Subject: [NEXTEL-1] Merrill Lynch On Nextel Communications Inc. - FCC May 13th Meeting could be the One To Watch

From: [email-masked]
Date: Thu, 08 Apr 2004 13:17:12 -0400

Merrill Lynch On Nextel Communications Inc.

Another Step Closer?

Reason for Report: Company Update
Jennifer Leonard

Event

• News reports indicate that three of five FCC commissioners have 
voted to require Nextel to pay between $1.3 and $1.5 billion more 
than its proposed $850 million with regard to the spectrum swap (for 
a total of $2.15 to $2.35 billion), but details were undecided.

Analysis & Recommendation

• Recall that Nextel has offered $850 million for relocation of
the 800 MHz incumbents. We have said before that we would not be that 
surprised to see a $2 to $3 billion price tag associated with the 
spectrum swap, possibly in addition to relocation costs, on our rough 
calculations—higher than the figures circulated in today's
reports. 

Furthermore, in our estimates, we had assumed that spectrum in the 
900 MHz band would be contributed by Nextel, which we now think may 
not necessarily be the case.

• At year-end 2003, Nextel had a cash position of $2.0 billion. 
Further, we estimate that Nextel will generate free cash flow of 
approximately $1.8 billion in 2004E. Therefore, we estimate that 
Nextel would clearly be able to fund with cash the potential spectrum 
purchase and relocation costs, which would likely be spread over 
several years.

• It is possible that the public safety spectrum proceeding could 
appear as an item on the FCC's open meeting of April 15th, or
more likely May 13th. We think that the next step beyond a ruling by the 
FCC very well could be litigation. Therefore, we suspect that final 
details are being worked out by the FCC in anticipation of possible 
litigation.

• So, in our view, it may take a while longer for the ultimate
story 
with regard to the spectrum swap to play out. However, the cost 
figures currently being circulated are somewhat lower than we had 
estimated.

• In our view, acquisition of 1.9 GHz spectrum by Nextel at
market 
value would be an incremental positive, with the potential for 
eliminating the uncertainty with regard to Nextel's ultimate
spectrum 
position. However, the incremental spectrum will be associated with 
incremental capital spending, thereby impacting our future free cash 
flow estimates.

• We maintain our Neutral rating.

Analyst Certification

I, David Janazzo, hereby certify that the views expressed in this 
research report accurately reflect my personal views about the 
subject securities and issuers. I also certify that no part of my 
compensation was, is, or will be, directly or indirectly, related to 
the specific recommendations or view expressed in this research 
report.

-- 
    "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/