Subject: [NEXTEL-1] Spurning Chapter 11, Nextel repairs its balance sheet

From: Marcel <[email-masked]>
Date: Sun, 30 Mar 2003 15:53:51 -0500

(Reads  like a reprint??)
Posted on Sun, Mar. 30, 2003

Spurning Chapter 11, Nextel repairs its balance sheet
By TOM GILES
Bloomberg News

[Tim Donahue]

Timmy Donahue (Looking Old)

A year ago, Nextel Communications Inc. executives Paul Saleh and Timmy
Donahue were urged by bankers to file for Chapter 11 bankruptcy
protection.

"A lot of folks were really concerned about Nextel's ability to
survive," Saleh, the chief financial officer, said in an interview.

The concerns: Nextel, the No. 5 U.S. mobile phone company by
subscribers, had too much debt, its international unit had missed a
loan payment and customer growth was slowing.

Saleh and Donahue, the chief executive, spurned the suggestion.
Instead, Saleh used cash and shares to cut debt by $3.2 billion in
2002, while the number of customers grew 23 percent to 10.6 million.

Donahue cut 5,300 jobs in the past two years and lowered capital
spending by 38 percent.

The result: Nextel made a $1.4 billion 2002 profit, the first profit
in its 15-year history.

Nextel stock, which fell as low as $2.50 in June from a March 2000
peak of $82.94, is reviving. The shares have risen more than 143
percent in the past year.

Investors have rewarded Nextel by accepting lower interest payments
on its debt.

"They've done some significant repair to the balance sheet," said
Eric Misenheimer, who holds Nextel debt among the $500 million in
high-yield bonds he helps oversee at Northern Trust Corp. in Chicago.

One-quarter of Nextel's board seats are controlled by billionaire
Craig McCaw, who with his family agreed in 1995 to invest as much as
$1.1 billion in Nextel in succeeding years. McCaw's company, Digital
Radio LLC, is the 11th largest shareholder in Nextel, according to
Bloomberg data.

The biggest risk for Saleh and Donahue may now be rival products.

Nextel targets corporate clients: construction crews, public safety
agencies and other businesses that communicate in groups. That has
allowed it to charge the highest bills in the industry, averaging $69
a month.

The company's mobile phones include a walkie-talkie device known as
Direct Connect, designed by Motorola Inc., that allows customers to
talk to groups of users at the push of a button.

Verizon Communications Inc., the biggest U.S. mobile phone company,
plans to introduce a push-to-talk product by the end of the year.

Alltel Corp., the No. 7 U.S. wireless carrier, intends to test a
similar product this year. And Sprint Corp.'s wireless division,
Sprint PCS, the fourth largest U.S. mobile phone company by
customers, is working on push-to-talk phones. None of the companies
has given much detail.

"Companies like Verizon Wireless will eventually get a service that's
comparable," said Michael Mahoney, manager of the $150 million
Communications and Technology Fund at EGM Capital in San Francisco,
which sold its Nextel shares earlier this year. "That may cause
Nextel to lose some of its premium."

In an attempt to stay ahead, Nextel is taking Direct Connect
nationwide. Currently, the push-to-talk function works in local
calling areas and between a limited number of cities, such as New
York and Boston. Later this year, Nextel customers will be able to
talk to each other across the country. The company will also sell
handsets with longer battery life and cameras attached.

Nextel's Donahue said it will take years for the competition to match
the sound quality and speed of the company's product.

"There isn't anything on the horizon that we can see that's going to
compete with us any time soon," he said in an interview.

For now, some investors agree.

"I don't think Verizon and Alltel would be making all this noise if
they weren't relatively close to having something similar," said John
Maxwell, an analyst at Overland Park-based Waddell & Reed Financial
Inc., holder of 700,000 Nextel shares at the end of 2002. "Just
having it doesn't mean you can sell it. It's going to be a while
before it hurts Nextel significantly."

The walkie-talkie phones, introduced by Nextel in 1993, have boosted
annual revenue 53 percent in the past two years, reaching $2.33
billion in the last three months of 2002. Profit reached a record
$1.47 billion, the third consecutive quarter in the black.

While Donahue and his team develop the products, former Walt Disney
Co. executive Saleh has focused on reducing debt.

Though he rebuffed advice to seek bankruptcy for the whole company,
Saleh put NII Holdings, the company's international division, into
Chapter 11 in May.

He bought back $3.2 billion in debt and preferred securities directly
from bondholders in the last three quarters of last year, and said he
may do more in coming months.
http://www.kansascity.com/mld/kansascity/business/5472137.htm