By Yuki Noguchi Washington Post Staff Writer
Thursday, July 22, 2004; Page E01
Nextel Communications Inc. posted large gains yesterday as the Reston-based company and other leading cellular phone providers reported growth in new subscribers.
Nextel reported its ninth consecutive profitable quarter on a large increase in revenue. It is the smallest of the six national carriers but generates the largest profit margins in the business.
It said profit quadrupled to $1.3 billion ($1.12 per diluted share) on revenue of $3.3 billion during its second quarter ended June 30, compared with $281 million (27 cents) on revenue of $2.6 billion during the same period a year ago. Part of the improvement in the most recent quarter stemmed from a one-time tax gain of $726 million.
For the first six months of this year, Nextel posted profit of $1.89 billion ($1.64) on revenue of $5.72 billion compared with $489 million (47 cents) and revenue of $4.6 billion for the same period a year ago.
The company had a net gain of 546,000 customers during the quarter, for a total of 13.9 million subscribers. Those subscribers paid more than a year ago -- $70 a month on average -- in large part because customers are talking more and using more data services, the company said.
"I am optimistic that we will maintain this momentum going forward," Nextel chief executive Timothy M. Donahue said in a conference call.
Other companies reporting earnings yesterday also showed success in signing up new customers. Sprint Corp., a larger carrier based in Overland Park, Kan., said it added 897,000 wireless subscribers in the quarter. Cingular Wireless, a joint venture of SBC Communications Inc. and BellSouth Corp., announced it added 428,000 new customers.
AT&T Wireless of Redmond, Wash., which had been bleeding customers, said it added 15,000 new subscribers in its most recent quarter. Verizon Wireless, the nation's largest carrier, will report its results Tuesday.
The wireless industry is growing faster than expected, in part because companies are trying harder to keep their customers, said Jonathan Atkin, an analyst with the RBC Capital Markets. More wireless carriers are locking customers into two-year contracts, which means more stable revenue.
Nextel's stock price has shot up in the last year from about $6 a share to about $26. Shares of Nextel closed yesterday down $1.54 at $24.46 a share.