Subject: [NEXTEL-1] Flarion is on FIRE~ Blazzzing Through N.C.

From: Marcel <[email-masked]>
Date: Sat, 17 Apr 2004 00:39:18 -0400

Nextel Communications 
(NASDAQ: NXTL)  
 
Company Update

Outperform 

Above Average Risk 

RBC Tests of NXTL/Flarion Show Performance Superiority vs. 3G and 
2.5G  
 
Event
 
Performance Test of Nextel's Flarion Technology
 
Investment Opinion
 
Our tests of NXTL/Flarion in North Carolina showed vastly superior 
bandwidth and latency to what we obtained during earlier 1xEV-DO, 
1xRTT, and EDGE trials. In fact, we found WiFi and wireline-based 
throughputs and latencies to be a more comparable performance 
benchmark for the Flarion technology. 
Faster Speed : Our tests yielded mean/median speeds of 952 kbps/942 
kbps, which places the technology on par with cable modem and WiFi 
systems and significantly faster than most DSL speeds, EV-DO speeds 
(300-500 kbps) and EDGE and 1xRTT speeds (80-100 kbps). 
Faster Latency : We experienced average latencies of 45 
milliseconds, which was comparable to DSL and slightly slower than 
most cable-modem connections we have tested, but significantly 
faster than our previous tests of 2.5G/3G wireless technologies, 
which yielded latencies in the range of 300-600 milliseconds. 
Net/net: While many questions remain as to the commercial viability 
of wireless broadband service and the cost, scope, and timeline of a 
potential buildout, we view our tests as tentative confirmation of 
NXTL's potential to offer vastly superior performance vs. other 
wireless technologies and on par with cable-modem performance. 
We maintain our Outperform rating with Above Average risk qualifier. 
Our 12-month price target is $31. 

 
METHODOLOGY 

We recently measured throughput and latency performance of Nextel's 
recently commercialized Flarion technology at five locations in the 
Durham/Cary/Raleigh area. Throughput is a measure of how much 
bandwidth the network is able to deliver, for instance when 
downloading a complex Web page or transferring a file. Network 
latency is a factor in determining the amount of delay between 
clicking on a Web link and the actual start of the page download. We 
measured throughput using a Web-based bandwidth meter (the same one 
we have utilized for previous cable modem, DSL, Wi-Fi, EDGE, and 
1xEV-DO throughput tests). We measured network latency by utilizing 
the "ping" function to track round-trip packet travel times from our 
computer to a local Web server.

RESULTS 

Speed : Our tests yielded average and median speed of 952 Kbps and 
942 Kbps, respectively, with 40% of the reading above 1.0 Mbps. This 
compares quite favorably to our past tests of Verizon's 3G 1xEV-DO 
network, which averaged throughput of 329 Kbps and median of 334 
Kbps. In addition, Flarion was almost 9 times faster than AWE's EDGE 
(111 Kbps) and PCS' 1xRTT (101 Kbps) services. Please refer to our 
analyses notes from 10/6/02 and 11/19/03 for highlights of our 
earlier performance tests. Although we understand NXTL has provide 
two T1s (approximately 2.2 Mbps) of backhaul capacity to many of its 
cell sites in the Flarion markets, we suspect that some of our test 
results may have run up against backhaul limitations or NXTL-imposed 
bandwidth constraints, rather than limitations of the air interface.

Latency : We experienced average latency of 45 milliseconds. This 
compares to 10-30 milliseconds for DSL and cable modem connections 
we have tested and is, in our opinion, an imperceptible difference. 
In contrast, other wireless technologies we have tested showed 
significantly higher latencies, e.g. 500-600 milliseconds for EDGE, 
and 300-400 milliseconds for 1xRTT and EV-DO.

Overall Performance and Coverage : Our tests suggest the 
NXTL/Flarion performance is vastly superior to all currently 
available mobility wireless data technologies and faster than most 
DSL services. We were also impressed with the contiguous network 
coverage. While traveling between the five test locations, we were 
connected to an instant messenger client and did not receive a 
single disconnection notification.

Pricing : NXTL offers four pricing plans ranging from $35 to 
$75/month with three of the four plans being unlimited usage plan, 
tiered by up/download speed. NXTL sells the Nextel Wireless 
Broadband PC card for $50, reduced from the original price of $200. 
Nextel management previously indicated that for a wireless broadband 
rollout to be profitable, it would need to generate revenue at 
approximately $20/Gbps/month. Given the very early stage of the 
rollout, it remains too soon to conclude whether the demand for 
wireless broadband will justify the cost to Nextel.

NET/NET: 

While many questions remain as to the commercial viability of 
wireless broadband service and the cost, scope, and timeline of a 
potential buildout, we view our tests as tentative confirmation of 
NXTL's potential to offer vastly superior bandwidth/latency 
performance vs. other wireless technologies and on par with cable-
modem and WiFi performance (but with a more extensive footprint 
because of its coverage advantages).

Valuation
 
We maintain our DCF-supported price target of $31 and our Outperform 
rating with Above Average risk qualifier. Our valuation is based on 
a 3-year DCF model that incorporates an 11% discount rate and 14.3x 
terminal-year FCF multiple. Nextel's prior track record, current 
operating trends, and recent management comments lead us to believe 
our current 2004 EBITDA, EPS, and FCF assumptions are readily 
achievable with a possibility of upside.

Price Target Impediment
 
Potential factors that would impede NXTL share performance include 
deteriorating economic conditions that would affect NXTL's business 
customer base, greater than anticipated competition from other 
carriers' push-to-talk offerings, pricing competition, escalating 
acquisition/retention costs, higher churn, slower subscriber growth, 
or higher interest rates.

Company Description 
Nextel Communications, Inc. provides wireless communications 
services, primarily to business users in the United States.  
 
Disclosures

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

 
RBC Capital Markets Corp. makes a market in the securities of Nextel 
Communications, Inc. and may act as principal with regard to sales 
or purchases of this security.

------------------------ Yahoo! Groups Sponsor ---------------------~-->
Buy Ink Cartridges or Refill Kits for your HP, Epson, Canon or Lexmark
Printer at MyInks.com.  Free s/h on orders $50 or more to the US & Canada.
http://www.c1tracking.com/l.asp?cid=5511
http://us.click.yahoo.com/mOAaAA/3exGAA/qnsNAA/61FxlB/TM
---------------------------------------------------------------------~->

-- 
    "NEXTEL-1 IT'S NOT JUST NEXTEL"
  Note The New address 
Subscribe to Nextel-1: http://www.groups.yahoo.com/subscribe/NEXTEL-1

  "NEXTEL2 FOR iDEN SOFTWARE DEVELOPERS"
Subscribe to Nextel2: http://www.groups.yahoo.com/subscribe/NEXTEL2

  "WIRELESS FORUM HOMELAND SECURITY GROUP"
     The Complete Resource for Wireless Homeland Security.
Subscribe to WFHSG:  http://www.groups.yahoo.com/subscribe/WFHSG

Yahoo! Groups Links

<*> To visit your group on the web, go to:
     http://groups.yahoo.com/group/NEXTEL-1/

<*> To unsubscribe from this group, send an email to:
     [email-masked]

<*> Your use of Yahoo! Groups is subject to:
     http://docs.yahoo.com/info/terms/