Nextel Partners Expects 1 Million Customers by 2004
New York, June 7 (Bloomberg) -- Nextel Partners Inc., which provides wireless telephone service under the Nextel name in smaller U.S. markets, expects 1 million customers by 2004, Chairman and Chief Executive John Chapple said.
``I'll be disappointed if we don't at least do that,'' he said in an interview at the Deutsche Banc Alex.Brown Media and Telecommunications conference in New York. ``I'd like to see it happen by 2003.'' The company had 75,400 subscribers at the end of the first quarter.
Kirkland, Washington-based Nextel Partners is 32 percent owned by Nextel Communications Inc., a nationwide wireless telephone company controlled by cellular pioneer Craig McCaw. Chapple said the subscriber forecast, prepared for the company's initial share sale in February, now seems conservative.
``We're more than fully funded to get our business plan done, the markets that we're in have less competitors than the major urban markets, and we're exceeding the business plan that was put together for the IPO,'' he said.
The forecasts suggest Nextel Partners will end the year with more than 200,000 subscribers, Chapple said. The rate at which customers leave the company, known as churn, has fallen from almost 4 percent in January 1999 to 2.3 percent at the end of the first quarter and should be below 2 percent by year's end, he said.
Nextel Partners' shares fell 7/16 to 26 5/16. They have risen 32 percent since the company first sold shares in February at $20 each. Nextel Communications, based in Reston, Virginia, rose 3 1/2 to 54 3/4.
What's in a Name?
Three-quarters of Nextel Partners' employees own company stock. Their business cards carry the title ``partner,'' regardless of the person's job function, Chapple said. Customer- facing employees have cards identifying them as part of Nextel Communications, helping ensure customers view all operations as part of a unified brand.
While affiliates of Sprint Corp.'s PCS Group, such as AirGate PCS Inc. and Alamosa PCS Holdings Inc., pay a percentage of their gross sales to Sprint for the use of the Sprint PCS name, Nextel Partners can use the Nextel name for free until 2003, when the company expects to have positive cash flow.
Analysts use cash flow, or earnings before interest, taxes, depreciation and amortization, to value companies with heavy debt loads, such as those building communications networks.
Nextel Communications shares its switches -- $20 million boxes that send phone calls to and from their destinations -- with Nextel Partners at cost, allowing the smaller company to conserve capital until its subscriber base reaches a certain size in each market. The companies also use the same advertising agency, network monitoring facility and computer systems.
``Nextel (Communications) was principally concerned with getting as much coverage as quickly as possible, with a strong management team,'' Chapple said. ``They weren't looking at burdening us with a significant expense infrastructure.''
Chapple said he has purchased Nextel Partners shares three times in the past few weeks. The company's original investors -- senior management, Donaldson, Lufkin & Jenrette Inc., venture capital firm Madison Dearborn Partners Inc., and McCaw -- agreed during the initial public offering not to sell for 18 months.
Expansion
Nextel Partners is looking for more wireless capacity along the Canadian and Mexican borders, Chapple said. The company can also exchange equity for additional U.S. licenses from Nextel Communications, in areas where the larger company hasn't yet built its own network.
Nextel Partners doesn't plan to participate in upcoming auctions of bandwidth in the 700-megahertz frequency now used by certain television stations. The U.S. Federal Communications Commission plans to sell the licenses in September.
The company currently uses 800- to 900-megahertz licenses, so its phones would have to be replaced or reconfigured to work at the 700-megahertz level.
``In the future, if there was a handshake technology and it made sense for us to acquire some 700 (megahertz licenses), we might do it,'' he said.
Jun/07/2000 16:26 ET |
