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

To: SteveG who wrote (9082)	4/19/1999 11:38:00 PM
From: SteveG	Read Replies (1) \| Respond to of 10227

Merrill on NXTL Investment Highlights: · Nextel Communications reported 1Q 99 operating results on Monday, April 19th, with in-line subscriber growth and better than expected domestic EBITDA. · We continue to maintain our intermediate-term Buy investment opinion. Fundamental Highlights: · Nextel added 415,000 net domestic digital subscribers during 1Q 99, excluding two one-time adjustments that removed 52,000 units from Nextel's subscriber base. This was higher than our estimate of 375,000. · Excluding this adjustment, monthly churn during 1Q 99 was 2.0%, flat with 4Q 98. · Domestic digital ARPUs during 1Q 99 were $71, higher than our estimate of $68 and minutes of use (MOUs) remained about 400. · Domestic EBITDA during 1Q 99 was $81.8 million, slightly higher than our estimate of $75.4 million. · International EBITDA losses were d$46.0 million, slightly higher than our estimate of $39.3 million. Nextel Reports 1Q 99 Results - Domestic Subscriber Adjustments Nextel reported that it added 415,000 net domestic subscribers during 1Q 99. However, there were two one-time adjustments that removed 52,000 subscribers from Nextel's ending subscriber base. This adjustments included the removal of 40,000 units that were previously classified as “temporary deactivations” over the past 12-to-18 months and determined to be permanent deactivations during 1Q 99. In addition, Nextel lowered its ending subscriber base by the 12,000 units that were given to Nextel Partners in conjunction with the company's transaction with Nextel. - Revenues Nextel's domestic revenues during 1Q 99 were $643.9 million, versus our estimate of $607.4 million up 105.0% over 1Q 98. Nextel International reported proportionate revenues of $19.9 million, versus our estimate of $26.0 million. - What about Minutes of Use? Nextel's average monthly MOU were approximately 400, with 46% cellular and 54% DirectConnect minutes. This compares to a 43% cellular and 57% DirectConnect mix during 4Q 98. We believe that the increase in the cellular MOUs has contributed to the strong monthly ARPUs during 1Q 99. - What about sales of the i1000? Sales of Nextel's high-end handset (i1000) continues to be strong. We estimate that it represented about one-third of the gross handset sales during 1Q 99. We believe that this smaller handset has helped Nextel with its sales to larger corporate clients and more white-collar subscribers. - Capital Expenditures NXTL's consolidated capital expenditures were $424 million during 1Q 99, with $375 million for domestic capital expenditures and the remaining $49 million for international. We believe that capital expenditures during 2Q 99 could be higher than 1Q 99 as the company installs additional switches to handle the increased traffic on the network. We continue to maintain our estimate that Nextel will spend a total of $1.9 billion in capital expenditures during 1999. - SpectraSite We believe that Nextel will complete its previously announced tower sale/leaseback transaction with Spectra Site within one week. The proceeds from this transaction for Nextel will be approximately $560 million. - What about capital availability? We believe that at the end of 1Q 99, Nextel had about $1.1 billion unused borrowing on its bank facility as well as $245.8 million in cash and cash equivalents. In addition, Nextel will receive cash of about $560 million for the Spectra Site transaction, $278 million this summer from McCaw options proceeds, and about $67 million for its LMDS licenses. This implies a total availability of $2.25 billion. - Nextel International Update Nextel International added 40,100 net proportionate subscribers during 1Q 99, versus our estimate of 52,000 net adds, for an ending base of 206,600. Nextel International launched dispatch-only service in Lima, Peru and plans to begin offering interconnect service in this market by the end of April. Although Brazil has experienced slower growth as a result of the economic turmoil, the company is continuing to add subscribers in that market. We estimate that Nextel International will generate about $170 million in revenues during 1999. Projections Subscribers: We estimate that Nextel will add 390,000 net domestic digital subscribers during 2Q 99, up 73.5% over 2Q 98 for an ending base of 3.54 million. We estimate that Nextel International will add 45,000 net proportionate subscribers for an ending base of 251,600. EBITDA: We estimate that Nextel's domestic operations will generate $123 million in EBITDA during 2Q 99E, up from $82 million during 1Q 99. We estimate that Nextel International's EBITDA losses during 2Q 99E will be d$44 million. This implies a consolidated EBITDA estimate for 2Q 99E of $79 million, up from $36 million during 1Q 99.