Nextel $1.25B 9.5% Senior Unsec Notes Rated B: S&P
01/23 11:50 (DJ)
Story 5152 PRESS RELEASE: S&P Rates Nextel $1.25B Sr Unsec Notes B
Following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's CreditWire) Jan. 23, 2001 --Standard & Poor's today assigned
its single-'B' rating to Nextel Communications Inc.'s $1.25 billion 9.5% senior unsecured notes due
Feb. 1, 2011.
At the same time, Standard & Poor's affirmed its ratings on Nextel and related entities (see list
below).
Nextel is a nationwide digital wireless service provider offering an integrated package of services
including cellular telephony, digital two-way radio (Direct Connect), paging, and advanced text
messaging.
Proceeds of the new note issue will be used to fund network expansion and to purchase additional
spectrum, as well as fund strategic investments, working capital, debt service, and general corporate
purposes.
Pro forma for the issue, total debt outstanding is about $12.5 billion.
The ratings on Nextel reflect its improved financial flexibility, expected continued growth in cash flow,
strong subscriber growth, and maintenance of high average revenue per unit (ARPU).
In 2000, the company commercially launched a new wireless packetized data service offering that
provides Internet access. Demand for the company's differentiated product offering, especially its
Direct Connect by industry user groups and recently by white collar professionals, remains strong. At
Sept. 30, 2000, the total number of digital subscribers in the U.S. exceeded six million. Domestic
penetration is low at 2% compared with average cellular providers, however, this reflects Nextel's
narrowly focused marketing strategy. The company's marketing strategy is to focus on the business
customer. Consequently, ARPU is higher, at $75 for the third quarter of 2000, compared with the
$50 area for other wireless providers. Nextel's ARPU is expected to be strong over the next three
years, in the $70 area. Churn, which is in the 2% area, is below the average for digital wireless
subscribers.
To accommodate higher future growth in subscribers and higher system usage, in addition to new
data products, annual capital expenditures over the next three years are expected to be in line with
levels experienced in 1999 and 2000. Proceeds from the note issue, together with cash balances and
availability under the $6 billion credit facility, are expected to fund the majority of capital
requirements through 2003.
Nextel has a good degree of financial flexibility given its pro forma cash balance of about $6 billion at
Sept. 30, 2000, proceeds from the new issue, and $1.5 billion availability under its $6 billion bank
facility. In addition, cash flows are anticipated to strengthen over the next three years. Near-term
capital requirements should also be mitigated by Nextel Partners Inc. Nextel Partners, which is 35%
owned by Nextel, was established to build out the Nextel network in small and midsize markets.
Nextel's EBITDA coverage of interest expense for domestic operations is expected to be in the 2
times area for fiscal 2001.
OUTLOOK: STABLE
Cash flow measures are expected to improve over the next three years to support current rating
levels. In addition, Standard & Poor's expects that Nextel will fund any spectrum investments in a
manner consistent with the rating. - CreditWire
RATING ASSIGNED RATING
Nextel Communications Inc.
$1.25 billion 9.5% senior unsecured notes B
RATINGS AFFIRMED RATING Nextel Communications Inc.
Corporate credit rating B+
Senior unsecured debt B
Preferred stock CCC+
Nextel Finance Co.
Corporate credit rating B+
Bank loan BB-
Nextel International Inc.
Corporate credit rating B
Senior unsecured debt B-
(END) DOW JONES NEWS 01 -23 -01
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