Nextel's Confidence Questioned
SEPTEMBER 14, 2001
Wireless Today via NewsEdge Corporation : Nextel Communications [NXTL] will
have to hustle to meet its subscriber- growth goal this quarter and will face
increasing debt to pay for migrating its network to third-generation (3G)
technology, equity analysts at Jefferies & Co. reported.
Reston, Va-based Nextel, the world's largest provider of specialized mobile radio
telecom services through its integrated digital enhanced network footprint, last
week said it has reached 8 million U.S. subscribers. The company said its growth
rate indicates it will reach its goal of adding 500,000 subscribers in the
July-September period.
"Domestic subscriber additions and operating cash flow for the third quarter are
currently on track to exceed second quarter levels and we are currently pacing to
exceed 500,000 subscriber additions," Nextel President and CEO Tim Donahue
said in a statement.
Jefferies equity analysts, led by Frederick Moran, maintained their "hold" rating
on Nextel's stocks following the carriers' guidance reiteration. They questioned
Nextel's confidence in reaching its growth goal.
"We believe that management has factored in a strong September result given
that the company will need to add approximately 185,000 subscribers this month
to meet its target," Jefferies analysts said. "We maintain third- and
fourth-quarter net addition estimates of 475,000 per quarter, leading to 8.6
million year-end subscribers, up 29 percent year over year."
In addition, Nextel's "heavy debt load and technology migration issues continue
to present considerable risk," according to Jefferies analysts. They estimate
Nextel's consolidated debt will be $18 billion at the end of the year and predict
that the company will need additional financing to migrate its network to 3G
level. "Given these concerns and our belief that a purchase of the company is
unlikely given its current debt burden, proprietary network, and less favorable
spectrum position, we remain cautious on Nextel shares," Jefferies analysts said.
In addition to reiterating its third-quarter guidance, Nextel announced these
executive-level staff appointments: Paul Saleh as executive vice president and
chief financial officer; Mark Angelino as senior vice president of sales operations;
and Gary Cohen as vice president of its enterprise market.
Saleh has worked as senior vice president and CFO of Walt Disney International
[DIS], and has had senior financial experience with Honeywell. He succeeds John
Brittain, who remains with the company as vice president and treasurer.
Angelino comes to Nextel from IBM [IBM], where he worked in senior sales
positions. Cohen worked in sales for IBM and Scient.
-- Malcolm Spicer, mspicer@pbimedia.com
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