Expanding Nextel Shrinks Its Losses; Record Number of New Subscribers Cited

Nextel Communications Inc. of Reston cranked up its growth andnarrowed its losses in the fourth quarter, sending the company'sstock up more than 10 percent yesterday.

Fourth-quarter revenue grew nearly 66 percent, to $980 million,from $592 million in the fourth quarter of 1998. Revenue for the yearrose 80 percent, to $3.3 billion.

The wireless communications company's loss narrowed to $369million for the quarter ended Dec. 31, down from a loss of $413million for the same period a year ago. Nextel said the addition of arecord number of new subscribers helped reduce the loss.

The company had a net loss of $1.53 billion for the year, comparedwith a loss of $1.8 billion in 1998.

Excluding a $68 million one-time charge for early retirement of adebt, Nextel beat Wall Street estimates. Its stock closed at $131yesterday, up $12.31 1/4, on the Nasdaq Stock Market; the company'sboard also approved a 2-for-1 stock split, scheduled to take place inJune.

President and chief executive Timothy M. Donahue, who replacedDaniel Akerson last summer, said the company ended the year with 4.9million Nextel subscribers.

Domestic operating cash flow, an important indicator to analystsof the wireless market, reached $698 million for the year, comparedwith an operating-cash-flow loss of $99 million a year ago.

In addition, Donahue said the company was successful in moving itswireless phones "up market." It now sells to half of the Fortune 500companies.

Nextel phones, which have a direct connect feature that allowsnetworks of users to communicate walkie-talkie style, have long beena favorite of plumbers, construction workers and electricians. Lastyear the company announced it would aggressively pursue larger, white-collar corporations.

"We had a terrific year in corporate accounts," Donahue said in aconference call with analysts yesterday.

Much of the conference call focused on the upcoming roll-out ofNextel's Internet services.

Twenty-five percent of Nextel subscribers have Internet-readywireless phones. Nextel has been seeding the market to preparecustomers for its launch of Web services and other data applicationsin the second quarter.

Analysts will be watching to see whom Nextel chooses as partnersfor its Internet services and applications. Some expect to see thefirst partnership announcements as early as this week.

"We'll find out shortly about partners for data [services]," saidJeffrey Hines, managing director at DeutscheBanc in New York. "Thatwill be of keen interest to the investment community."

Nextel has tested its data services in several markets, includingWashington, but analysts do not expect these services to have animpact on revenue until the third quarter.

The company has been spending--and borrowing--heavily to expandits business. In 1999, Nextel had capital expenditures of $2.08billion. Next year, the company will spend even more, said JohnBrittain, Nextel's treasurer. The company's long-term debt went from$7.71 billion at the end of 1998 to $9.76 billion at the end of 1999.

The company plans to introduce a worldwide roaming service in thesecond quarter that will let customers use one phone number andtelephone in 65 countries in Europe, Asia, and Latin America, as wellas the United States.

"That's a whole new stream of revenue to the company," Hines said.

Nextel, which focuses on business rather than consumer users,added 549,100 subscribers in the fourth quarter and expects to addfrom 450,000 to 475,000 each quarter in 2000.