NEW YORK-Nextel Communications Inc. will be active in the upcoming government auctions for 1.9 MHz and 700 MHz spectrum, said Steven M. Shindler, executive vice president and chief financial officer.
“There is all sorts of speculation about spectrum, auction and M&A issues, and Steve has promised me full disclosure,” said Steven R. Yanis, wireless telecommunications services analyst for Bank of America Securities.
“Nextel’s fundamentals are fantastic,” Yanis added, before introducing Shindler May 16 at the bank’s “Growth Telecommunications, Media and Entertainment” conference.
Shindler said Nextel’s planned pursuit of additional spectrum has nothing to do with its network capacity, which he said is sufficient to meet the needs of its core business in voice and narrowband communications.
“We will be active in these auctions because of future opportunities for incremental penetration and additional services that will generate more revenues and cash-flow streams,” he said.
The chief financial officer did not directly address Nextel’s merger and acquisition strategy, which Yanis raised in his introduction. The company has been rumored to be a potential acquisition for a number of companies, the latest being America Online Inc. However, Shindler did offer a general perspective on mergers taking place in wireless telecommunications.
“Increasing consolidation is a good thing because it enhances the overall quality of networks and gives the United States the opportunity to raise penetration to 50 percent, from 31 percent at the end of 1999,” he said.
“Wireless accounted for 4 percent of (U.S. telecommunications) minutes in 1999, and we expect that to increase four-to-five times in the next several years.”
Wireless data offerings are expected to be part of that increased use. Nextel’s Internet Protocol network is packetized, always on, makes efficient use of spectrum and allows fast throughput rates, Shindler said.
In early April, the carrier made its packet data services available to 125 million of the 190 million people its network covers. By early July, the remainder will have access to this service. By year-end, Nextel also plans to have expanded its coverage area to include an additional 10 million people.
Getting customers to use the service is as important as making it available to them, Shindler said. This is the goal now.
“It is very early in the process, but we hope to get to high single-digit usage of data applications,” he said.
Already, 2 million of Nextel’s subscribers have Internet-enabled phones equipped with a free Phone.com Inc. Wireless Application Protocol browser. Via these handsets, subscribers can take advantage of throughput rates of about 19.2 kilobits per second, with a slight degradation in speeds during busy periods. By contrast, NTT DoCoMo’s immensely popular iMode service offers maximum speeds of 9.6 kbps, he said.
“Our initial data apps are vertical, which are very exciting for us, with true key revenue drivers being the applications, access fees and transaction-related revenues,” Shindler said.
So far, Nextel has announced partnerships with companies that include: Aether Systems, for sales-force automation; IBM Corp., for services like calendar and e-mail; and Amazon.com, for electronic commerce.
“Amazon.com is our only e-commerce application to date, but we will add significantly to these over time,” Shindler said.
The carrier’s new Nextel.com online customer service and provisioning “is not a revenue producer but a cash-flow generator,” he added.
Nextel, he noted, has achieved operating cash flow of $18 per subscriber, a level ahead of all other domestic, all-digital wireless carriers. It also is the only U.S. all-digital carrier to have attained cash-flow positive status.
During the first quarter of this year, the carrier added 540,000 net new customers, bringing its customer base to 5.1 million as of March 31. The 540,0000 additions comprised 10 percent of all net new customers in the United States during this period, Shindler said. Of the 540,000, one-third were additional units placed in service by existing customers, 50 percent of which are blue-collar business and 30 percent, white-collar users.
During the first quarter of this year, Nextel earned $1.079 billion in customer revenues, nearly double the $664 million earned during the first quarter of 1999. Monthly revenue per subscriber averaged $72 during the first three months of this year.
Shindler also serves as acting chief executive officer of Nextel International. Until this year, he said Nextel International has been quiet about its activities. These include majority ownership of Integrated Digital Enhanced Networks in operation or under construction in Argentina, Brazil, Mexico and Peru.
“Very recently there have been favorable developments for us in Brazil, with restrictions removed on numbering plans and on selling our services to individuals,” Shindler said. “2000 will be a break-out year for our international business.”
