Subject: [NEXTEL-1] Verizon Calls Nextel Out

From: [email-masked]
Date: Thu, 14 Aug 2003 19:16:40 -0400

Verizon Calls Nextel Out
By Scott Moritz
Senior Writer
08/14/2003 01:15 PM EDT
 by Scott Moritz

After months of talking the talk, Verizon (VZ:NYSE - commentary - research) is
finally walking the walk.  Now, once more, the question is whether wireless users
will stroll away from Nextel (NXTL:Nasdaq - commentary - research).
After much talk and not a little waiting, Verizon
is rolling out its new walkie-talkie service,
featuring a so-called push-to-talk two-way radio
feature that's aimed squarely at rival Nextel.

Nextel's greatest advantage has been a service
called Direct Connect that enables work groups
and field service teams, not to mention teens
and taxi drivers, to make conference call-type
connections. That hugely popular feature has
helped Nextel dominate its niche with business
customers and deliver the highest
per-subscriber revenue in the industry.
Investors have been happy with the company of
late as well, propelling its stock to a more than
200% gain over a year.

Now, with Verizon's offering, and Sprint PCS'
(PCS:NYSE - commentary - research) own version due out any day, Nextel will face
its first head-to-head competition for its higher-spending customers. And while
Nextel has long contended that its technology is superior to its rivals' best
efforts, investors have been less confident.

Shares of the No. 5 cell-phone service have slipped from their recent highs
despite Nextel's better-than-expected sales and subscriber growth, as well as
solid profits. In midday trading the stock was up 36 cents, or 2%, to $17.63.

For Wall Street, the overhanging issue in wireless -- now that subscriber growth
rates have peaked -- is how well companies can hang on to their customers, and
keep them from shrinking their phone bills. The worry is that in a six-player
market, differentiation is critical. Having a distinctive technological edge
always helps, especially as the industry braces for a November rule change that
will allow customers to keep their cell numbers as they jump to other carriers.
Now Nextel's advantage is at the very least under pressure.

To be sure, Nextel has a very loyal following among business users and one of the
lowest churn rates, tracking customer defections, in the business. But with rivals
imitating Nextel's service, investors can't help but wonder how long it will take
before Verizon and Sprint also imitate its success.

http://www.thestreet.com/tech/scottmoritz/10108237.html

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