Nextel shares drop on warning of charge at unit
3:40 p.m. 02/19/2002
By Yukari Iwatani
CHICAGO, Feb 19 (Reuters) - Shares of Nextel Communications Inc. (NXTL), the nation's No. 5 wireless operator, fell to an all-time low on Tuesday -- hit hard after the company said its NII Holdings Inc. unit will take a pretax noncash restructuring charge of $1 billion to $2 billion in 2001.
Nextel fell to an all-time low of $3.41 before recovering some to $3.52, off $1.34, or 27.5 percent, in afternoon trade on the Nasdaq, where it was the most actively traded stock and a top percentage loser.
Nextel Partners Inc. (NXTP), a completely separate affiliate company, also saw its shares fall $1.15, or 23.5 percent, to $3.75.
Options traders cited mixed call and put activity on Nextel options. "There is an increase in volatility due to some rumors that they have problems with their debt," said one trader on the American Stock Exchange. "It's been two-way order flow."
NII Holdings, a provider of wireless services to business customers in four Latin American countries and the Philippines, on Friday said it expected to record the charge as a result of cash preservation initiatives and proposed debt restructuring. Nextel filed the press release with the Securities and Exchange Commission on Tuesday.
The company said previously that NII was in discussions with various creditors regarding a restructuring of debt. It said options included a sale of strategic assets, Chapter 11 bankruptcy protection or other measures.
Analysts said the news was not surprising.
"Everyone has kind of written it off. I don't think it surprised anyone," said William Benton, wireless analyst with William Blair & Co.
"It is more evidence of the fact that the company is probably looking to efficiently realize its remaining cash resources which automatically creates a little bit of trepidation among investors." Benton said.
NII Holdings also said it expected 2001 full year operating revenues of $680 million and negative operating cash flow of $100 million. It expects fourth-quarter revenues of $194 million and a cash flow loss of $4 million. NII said it added 27,400 subscribers during the fourth quarter finishing the year with 1.19 million global proportionate subscribers.
The disclosure also followed an article by financial publication Barron's that said the wireless industry, faced with high marketing costs, large customer turnover and a lack of pricing power, may consolidate in 2002.
Thomas Lee, wireless analyst for J.P. Morgan Chase, said he believed Nextel's shares were pressured more by the article, which said that investors should avoid Nextel stock.
The article also pointed out that Nextel's debt was trading last week at about 60 cents on the dollar and suggested that Wall Street anticipates a debt restructuring.
Nextel had $16.6 billion of debt and cash of $4.4 billion as of Sept. 30.
"You've got the article in Barron's and they're taking this charge and it appears that they're writing down the value of their international business," said Peter Friedland, wireless analyst with WR Hambrecht & Co. "There's just uncertainty there. It's not clear exactly what's going to happen so investors are just selling."
Friedland added, however, that Nextel should not need to restructure its debt because it will likely only see a shortfall of about $1 billion in 2002, which can be covered by its cash.
Shares of other wireless firms were also weaker on Tuesday. Sprint PCS Group (PCS) stock fell 74 cents, or 7.98 percent, to $8.53 on the New York Stock Exchange, while shares of AirGate PCS Inc. (PCSA) were off 91 cents, or 7.55 percent, at $11.14 on the Nasdaq.
On a broader basis, the Philadelphia Stock Exchange's wireless telecommunications index was off 3.6 percent. |
