Subject: [NEXTEL-1] Goldman On WNP

From: [email-masked]
Date: Fri, 05 Dec 2003 12:30:50 -0500

WIRELESS UPDATE: TOO EARLY TO CALL ELECTION OUTCOME;ADJUSTING AWE ESTIMATES

The effect of WNP will take time to play itself out. Based on 1 1/2 weeks of
sketchy data, nobody should draw too many firm conclusions. While traffic
appears to be light so far, this is not necessarily an indication of future
developments, particularly since the greatest impact from WNP will depend on how
aggressively carriers go after each other. And this card hasn't even begun to be
played yet. We continue to expect a severely negative number portability impact,
but acknowledge that there is nothing in the anecdotal reports so far which
either fully support or reject this view. In this note we have drawn some
low-risk conclusions, including adjusting AWE's 4Q estimates reflecting current
operating challenges.

REMAINING CAUTIOUS ON THE STOCKS. In our view, investors should remain cautious,
and not get positive just because consumers have not yet stampeded to switch
their carriers. Remember, every press report of the last month warned consumers
of potential glitches in porting their numbers and to avoid becoming guinea
pigs. The media was right in this instance, and their readers took heed it
seems. In our view, the impact is likely to be more drawn out, but just as
severe as expected. As a result we remain with our underperform ratings on all
three independent national wireless operators: AWE, NXTL, PCS.

LOWERING AWE 4Q NET ADDS TO REFLECT CRM CHALLENGES. The combination of theGSM
order/entry problems with porting problems is creating a PR nightmare forAWE,
not to mention inevitably raising costs materially. It will alsoinevitably limit
the number of customers who might have been thinking aboutmoving their numbers
to AWE. As a result, there is a very high probabilitythat AWE's results for the
quarter will be worse than the Street had beenexpecting. Noting the GSM problems
back in November we had written then thatthere was probably downside rise to our
365,000 net add estimate for thefourth quarter.

Given the persistence of these issues we are lowering our net adds estimatefor
4Q by 100K to 265K to reflect our best estimate of the impact. We deriveour
estimated impact assuming 50% of our original 2.4mn gross adds
estimaterepresented GSM additions, that 25% of these would have been added in
Novemberand that about a third of these November GSM adds chose not to elect AWE
dueto activation delays. We assume the number of churners remains constant
versusour old estimates, so there is a direct impact on our net adds estimate.
Thereis also a modest upward impact on EPS in 2003 due to lower
acquisitionspending, so we are raising our 4Q EPS estimate to a loss of $0.01
from a lossof $0.02 and our 2003 full year estimate to $0.19 from $0.18.

VZ BY EVERY ANECDOTAL STORY IS WINNING AT THE POLLS, AND THERE IS NO REASON
TOTHINK THIS TREND WILL CHANGE. Reports are mounting with consistency that VZhas
the early lead at the polls. This is not surprising. Everyone predictedthis
going into number portability. Our hunch is that the lead is bigger thanexpected
however. Even yesterday's positive report out of Qualcomm of strongdemand for
CDMA chip-sets supports this notion, as there is very lowprobability that the
demand is being driven by PCS. It must be coming fromVZ. Because service
quality, and marketing scale are so important to successin winning customers in
the WNP battle underway, we expect VZ's early lead toexpand and finally be
confirmed with 4Q earnings announcements in January.

WOUNDED TIGER THE INDUSTRY'S WORST ENEMY. Our view has always been that WLNP is
bad because it will provoke intensified competition among carriers vyingfor
market power. WLNP is the vehicle by which carriers can raise thecompetitive
intensity once again. Just because this hasn't happened much yet,doesn't mean it
won't. If certain carriers are getting hurt particularly inthe porting game, or
others aren't winning enough, the real danger is thatthey will strike out with
more aggressive programs for both offensive anddefensive intentions. We fully
expect this to happen, maybe before yearend,or maybe after. The timing is not
clear. But given the high likelihood of ahighly differentiated outcome from
porting, by carrier, the intensifiedcompetition is likely to arrive soon. Losers
will strike back at winners, asthey fight to keep or expand their share of the
market. Scale is such animportant factor in succeeding long term in the wireless
business thatcompanies can not afford to fall behind competitors in this battle.
Forexample, if AWE is being hit hard - whether due to GSM network problems
orWLNP or both -- that means it is likely to become more aggressive in themarket
to offset/avoid share losses, thereby raising competitive pressure forall
carriers. This competitive response will play itself out over the next couple of
quarters, which is the real damage from WLNP.

I, Frank Governali, CFA, hereby certify that all of the views expressed inthis
report accurately reflect my personal views about the subject company
orcompanies and its or their securities. I also certify that no part of
mycompensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed in this report.