OJ (Oops, I mean PT),
My reponses to your "+++" comments are preceeded by "******".
"+++ Sure. Nextel was first to market the digital cellular on a large scale. This window of opportunity, if still open, is closing fast."
****** NXTL has had strong competition in place before they began in most markets. Just because they were first to market in your town doesn't mean they were first everywhere else. They weren't but they're succeeding anyway because they can differentiate themselves from other digital companies. Remember, they're interested in mobile work groups, a niche market that includes 65 million people. Who else offers direct connect to compete with them? Answer: NOBODY.
"+++ Being proprietory and as a consequence dependent on a single technology supplier is a curse, not a blessing. Coverage is one variable of the equation, bandwidth is another. Nextel owned spectrum is fairly narrow (10-15MHz) and non-contiguous."
****** MOT owns the 2 way hardware biz. There's MOT and everyone else. Kinda like Big Blue and the rest of the pack back in the main frame days. As a shareholder of NXTL, MOT has an interest in NXTL succeeding. Furthermore, McCaw & Akerson are big boys and have protected the company in their agreements with MOT. Speaking of looking in the rear view mirror, where were you last week when it was announced that NXTL bought the goodies to give them contiguous spectrum?
+++ It is heavier and costs more.
****** For now it's heavier but not for long. Again, rear view mirror stuff, P.T. Costs more compared to what? Nobody else offers Direct Connect. And don't give me that baloney about users who don't have direct connect. That's not NXTL's primary market. Never has been, isn't currently and probably won't be in the future.
+++ What business? At best, they are a leading SMR operator. Much like the long-distance business, the digital cellular one is owned by noone, and the competition there is going be just as, if not more, intense.
******What business? How about the business of providing wireless telecommunications services to mobile work groups? Name one other telco that can compete on level ground with NXTL in that arena. (Hint: there aren't any.) Ok, now name a telco that is currently planning a 2 way feature to compete with NXTL. (Hint: there aren't any. Even if there were, it would take 3-5 years before they could offer the service.) The telecommunications industry has left the mobile work group business to NXTL. Why? Because they are obsessed with market share in the commodity business.
+++ Nextel's digital cellular looks good in comparison with "AMPS", but so do most other digital offerings.
***** Now wait a minute. You can't have it both ways. Does NXTL have a cost advantage over digital or not? The answer is "DOES". You've admitted as much in earlier posts. Fact is, it's true that NXTL has a cost advantage, from the cost of its spectrum to the cost of its network.
They will be cash flow positive in about 6 months.
+++ Says who?
****** The company. At the June annual meeting the CFO said as much. Actually what he said was the company would be operating cash flow breakeven when they had 2 million digital customers. He also said that would occur in the 3rd quarter of 1998. Akerson and Donahue have both affirmed that statement numerous times since then.
7. They have the best management in the cellular business.
+++ Says who?
****** I do. McCaw is THE pioneer of the wireless industry. Akerson is a former honcho with MCI. Need I say more?
8. They are in an industry that is growing about 35% each year. Nextel is getting a nice share of this new business.
+++ What business?
****** Ever heard of the wireless telecommunications industry? Check it out and you'll find out "what business".
10. The CEO stated recently that Nextel should be able to add about 1.5 million subscribers each year (they are close to that rate of new subscriber additions now). Since 2 million makes them cash
flow positive, you can see (if you play the the new subscriber numbers going forward) that they will be going to generate a very large amount of revenue over the next few years.
+++ Then why does Armstrong remain "guardedly optimistics" about Nextel's future?
****** Who's Armstrong? And more to the point, who cares what he thinks?
11. Their gross margins and ratio of net income to sales will be larger than most US companies. They have no telephone operators, they do now own the software, etc. ---this is a low maintenance company.
+++ Betrays complete misunderstanding of Nextel's cost structure.
****** So, Mr. Expert, kindly elucidate on the correct understanding of Nextel's cost structure.
+++ Overall, Nextel bulls appear to be looking into a rear-view mirror. A lot what they say was true yesterday, may be true today, and unlikely to be true tomorrow. The market is looking 3-6mo ahead, which is reflected in the stock price.
****** Oh, the old efficient market gambit, eh? And why would NXTL bulls look in the rear view mirror when all they'd see is debt and negative cash flow?
Arnie |
