Few wireless executives have had as much of an impact on the industry over the past several years as Nextel Communications Inc.’s Tim Donahue, who-despite running the smallest of the six nationwide carriers-has managed to garner significant influence over larger competitors looking to imitate Nextel’s profitable business model.
Since adding the chief executive officer title to his president duties in 1999, Donahue has guided Nextel to an enviable position of regularly posting strong financial and operational metrics, including consistent growth, industry-leading customer revenue and stable churn results. Indeed, most important for an industry saddled with huge debt, Nextel has provided a monetary return for investors.
While Donahue has led Nextel to its current position as one of the most highly regarded carriers among the financial and analyst communities, his leaderships skills are expected to be tested over the next several years by a number of issues facing Nextel. At the top of that list are Nextel’s attempts to gain support for the controversial spectrum realignment Consensus Plan, implementing the carrier’s next-generation technology path and guiding Nextel through industry consolidation.
The most pressing issue currently facing Nextel is the ongoing attempt to get Federal Communications Commission approval for the Consensus Plan. While the plan has support from a number of public-safety groups, it is furiously opposed by most of Nextel’s wireless competitors and the Cellular Telecommunications & Internet Association, which is backed by its own selection of public-safety agencies. With recent reports out of Washington indicating growing support from government for the Consensus Plan, Donahue said he remains confident the proposal will be approved in the near future, and Nextel is prepared to move ahead with the details of the plan.
“From my perspective the FCC clearly understands the only solution for public-safety interference is re-banding at 800 MHz, and I think everybody has come to understand that this is not a fix with filters,” Donahue said, countering claims by Consensus Plan opponents. “I think the proposal we have put on the table today is a fair proposal given the spectrum we’ll be turning in and the value of that spectrum and what we paid for that spectrum vs. the value of the 1.9 [GHz spectrum]. Obviously there are others who don’t agree with that, but that’s what makes the world go round.”
Donahue added that he understands the opposition to the plan from both Nextel’s competitors as well as a trade organization that counts Nextel as a member, though he questions the reason for such opposition.
“I think Steve [Largent, CEO of CTIA] has to answer to his trade association and unfortunately for public safety, most of CTIA’s members are against the Consensus Plan because they are not thinking of public safety and instead are thinking about is this fair for Nextel to get 10 megahertz of 1.9 [GHz] spectrum,” Donahue noted. “Unfortunately for CTIA and the opponents of the Consensus Plan they are not putting the best interest of public safety first. CTIA is just reacting to their membership and in that regard I understand it. Am I happy about it? No. But I understand it.”
Donahue added that while he is aware of reports that the FCC is looking at possibly increasing Nextel’s financial obligations if the Consensus Plan is approved, Nextel has yet to receive any word on modifications to its original plans to contribute $850 million to the re-banding efforts.
“We have a deal on the table and have not had any further conversations with the FCC about any changes to that deal,” Donahue said. “While we understand it’s pending, we don’t know exactly what the outcome will be because they have not talked to us about it yet. We expect to have those conversations in the next couple of weeks.”
If the Consensus Plan is approved, Nextel likely would have more options for launching third-generation services because the 1.9 GHz band would provide the carrier clear spectrum to launch any number of high-speed wireless technology choices.
Nextel is testing Flarion Technologies Inc.’s Flash-OFDM technology in North Carolina as a possible high-speed wireless complement to the carrier’s iDEN packet data-based network. Donahue said its iDEN technology is scheduled to receive a Wi-DEN update by the end of this year that will increase network speeds to match that of CDMA2000 1x-based networks. Despite the recent increase in coverage of the Flarion trial, Donahue said the carrier is looking at a handful of different wireless broadband initiatives including CDMA-based technologies that he said would leapfrog anything currently available.
While Nextel has yet to commit itself to any one technology path, Donahue remains a firm believer that wireless broadband services will play an important role in the carrier’s future.
“The whole issue of broadband is interesting to me. I don’t think it’s a matter of if, it’s a matter of when,” Donahue said. “What we’re trying to do is to figure out what it is customers are going to want, what speeds are they going to demand, what can a big pipe do for a company like Nextel in terms of content and attracting content providers, and we feel very positive about the early results from a technology perspective and the early results from a customer-acceptance perspective. We’re jazzed about it.”
Donahue added Nextel’s wireless broadband plans will not depend on attaining spectrum as part of the Consensus Plan, noting the carrier has cleared spectrum in the 800 MHz bands as well as the possibility of tapping into the carrier’s vast 2.5 GHz spectrum holdings, which amount to an average of 96 megahertz in 67 of the country’s top 100 markets.
Donahue also showed support for the recent consolidation activity in the industry, noting fewer competitors likely would strengthen those that remain as uncertainty among wireless subscribers will provide an opportunity for Nextel as well as its competitors to steal market share.
“I think as a result of consolidation there will be some opportunities for some of the other wireless players, ourselves included, to pick up some business,” Donahue said. “Typically what happens in a merger is that it takes two years to really sort it out and get your act together, and so I think it spells opportunity for us and the rest of the carriers.”
With Donahue recently signing on to run Nextel through at least 2006, the carrier appears set to tackle its challenges and continue to be an influential force in the wireless industry.
