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Nextel Profit Up On Sustained Wireless Growth

By Yuki Noguchi
Washington Post Staff Writer
Saturday, October 23, 2004; Page E01

Nextel Communications Inc. yesterday reported improved profit and revenue during its third quarter as it boosted its subscriber base to 14.5 million, an increase of 550,000.

The results for the nation's sixth-biggest provider of mobile phone service echo reports earlier this week of strong customer growth from other major cellular companies.


Nextel's Paul Saleh said he expects continued growth in key sectors.

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Sprint PCS Group said it added 429,000 customers during its third quarter, not including wholesale customers. AT&T Wireless Services Inc. reported adding 170,000 customers to its base, and Cingular Wireless LLC said it added 657,000. Verizon Wireless, the nation's biggest carrier, is to report results Thursday when its parent company, Verizon Communications Inc., releases its earnings.

Earlier this year, the industry had braced for a slowdown in growth. Instead, users keep signing up for cellular service, and the U.S. subscriber base has grown from 158 million at the end of last year to more than 170 million so far this year, according to the Cellular Telecommunications & Internet Association.

Reston-based Nextel earned $588 million (52 cents a share) on revenue of $3.4 billion in the quarter ended Sept. 30. Results for the quarter reflect a $175 million one-time tax benefit. In the comparable quarter last year, Nextel posted a profit of $348 million (32 cents per share) on revenue of $2.89 billion.

Nextel said it added 195,000 new customers to its prepaid service unit, Boost Mobile, which targets younger customers. Boost started expanding into Ohio, Phoenix and Detroit during the quarter and has 800,000 subscribers in 11 markets. Its operations should break even next year, the company said.

"Financially it was a solid quarter," said Jonathan Atkin, an analyst with RBC Capital Markets. The only unpleasant surprise was that the average monthly revenue Nextel gets from a customer was down to $69 from $71, he said.

Paul N. Saleh, Nextel's chief financial officer, said the company signed up more government and large corporate clients during the quarter. Those customers pay a little less on their monthly bills but tend to stay with the service longer, he said.

Still, most of Nextel's base is high-paying business customers who pay a premium to use its popular walkie-talkie feature. Average revenue for other carriers is about $50 a customer.

Growth among government customers, young customers and data users has been stronger this year than anyone expected, Saleh said. "We believe that momentum is going to spill over into 2005."

The company plans to increase spending on its network this year to $2.4 billion, up from $2.2 billion previously announced, to expand coverage. It is testing a new very-high-speed Internet service in Raleigh, N.C., as well as other technologies, and will decide early next year which technology it will use to upgrade the entire network, chief executive Timothy M. Donahue said in a conference call.

Nextel is also waiting for final rules from the Federal Communications Commission that will allow it to swap out some of its airwaves with those of public-safety groups to reduce cellular interference with police and fire radios. Final terms of the swap should be clarified within 60 days of the government's release of the proposed rules, Donahue said.

Shares of Nextel closed yesterday at $25.34, up 7 cents.


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