Subject: [NEXTEL-1] William G. Crawford, on Nextel

From: Marcel <[email-masked]>
Date: Fri, 25 Oct 2002 15:29:37 -0400

William G. Crawford, [email-masked]
Darren P. Aftahi, [email-masked]
Nextel Communications, Inc. (NXTL-$11.00 - #>)
Outperform; Volatility: High
 Above The Crowd. Reiterate Outperform Rating.

Differentiation Yields Profitability. Nextel's solid EBITDA results of $878 million and
normalized EPS of $0.14/fully diluted of $0.13 (above our street high $0.10 estimate)
demonstrate the clear correlation between its wireless differentiation and profitability.
Nextel's profitability per sub, which currently stands at $1,840, is almost three times
that of its next closest competitor, AT&T Wireless (AWE, $6.50, OP #).

Bad Debt Issue Not Completely Put To Bed. Continued delays from a new billing system led
to an increase in DSOs (47 to 49 days using our calculation), but churn fell from 2.2% to
2.0%. The billing kinks should be completely worked out by 1Q03.

Raising F2003 Estimates. We have raised our fully diluted 2003 EPS estimate from $0.54 to
$0.77 based on four factors: 1) improved churn of 2.1% (down from 2.15%), 2) reduced
interest expense from lower debt levels, 3) lower projected losses of unconsolidated
equity losses in affiliates, and 4) lower taxes.

Strong Cash Generation Facilitates An Improved Balance Sheet. Excluding the $394 million
the Company used to pay down long-term debt and preferred stock, Nextel actually generated
$121 million in free cash flow this quarter. The Company's total debt-to-capital fell from
100% to 94% this quarter.

Risks. Direct Connect could face competition, putting pressure on Nextel's financial
condition. While not currently cash constrained, the Company has a highly levered balance
sheet, which could pose as a longer-term issue.

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