Nextel issues Q1 warning; cites slower economy

Nextel Communications is the first wireless carrier to indicate that the slowing U.S. economy will impact the company's first quarter 2001 results.

President Tim Donahue told the investment community that the company's expectations for the first quarter will be impacted by slowing business purchases, downsizing and higher costs.

Nextel now expects to report about 500,000 subscriber additions in the first quarter. Analysts had expected between 520,000 and 550,000 additions. Nextel expects to report cash flow that will be 15% below fourth quarter 2000’s $418 million cash flow, said Donahue.

Analysts say Nextel has been hit first because it sells to fleets such as the construction industry that use the service to keep in contact with group members. This industry is susceptible to the economic slowdown.

However, wireless services analyst Christopher Larsen with Prudential Securities believes earnings warnings from other carriers will follow.

"This is definitely an issue we are going to see reflected in other carriers, and it may not be this quarter but the coming quarters," he said.

Sprint PCS warned earlier this year that the slowing economy could have an impact on discretionary spending in 2001, affecting the wireless industry. However, the company has yet to change its guidance for the year.

Nextel also pulled its planned initial public offering for Nextel International, citing poor market conditions. Nextel International had hoped to raise $720 million in the IPO, with a per-share price of $10 to $12, to finance its digital network expansion.