UPDATE 2-Nextel stock falls on low subscriber growth
(Updates share price, adds details paragraphs 1-5,8-9. Adds
byline)
By Jessica Hall
NEW YORK, Oct 5 (Reuters) - Shares of Nextel Communications Inc. fell 10 percent on Thursday after the wireless telephone company said it added slightly fewer domestic subscribers in the third quarter than Wall Street had expected.
Reston, Va.-based Nextel said it added more than 540,000
subscribers in the United States, falling short of the average Wall Street forecast of about 550,000 new subscribers and below some analysts' optimistic forecasts of more than 575,000 new customers.
Shares of Nextel fell $4-1/2, or more than 10 percent, to $39-5/16 in afternoon trading on Nasdaq. The stock is down about 25 percent so far this year.
"People are accustomed to Nextel beating numbers, and now they're not beating numbers and they're even falling a bit short," said Bear Stearns analyst David Freedman.
Nextel, which serves mostly high-spending business
customers rather than consumers, had averaged 550,000 net
subscriber additions in the first two quarters of this year.
Nextel Chief Executive Tim Donahue had said in July he saw "no reason why we can't continue to add customers at that rate."
Nextel's lower-than-expected third quarter subscriber
growth follows similar warnings by other wireless carriers.
Sprint PCS Group said it would have slower
subscriber growth due to increased competition and its decision to cancel some unprofitable customers. Dobson Communications Corp. , meanwhile warned that higher-than-expected customer turnover would dampen its growth.
The sharp drop in Nextel's stock price "shows how jittery the market is. You don't have to miss by much to get (your stock) pounded," said one trader.
While Nextel indicated that its third quarter average
monthly revenues and customer turnover would be better than
Wall Street expected, "the market just looks at the sub growth and panics," the trader said.
Nextel said its customer turnover, or churn, remained at
about 2 percent in the third quarter. Its average monthly
revenue per subscriber met or exceeded the $74 average revenues seen in the second quarter, and its initial forecasts of $72.
Nextel said it has made "significant progress" in its
wireless data operations. It said it had more than 200,000 data subscribers on its Nextel National Network by the end of September.
The company, which industry sources said has been in talks to combine its operations with AT&T Corp.'s wireless
unit, plans to release its third quarter results later this
month.
A combination with AT&T Wireless would give Nextel access to AT&T's extensive wireless spectrum licenses and deep pockets to expand its network and participate in the upcoming auctions for U.S. wireless licenses, analysts said.
Nextel has declined to comment about the rumored
negotiations with AT&T.
Nextel had said in July it was weighing partnerships with various telephone companies and Internet-related firms. It also said it may enter the upcoming auctions for U.S. wireless licenses with a partner.
Nextel said it has doubled its frequency position in the
top 100 U.S. markets since it launched its first digital
service in 1996.
Nextel now has more than 22 megahertz of wireless frequency in the United States in the 700-, 800- and 900-MHz frequency bands, which is more than some analysts had expected.
"While there are limitations on using 700-MHz channels,
this spectrum increases our flexibility going forward and we
remain quite positive on our ability to continue to offer
innovative wireless communications solutions aimed primarily at business users," Donahue said in a statement.
"While the wireless industry is certainly becoming more
competitive for low cost consumer wireless services, business growth continues to be our focus," Donahue said. More than 90 percent of Nextel's monthly service bills are paid by a
business. |
