Nextel Communications Inc. surpassed even the most bullish expectations, posting a quarterly record 591,000 net customer additions during the second quarter, compared with 469,000 net customer additions during the second quarter of 2002, and ending the first half of the year with 11.7 million total customers.
Most analysts expected the nation’s fifth-largest wireless operator to add between 350,000 and 500,000 subscribers during the second quarter.
Bolstering Nextel’s record-setting customer growth was a reported 1.6-percent customer churn rate during the quarter, which was well below the 2 percent analysts were expecting and 2.1-percent churn the carrier reported last year.
Nextel also reported $2.6 billion in revenues during the quarter, which was a 19-percent improvement compared with the $2.2 billion the carrier reported last year and above the $2.5 billion analysts expected. The revenue increase came despite a 2.8-percent drop in average revenue per user from $71 during the second quarter of 2002 to $69 this year and a 4.5-percent increase in Nextel’s reported cost per gross addition from $440 last year to $460 this year.
Nextel’s net income did drop slightly from $325 million during the second quarter of 2002, a gain of 37 cents per share, to $281 million this year, a gain of 27 cents per share.
“This quarter represents Nextel’s strongest performance to date,” said Tim Donahue, president and chief executive officer of Nextel. “We are delivering on every front and producing record earnings, record subscriber additions and garnering the most valuable customers in the industry.”
Nextel also reported that its Boost Mobile L.L.C. joint venture signed up 80,000 customers during the second quarter, ending the first half of the year with 140,000 total subscribers to the prepaid service offering.
Following the robust quarterly results, Nextel said it was raising its expectations for the rest of the year from 1.7 million net customer additions to 1.9 million net customer additions; from $500 million in free cash flow to $600 million or more in free cash flow; and earnings per share from 75 cents per share to at least $1 per share.
In addition to its quarterly results, Nextel said it intends to offer $1 billion of senior serial redeemable notes due 2015 in a public offering with proceeds expected to be combined with cash on hand to redeem all outstanding shares of Nextel’s 11.125-percent Series E exchangeable preferred stock and to commence a repurchase of its outstanding 10.65-percent senior redeemable discount notes due 2007.
Despite the relatively positive quarterly report, Nextel’s stock was down about 2 percent following its report, to about $19.60 per share. However SpectraSite’s stock was up more than 2 percent on Nextel’s earnings report, trading at $60.25. SpectraSite owns a majority of Nextel’s towers and stands to gain if Nextel increases its tower builds later this year.
While Nextel was posting record setting customer additions, rural wireless operator Dobson Communications Corp. said its customer growth dropped from 20,100 net customer additions during the second quarter of 2002 to approximately 13,000 net customer additions this year. The slower customer growth came despite a wireless property swap with AT&T Wireless Services Inc. that resulted in a net gain of nearly 79,000 subscribers for Dobson.
Dobson added that postpaid customer churn dropped from 1.7 percent last year to 1.5 percent this year and that local and preferred calling plans accounted for a large majority of its gross customer additions.
Dobson’s American Cellular Corp. joint venture with AT&T Wireless also posted reduced customer growth results that dropped from 15,700 subscriber additions during the second quarter of 2002 to 5,400 net customer additions this year.
Canadian operator Rogers Wireless Communications Inc. also reported second-quarter results last week that included a slight drop in net customer additions from 67,300 subscribers last year to 64,100 customers this year. An increase in prepaid customer churn from 2.41 percent last year to 3.53 percent this year offset a 14.7 percent increase in gross customer additions during the quarter.
