, that it must
balance its cash position with continued debt and preferred repurchases(at or near par)
with an eye on cheap bank financing currently in place that will eventually be
renegotiated.

Meanwhile, it is getting quotes from investment bankers of proposed "overnight" deals
priced at 7-7.5% for high yield and presumably cheaper for what is a very strong
convertible market. It is not lost on management that this is significantly lower than its
current cost of capital and that the window of opportunity will not be open forever.
leading us to believe that they will not sit on the sidelines forever.

Valuation

With respect to valuation, it is among the cheapest in the group on an EV/EBITDA basis and
is emerging as the only earnings play in U.S. wireless trading at 12.4X 2003 and 8.6X 2004
earnings. In a market increasingly focused on immediate returns, it also trades at the
most attractive free cash flow yield of the U.S.  carriers at 8.0% off 2003 and 14.1% off
2004, compared to European mobile operators at 5-7%, and remains the most attractive in
the U.S. group on that basis over the long-term even after accounting for an as yet
unannounced network upgrade(est. $3 billion) that we have factored into our numbers.

Quarterly Recap

Nextel reported strong first quarter results with net additions of 480,000, 5.5% ahead of
our estimate of 455,000, but 4% below first quarter 2002.  The subscriber figures no not
include the net adds from Boostthe company's joint venture focused on attracting the youth
marketwhich were 40,000 giving Boost an ending subscriber base of around 60,000. Churn for
the quarter improved to 1.9%, the lowest level in four years and 30 basis points better
than our estimate. Minutes of use for the quarter increased marginally to 650 per month
per user from 640 reported in the fourth quarter 2002. Nextel experienced the
usual seasonal decline in ARPU and for the quarter Nextel reported an industry-leading
ARPU of $67, $1 below our estimate and first quarter 2002 ARPU of  $68. However, the $1
difference is ARPU is a result of other revenue that Nextel includes in
its service revenue$24 million this quarterbut not in its reported  ARPU. As a result, our
estimate of $68.14 was actually only $0.30 higher than the calculated ARPU. The promotions
that drove Nextel's December subscriber numbers were pulled in early February, aiding
subscriber growth but  contributing to some re-rating of the subscriber base although we
believe the impact was  somewhat limited since only customers that were off of contract
were able to re-rate to the new plans.

Additionally, the promotion ran for only a few monthsDecember through early
Februaryfurther limiting the impact that re-rating may have had on ARPU. Of course, the
weather in the Northeast and lower new construction activity could have impacted usage as
well(and more credibly).

Nextel's differentiated product offering is what continues to attract high value customers
with the company capturing about 17% of industry net additions in the first quarter
despite having only 10% of the industry's subscribers.  Enterprise and government
subscribers accounted for over 20 %, or 2.3 million, of the company's subscribers while
small and medium sized businesses subscribers totaled 5.8 million and individual consumer
base was 3.0 million.  This would imply that the majority of the first quarter growth, or
approximately 300,000 subscribers(plus or minus due to rounding), came from high-end
individual users.
However, Nextel has stated in the past that many of the subscribers that it classifies as
consumer are really business users that are simply added through indirect channels making
it difficult to accurately classify the subscribers without contacting the user directly.
Thus, we believe that Nextel's individual subscriber mix is less than the 27% currently
being reported by the company, which helps to explain how Nextel is able to retain its
industry leading ARPU.

Total revenues of $2.37 billion were 21% ahead of 2002 and in-line with our estimate of
$2.36 billion. Cost per gross add declined to $450 from $460 reported in first quarter
2001 and was in-line with our estimate.  Cash cost per user was below our expectations of
about $24 and was reported to be $23. Helping to drive down costs has been the company's
focus on shifting its add mix to the direct channel and during the quarter the company
brought on 52% of its subscribers through these channels. Additionally, the company added
50 new stores during the quarter to help with the process. The strong cost control
resulted in EBITDA ahead of our expectations at $906 million, 4% ahead of our estimate of
$871 million and almost 55% higher than first quarter 2000.

Recurring EPS for the quarter was $0.21 versus our estimate of $0.14 led by stronger
EBITDA, lower depreciation and amortization expense and lower losses at NII. Capital
expenditures for the quarter came in 36% below our forecast at $305 million. During the
quarter, Nextel also repurchased an additional $568 million in debt and preferred
securities for $570 million in cashwhere buying back at par generates about 10% interest
savings and perhaps increases the chances Nextel will use its recently filed shelf to tap
the market for cheaper financing(not necessarily a bad thing). The combination of higher
EBITDA and lower capex and interest costs helped Nextel achieve a reported positive free
cash flow of $201 million.