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Technology Stocks : NEXTEL -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (7976)	10/16/1998 10:51:00 AM
From: Anthony Wong	Respond to of 10227

Junk Bond Mkt Shrugs Off Nextel's Weak 3Q Customer Growth October 15, 1998 2:26 PM By Tom Sullivan NEW YORK (Dow Jones)--Nextel Communications Inc.'s (NXTL) bondholders were calm Thursday despite disappointing third-quarter customer growth, a development that spooked stockholders. The McLean, Va., wireless communications company said it added 375,300 new domestic customers in the third quarter, slightly less than analysts expected, and said new customer growth in the fourth quarter would slacken or, at best, hold steady. The company had never previously reported a slowdown in subscriber growth. Nextel's stock tumbled on the news. Its class-A shares were quoted down 2 7/16 at 17 1/4. At one point it tumbled as much as 4 5/16 to hit 15 3/8, a new 52-week low. But Nextel's 9.75% senior serial redeemable discount notes due 2007 were quoted around 54 bid, down a point, compared with Thursday's broad drop in the junk bond market of 1/2 to 3/4 point. "Nextel has made substantial progress" in meeting its national buildout, said Christopher Towle, high-yield portfolio manager at Lord Abbett & Co., who owns some Nextel bonds. "But people get nervous" at any bump in the road "because this is capital-eating machine that needs constant flows of capital for its major national buildout." Nextel officials said the company was going into the fourth quarter with about $1 billion in credit commitments from banks for domestic use and is working to raise vendor commitments outside the U.S. Company officials said existing credit would be not be enough to carry it all the way through next year, adding that it was "well aware" that current market conditions rule out a new junk bond offering. Investors Cite Long-Term 'Momentum' Nextel had capital expenditures of $473 million in 1996, $1.6 billion in 1997 and, for the 12 months through June 30, $2.19 billion. The company "has tremendous momentum and its third-quarter revenues more than doubled" to $506.6 million from $207.2 million, noted Lord Abbett's Towle. The company also reported a third-quarter loss of $1.39 a diluted share, excluding a charge, compared with a loss of $1.26 a share a year ago. However, it also reported positive third-quarter domestic operating cash flow of $7.2 million, its first positive cash-flow ever. "You have to balance the short-term against the long-term focus," said Peter Andersen, high-yield portfolio manager at Conseco Capital Management, who owns some Nextel bonds. "You have to expect some bumps in the road, especially in a buildout investment. Over the long term, they're doing just fine." Still, although he likes Nextel as an investment, Andersen said he has some concerns about the company's product mix. Nextel sells hybrid cellular and two-way radio handsets. Its low-frequency digital service is aimed at businesses. "I know people who use (the Nextel phone) and swear by it," said Roger King, portfolio manager at Dreyfus Corp., owns just a smattering of Nextel's bonds. He said the users he knows "are the target of Nextel's marketing, small business people." -Tom Sullivan, 201 938-2048; Tom-G.Sullivan@cor.DowJones.com