Subject: [NEXTEL-1] Wireless maverick wins loyal corporate following

From: [email-masked]
Date: Thu, 12 Feb 2004 17:17:35 -0500

Wireless maverick wins loyal corporate following
Nextel Communications Inc.: Focus on higher margin business customers 
like Motorola pays off
  
Paul Taylor  
Financial Times 

Thursday, February 12, 2004
 
When the first round of bids for AT&T Wireless Services Inc., the 
U.S. wireless network operator, closes tomorrow it will become clear 
whether the long-awaited consolidation of the U.S. wireless telephony 
sector has finally begun.

Whether or not Nextel Communications Inc.'s name is among the 
bidders, the fifth-largest U.S. wireless carrier already looks like a 
long-term survivor.

In many respects the company, based in Reston, Va., is a maverick in 
the sector. It built its nationwide network in the mid-1990s using a 
digital technology called iDEN (integrated dispatch enhanced network) 
instead of the CDMA (code division multiple access) and GSM (global 
system for mobiles) technologies favoured by rivals such as AT&T 
Wireless, one of the three U.S.-based GSM operators.

And while other carriers courted consumers and staged sporadic 
pricing wars, Nextel focused on business users.

By industry measures Nextel, which expanded its subscriber base by 
almost 22% to 12.3 million in the 12 months to the end of September, 
is one of the most successful wireless operators.

For example, Nextel's customers spend an average of US$71 a month 
with the carrier while most other network operators manage average 
revenue per user of US$50 to US$60.

Equally importantly, customer satisfaction is high and customers are 
loyal. Nextel has a churn rate of about 1.4% less than half that of 
most other carriers. The company's share price has risen from a low 
of under US$11 in March last year to about US$28 recently. The rise 
has been underpinned by solid financial results over the past year 
and an aggressive debt reduction program that has cut net debt from a 
peak of more than US$16-billion in early 2002 to less than US$10-
billion.

This is a remarkable turnaround for a company that many were ready to 
write off as an also-ran in the U.S. wireless industry just a few 
years ago. Much of the credit for this turnaround goes to Tim 
Donahue, an industry veteran who joined Nextel in 1996 and became 
chief executive three years later.

Mr. Donahue is a long-time associate of wireless pioneer Craig McCaw 
who came to Nextel's rescue with a $1.1-billion investment in 1995.

Together with Mr. McCaw, who stepped down from Nextel's board at the 
start of December, Mr. Donahue persuaded Motorola Inc., the U.S. 
telecommunications manufacturer, to replace the company's flaky 
technology with iDEN digital technology.

Mr. Donahue recognized that, in order to survive, Nextel needed to 
differentiate its service by exploiting the iDEN technology, focus on 
higher-margin business customers and strengthen the company's balance 
sheet.

Today, the bulk of Nextel's customer base comprises business users in 
industries such as construction, trucking, retail, utilities and the 
emergency services. The rollout of its nationwide network, which 
serves 293 of the top 300 U.S. markets, was completed in August.

Three months later, Nextel announced plans to quadruple data speeds 
available over its packet-switched data network by integrating 
Motorola's third-generation WiDEN higher-speed data technology, due 
to start this year.

Underscoring the commitment to upgrade its network and the 
flexibility of the technology architecture it is built upon, Nextel 
said last week it was about to begin trials of a wireless broadband 
Internet service in North Carolina.

The broadband fourth-generation service can deliver average downlink 
data speeds of 1.5 megabits per second 50 times faster than a 
standard dial-up internet connection.

"Deploying this technology enables a wireless operator to skip a 
generation, leapfrogging the competitors' service offerings," says 
Edward Rerisi, head of research at ABI, a New York-based market 
research company. "With Nextel's history of operating against the 
grain, they are not committed to either the GSM or CDMA camp, freeing 
them to make these bold moves."

As the U.S. wireless sector restructures and responds to new 
technical challenges, this flexibility is likely to prove valuable.

http://www.canada.com/technology/story.html?id=8A36AC47-BE25-4E41-9883-6AFF3C662F56

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