Nextel Downplays Market Rumors Of Takeover By MCI WorldCom
November 05, 1998 4:57 PM
NEW YORK -(Dow Jones)- Nextel Communications
Inc.'s shares climbed Thursday on a fresh round of
rumors that the wireless company would be acquired by
MCI WorldCom Inc., the newly formed long-distance
giant.
At the close, Nextel (NXTL) was up $2.188, or 10%,
to $23.188 on volume of 8.1 million, more than doubling
the daily average. Nextel said the speculation was
unfounded, and attributed the stock's rise to a recovery
from a sell-off that followed third-quarter earnings.
Options traders who specialize in takeovers said they
have heard rumors about Nextel and MCI WorldCom,
but are cautious. The market's recent rebound has
revived many flimsy takeover rumors, they said.
But others suggest that since MCI WorldCom
(WCOM) lacks a wireless division, an acquisition could
be in the offing. They say phone companies are
increasingly eager to offer customers a full range of
services, and Nextel's extensive network and popularity
among business customers would represent an attractive
asset for MCI WorldCom.
Nextel got a second wind a couple of years ago after
cellular-industry pioneer Craig 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 cellular players. Many businesses are
buying an average of seven Nextel phones per
transaction, allowing Nextel to spread its marketing
costs better than a cellular company.
The once-struggling company aims to become 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 the effort is defensive. AT&T and
other wireless concerns with far-bigger resources have
stepped up their marketing in the last year to business
users, a market where customers use their phones more
and rarely cancel service.
MCI WorldCom, the second-largest long-distance
carrier, is taking aim at the global networks of its two
largest rivals, No. 1 AT&T Corp. (T) and No. 3 Sprint
Corp. (FON). AT&T has teamed with British
Telecommunications PLC and Sprint with France
Telecom and Deutsche Telekom AG.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
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