Subject: [NEXTEL-1] Nextel Nails It Again

From: [email-masked]
Date: Wed, 21 Jul 2004 11:23:57 -0400

Nextel Nails It Again
By Scott Moritz
Senior Writer
7/21/2004 7:31 AM EDT
URL: http://www.thestreet.com/tech/scottmoritz/10172495.html

Nextel (NXTL:Nasdaq) continues to hit on all cylinders.

The fast-growing cell-phone service provider doubled second-quarter
operating profits Wednesday, while posting stronger-than-expected
subscriber growth and reduced customer defections. The company's
shares rose in early action.

For its second quarter ended June 30, the Reston, Va., company posted
earnings of $1.3 billion, or $1.17 a share, after a tax-valuation
gain. That's up from the year-ago $281 million, or 27 cents a share.
Revenue surged 29% from a year earlier to $3.3 billion.

Excluding charges and gains in both periods, latest-quarter earnings
jumped to $608 million, or 55 cents a share, from the year-ago $288
million, or 28 cents a share. Wall Street analysts had expected Nextel
to post earnings of 50 cents per share on $3.2 billion in sales.

"Our second-quarter results reflect continued progress on multiple
fronts and we are on track to meet or exceed our 2004 guidance," said
CEO Tim Donahue. "Subscriber quality improved during the second
quarter as reflected by an increase in average monthly revenue per
subscriber (ARPU) and a reduction in customer churn.

For the year ending in December, analysts surveyed by Thomson First
Call expect the company to earn $2.09 a share on revenue of $13 billion.

On Wednesday, Nextel said it added 546,000 subscribers and posted a
monthly churn rate of 1.6%. The company said average revenue per user
rose to $70 from $69.

Some industry observers had expected Nextel to post a monthly customer
defection, or churn, rate of 1.4% for the quarter ended in June. That
would be one of the company's lowest rates ever and a far cry from the
3.7% rate of departures at troubled AT&T Wireless (AWE:NYSE) last
quarter. Nextel was also expected to add about 500,000 new subscribers
last quarter.

The company said it ended the second quarter with $2.1 billion in cash
and $9.6 billion in debt.

Nextel has made plenty of believers with its performance over the last
two years. And this year the news has only gotten better, with strong
financial progress buttressed in recent months by a new credit line
and a favorable spectrum swap decision. But as is the case throughout
tech, the walkie-talkie seller finds itself facing rising expectations
this summer -- a situation that Wall Street knows can be fraught with
peril.

Concerns about the company's debt load and rising competition have
weighed on the stock this year. Unlike last year, when its shares
doubled, Nextel has spent 2004 sputtering. It closed Tuesday at $26,
putting it down 7% for the year.

Like the suddenly struggling Net sector, the wireless sector leaders
have come under pressure recently. Another earnings disappointment
last week from handset king Nokia (NOK:NYSE ADR) certainly didn't help
matters, though Tuesday's more measured report from Motorola
(MOT:NYSE) was reassuring.

Last week, the company refinanced by replacing a secured loan and
credit line worth $2.6 billion with a new $4 billion credit line.
Earlier this month, the Federal Communications Commission approved of
a radio frequency swap that gives Nextel a swath of 1.9 megahertz
spectrum in exchange for $4.3 billion worth of 800 MHz licenses.

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