Nextel reaffirms 2001 targets

Nextel Communications reaffirmed its target to add 1.9 million to 2 million domestic customers in 2001 and reach $1.9 billion in domestic cash flow despite a challenging economy.

“I strongly believe we can build on this momentum in the fourth quarter and carry it into 2002,” said Tim Donahue, president and chief executive officer of Nextel. “Domestically, we are taking about 10% of customers in the entire U.S. wireless industry.”

Nextel added 481,200 domestic subscribers and improved domestic EBITDA--the key financial metric for the wireless industry--by 34% from the previous year, reaching $526 million in operating cash flow.

Donahue said Nextel is beginning to see a pay off from cost-containment measures the company launched in the fourth quarter last year. The effort calls for expense reductions of $1 billion to $2 billion during the next three years.

“We have implemented several new strategies to bolster revenue growth and enhance our operating efficiencies,” said Jim Mooney, Nextel’s executive vice president and COO. “We see tremendous opportunity in the enterprise space, where we can bring our total solutions of Nextel Direct Connect--our digital two-way radio feature, digital cellular, messaging and mission-critical packet data applications to a broad range of businesses.

“We are also increasing our sales volume through lower cost distribution channels such as our retail stores, web and tele-sales operations. Together with targets for increased efficiencies in customer-care and billing services, we believe we can cut significant costs from our business while increasing our revenue share.”

In addition, Nextel is reducing its international investment by scaling back the pace of net additions for 2001. Nextel International requires additional funding, and market conditions aren’t favorable for an initial public offering.

Donahue reiterated the company would continue to monitor 3G technologies and would implement an overlay strategy over its existing integrated Digital Enhanced Network (iDEN) only when the company can take advantage of the anticipated cost curve benefits of handsets and infrastructure, it can justify a return on invested capital, and ensure that the overlay network is fully funded.

Investors were relieved earlier this month when Nextel said it would enhance iDEN technology to increase capacity and data speeds rather than overlay the network with CDMA 1X technology. They have been concerned about Nextel’s debt load.

--Lynnette Luna, senior editor