Here is the story from the WSJ.
Nextel Takes Its First Steps
Into Tricky Consumer Market
By STEPHANIE N. MEHTA
Staff Reporter of THE WALL STREET JOURNAL
Nextel Communications Inc., the wireless-phone carrier that sells its
services almost exclusively to business clients, is sticking a toe in
the far more treacherous consumer market.
Emboldened by its turnaround from network glitches that earlier
threatened to make it a bit player in the wireless revolution, a revived
Nextel Wednesday disclosed talks to place its phones in more than 400
Ritz Camera Centers Inc. stores. Friday, the company will begin selling
its wireless phones on a trial basis in seven CompUSA Inc. stores. Both
retailers cater to small businesses and the consumer market.
Nextel is entering the consumer business cautiously -- the CompUSA link
is hardly retailing on a mass scale. But a broader consumer offensive is
definitely coming from the McLean, Va., company. Beyond the retailing
test, Nextel has already eliminated the costly and confusing "roaming
fees" that other cellular-phone companies charge. It is also exploring
new products, such as less expensive pager-size phones that would let
parents and their kids communicate walkie-talkie style, using
transmission technology that is exclusive to Nextel. And the company's
current ad campaign features snappy television spots aimed at consumers.
Designs for Consumers
"Our primary focus today is the business market," Nextel Chairman Daniel
F. Akerson said. But "over the long term, we will gravitate to consumer
applications." He said such applications are at least 12 to 18 months
away.
Mr. Akerson aims to take the once-struggling, small wireless company to
the next level as a national brand that can compete on the scale of AT&T
Corp.'s wireless unit and the ambitious service being built by Sprint
Corp. Part of his effort is defensive. AT&T and other wireless concerns
with far-bigger resources have stepped up their own marketing in the
last year to business users, a cushy niche where customers use their
phones more and rarely cancel service. Striking back in the mass market
would also boost Nextel's growth and command loftier stock valuations,
analysts said.
But there are big risks. Expanding beyond the lucrative business market
into the mass market "is a double-edged sword," said Steven Yanis, an
analyst at BancAmerica Robertson Stephens. Consumer is a "bigger market
with more questionable economics," given that phone-savvy consumers
regularly cancel service, and they don't make as many calls as business
users, Mr. Yanis said.
Built-In Walkie-Talkie
Nextel got a second wind a couple of years ago after cellular pioneer
Craig O. McCaw made a big investment. Today, the company's
wireless-phone system uses the radio band traditionally used by taxi
dispatchers and truckers, and its phones contain a built-in
walkie-talkie that allows work groups to communicate at cheap rates,
and which makes Nextel unique in a sea of me-too cellphone players. Many
businesses now are buying an average of seven Nextel phones per
transaction, allowing Nextel to spread its marketing costs better than a
cellphone company can, Mr. Yanis said.
But Nextel hasn't had much of a mass retail presence beyond typical
cellphone dealers. Much of the company's sales are done directly to
businesses. And its phones are brawny at about eight ounces, compared
with sleek cellphone models such as Motorola Inc.'s popular 3-ounce
Star-Tac cellphone.
Mr. Akerson promises that slimmer Nextel models will be available within
a few months. And, he said, new services specifically for the mass
market are being studied, including possibly the inexpensive family
walkie-talkie. As a further aid, a federal auction now in progress is
enabling Nextel to amass a single giant block of radio channels, thus
eliminating what is believed to be one of the carrier's biggest present
handicaps: Its phones must seek out channels by sometimes skipping over
those occupied by other carriers.
"We've come a long way, but we've got to go 10 times farther to achieve
the goals and objectives we've set," Mr. Akerson acknowledged, adding
that he was "guardedly optimistic" that the new Nextel can pull it off. |
