- The Washington Times - Monday, January 5, 2004

Nextel Communications Inc. yesterday said it expected strong 2003 sales. But analysts remain cautious about the Reston wireless carrier’s long-term outlook as more competitors move into the company’s walkie-talkie market.

The fifth-largest mobile-phone company yesterday said it netted about 2.2 million subscribers and $1 billion in cash flow for the year, although official numbers will not be released until February.

Nextel expects to report earnings at $1.15 per diluted share for the year, a 39 percent drop from $1.88 for 2002.

Diluted earnings in 2002 included some one-time, non-cash gains from NII Holdings Inc., a former subsidiary, exiting bankruptcy.

Diluted earnings per share represent the value of convertible warrants and stock options.

But the company, whose average subscriber rate is $71 per month, is poised to lose its monopoly on walkie-talkie services as competitors including Verizon and Sprint introduce their own models.

“I’ll be watching Nextel’s numbers closely to see if the stock is repriced for a more competitive environment,” said Kevin Calabrese, a telecommunications analyst at New York investment and research firm Argus Research Co.

Nextel’s stock hit a 52-week high yesterday at $28.94 on Nasdaq, more than twice its price a year ago at $13.47. Shares closed Dec. 29 at $28.

The company posted a 9 percent drop in profits for the third quarter ended Sept. 30 to $348 million (32 cents per diluted share) from $383 million (55 cents) a year earlier.

During the quarter, sales rose 27 percent to $2.88 billion from $2.27 billion the previous year.

Mr. Calabrese rated Nextel as a “buy” for near-term investors, but advised long-term shareholders, who plan to own the stock for three to five years, to sell.

He does not own any stock, and Argus does not have a banking relationship with Nextel.

Albert Lin, a telecom analyst with San Francisco research firm American Technology Research Inc., said Nextel has fewer resources than its rivals to compete in theemerging trend of packaging phone and Internet services in one plan.

“Nextel is only a wireless carrier and limited in the package it can provide,” such as local and long-distance phone services, Mr. Lin said, advising investors to hold their stock.

Mr. Lin does not own any shares of Nextel, and American Technology does not have a business relationship with the company.

Nextel spokeswoman Audrey Schaefer said the company already bundles wireless Internet, digital walkie-talkie and cellular services for its 13 million subscribers.

Telecommunications analyst Thomas Watts said a merger between Nextel and one of the larger wireless carriers may be likely as more companies develop walkie-talkie products.

“It would be a positive event to shareholders and would bring a large business customer base for another company,” said Mr. Watts, with New York investment bank SG Cowen.

Mr. Watts, who rated Nextel as a “strong buy,” does not own any stock, but SG Cowen does have business with the company.

Ms. Schaefer said she is unaware of any developing deals between Nextel and another mobile-phone company.

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