Investors didn’t flinch when Nextel Communications Inc. announced shifts in upper management last week. The company’s largest investor, cellular industry pioneer Craig McCaw, is set to become chairman in 2000, and Tim Donahue assumed the position of president and chief executive officer, with current Chairman and CEO Daniel Akerson set to become Nextel co-chairman and a significant investor in Eagle River Investments L.L.C. Eagle River is McCaw’s private investment company, which has ownership interests in the likes of Nextel, Nextlink Communications Inc. and satellite venture Teledesic L.L.C.
Investors also were pleased with the company’s second-quarter results, as the enhanced specialized mobile radio operator reported lower-than-expected losses on record subscriber numbers. Nextel’s stock closed Thursday up $2 at $54.69 after heavy trading on Nasdaq, as the carrier exceeded Wall Street expectations on loss, subscriber additions, average revenue per subscriber and EBITDA margins.
Nextel, which offers voice, paging and two-way radio services all in one handset, recorded a loss to common shareholders of $315 million, or $1.40 per share, for the second quarter, a bit greater than Wall Street analysts’ expectations of about $1.35 per share, according to First Call Corp.
The company added 440,000 U.S. digital subscribers during the quarter, ending June with 3.6 million digital customers in the United States. Average revenue per subscriber increased 4.2 percent quarter-over-quarter to $74, exceeding Wall Street’s expectations of $72. Consolidated revenue increased 88 percent to $793.1 million, compared with $421.4 million in the second quarter of 1998. Churn remained flat at 2 percent, Nextel said.
“We’re pleased with the quality of subscriber base,” said Donahue in a conference calls with investors. “Average customer usage climbed to a leading level of 425 MOUs per month per subscriber … We doubled our usage on our network in one year. We will ramp up network capacity to keep up with demand.”
Steve Shindler, Nextel’s chief financial officer, said the second quarter historically is Nextel’s strongest quarter in terms of subscriber growth. Capital expenditures will be higher in the second half of 1999, but the company is confident it can retain average revenue per subscriber in the $70 range, he said.
“Revenue per subscriber increased $3. Monthly cash flow per sub increased by $6,” said Shindler. “We are in line with other operators who have been operating 15 years … Cash flow is ahead of expectations. We’ll exceed $650 million for 1999.”
Analysts viewed Akerson’s departure as positive, saying the move shows Nextel has moved from a start-up to a strong ongoing company.
“I’m more of a fixer or builder than a good manager,” said Akerson. “The company three-and-a-half, four years ago was more or less an afterthought in the wireless industry. Today it is viewed as a robust national competitor. The goals and objectives set for the company in large measure have been achieved.”
