Subject: [NEXTEL-1] Verizon Moving In on Nextel's Niche Market

From: [email-masked]
Date: Fri, 27 Jun 2003 18:42:42 -0400

Scott Moritz
Verizon Moving In on Nextel's Niche Market
By Scott Moritz
Senior Writer
06/27/2003 06:27 PM EDT
URL: http://www.thestreet.com/tech/scottmoritz/10096995.html

Editor's Note: This column first appeared in The Tech Edge, a proprietary
newsletter, on Tuesday, June 24. For more information on The Tech Edge, click
here.

Wall Street's fling with Nextel (NXTL:Nasdaq - news - commentary) will heat up
this summer, but shrewd investors should brace for the moment when the winds
change and the stock sails into rocky shoals.

By several accounts, Nextel is making solid progress on subscriber growth and is
on track to post second-quarter results that will sate the bulls next month.
Current expectations call for the company to report earnings of 24 cents a share
on $2.5 billion in sales, a glowing endorsement of the company's industry-leading
margins.

As testament to the Street's rapture, enthusiastic Nextel buyers have pushed the
wireless phone service provider's stock up nearly 50% so far this year. That
compares favorably to the 24% gain by Sprint PCS (PCS:NYSE - news - commentary)
and the 38% increase of AT&T Wireless (AWE:NYSE - news - commentary) .

But the second half of the year holds a couple of daunting challenges.

The most threatening development looks to be a direct attack on Nextel's niche,
which, if successful, could not only slow subscriber growth, but rob it of
customers outright.

The company has spent the better part of a decade improving its "Push-to-Talk"
service, and recently announced it would offer the service nationwide. To date,
there have been no significant challenges to the technology, supporting Nextel's
claims that it is the only telco that can offer instant two-way radio
communications. It has certainly been a good trick and the key to Nextel's
success, but it also represents the company's technological Achilles' heel.

Starting as early as next month, Verizon (VZ:NYSE - news - commentary) will
introduce new phones that imitate Nextel's beloved walkie-talkie features. Other
rivals are also developing this service, which comes at a bad time for Nextel to
lose its most differentiating feature, because starting Nov. 24, new number
portability rules kick in that will allow customers to switch carriers yet keep
their phone numbers.

As the smallest of the six national wireless companies saddled with a somewhat
limited Motorola (MOT:NYSE - news - commentary) -specific network technology,
Nextel had its fair share of naysayers. But ever since hitting a profit for the
first time last fall, Nextel has proved its critics wrong. Many investors
underestimated the power of "Push-to-Talk" and the must-have appeal the two-way
radio has for in-the-field technicians, taxi drivers and teens.

Nextel has long been confident that no other service can replicate the quality of
its walkie-talkie service, but suddenly it seems the company may have doubts. On
Friday, Nextel announced that it will defend its legal claims to the name
"Push-to-Talk." That same day, as it just so happened, Bloomberg reported that
Verizon is expected to offer phones with walkie-talkie features in July. Add that
to a gloomy industry backdrop of slowing wireless subscriber growth, weak business
spending and an overall soft economy, and you are left with a fairly expensive
stock.

Storms on the Horizon

Nextel's always been a strong, albeit niche player, but with its defining feature
in the hands of competitors, the odds don't work well in its favor. Wireless
telcos will be turning up the marketing volume as number portability kicks in, and
consumers will have a whole new crop of color-screen, camera ready, Net-accessible
phones, and the new ability to switch to better service providers without having
to change phone numbers.

It's likely that customers will flock to the companies that offer the hottest
phones, cheapest rates and best network coverage.  People who stuck with Nextel
because of "Push-to-Talk" despite higher prices, consistently poor-rated service
and a thin selection of phones may have less of a reason to stay put. So while the
stock should get nice and steamy in July and August, it's likely to cool ahead of
a November chill.

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From: Jack Daniel <[email-masked]>
Date: Sun, 29 Jun 2003 10:22:06 -0700

Boy, what if Verizon offered;

1. Free press-to-talk service for 6 months while rolling out the service 
2. Offered an optional $2/ month average 1 year service charge contract.
3. Offered handset-up grades to existing customers.
4. Took Nextel handsets as trade-ins as a 'net zero' handset cost to the
end user for 1 year contracts. 
5. Contracted a 3rd party to flood the iDEN dealer market with
refurbished handset trade-ins at a fraction of what Nextel charges users
for handsets.
6. Offered multi-brand dealers a bounty for Nextel account conversions
(the 'exclusively Nextel dealers may want to add Verizon to make some
money).

Maybe Nextel should demand brand loyalty by cutting off combo dealers
and increasing comms to Nextel only dealers.

Then the other deeper packets, the 3 other carriers besides Verizon that
are bigger than Nextel, join the pres-to-talk melee and start chopping
at each other so much it's possible Nextel's could be so far behind the
price cutting war they are not even a competitive concern for the big
four.

And who needs to buy a company that they are beating on the street
anyway, except when the price is so low it's a cheaper cost per new
customer?

Other carriers probably can't use their existing hodgepodge of spectrum
remnants. (Kind of like trying to convince someone they can build a new
Benz out of a lot of junk yard scraps)

If I was a big investor, I'd be watching the Verizon ads a lot closer
and listening to 'influenced' investment advisors a lot less.

But I could be wrong......
Jack Daniel
=====================================

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From: [email-masked]
Date: Sun, 29 Jun 2003 14:05:58 -0400

Jack you are going to see some very aggressive marketing by Verizon which incorporates some of your ideas below with some slight
modifications. It is clear that Nextel is scared of  the competition. Nextel has been down talking and comparing their product to others for a
few months and the "other products" and the other products are not even out yet! A further demonstration of how desperate they are is their
campaign to collect Rumours & Gossip on the competition. Nextel has set up an email address just for this purpose.

<Snip>
As you know, Nextel has heard rumblings of competitors trying to copy Direct Connect
with their “push to wait” services. We want to hear from you! Tell us what you have
seen or heard! Also, we want to hear success stories, such as how customers use
Direct Connect, or even better, how they are taking advantage of Nationwide Direct
Connect! Email us at [email-masked]

http://groups.yahoo.com/group/NEXTEL-1/message/6884

In the lawsuit It  alleges Nextel shared that information with an unnamed industry analyst to "improperly  influence industry reviews" of
Verizon Wireless' upcoming service.

Look for some very familiar names in the papers filed on Friday. I also expect to Nextel to file some sort of counter suit or maybe a
trademark infringement against VZ to throw everyone off the sent of their pack of lies.
This is going to be real interesting.