Nextel turns profitable

Nextel posted its first-ever profit for the second quarter off of significant revenue and subscriber increases.

Nextel added 471,000 customers in the second quarter, bringing its total to 9.64 million. The carrier reported net earnings of $325 million, compared to a $426 million loss from the same period last year. Nextel also managed to increase its revenues by 25% to $2.2 billion. Nextel has the highest average revenue per subscriber of all of the major U.S. carriers at $71. It also kept its churn rate flat at 2.1%. Wall Street rewarded the good news by upping or reiterating Nextel’s buy ratings, and shares on NASDAQ rocketed upwards 30%, becoming the most heavily traded stock on the exchange by midday.

“We’re clearly beginning to distance ourselves from the rest of the wireless players by continuing to attract and – as importantly – retain the most profitable customers in the business,” said Nextel CEO Tim Donahue.

The results are the best in Nextel’s history and far better than any analysts expectations. Analysts had Nextel reporting an average loss of 24 cents a share this quarter and not reporting a profit until far in the future, according to Thomson First Call.

It remains unclear how the rest of the wireless industry will do this quarter, as Nextel was the first carrier to report its earnings, but investors gave them the benefit of the doubt, driving up shares of AT&T Wireless, Sprint PCS and Leap Wireless along with Nextel.

Company officials said the results were not a fluke and that Nextel would continue to post profits in the third and fourth quarter.