Nextel 3Q Profit Rises

Byline: Yuki Noguchi

Nextel Communications Inc. today reported bigger profits and revenue during its third quarter, as it boosted its subscriber base by 550,000 to 14.5 million.

The Reston-based mobile phone provider earned $586 million (52 cents a share) on revenue of $3.4 billion during the quarter ended September 30. Nextel received a tax benefit during the quarter of $175 million, which is included in the income. During the same period last year, Nextel posted income of $346 million (32 cents per share) on revenue of $2.89 billion.

Nextel said it added 195,000 new customers to its prepaid service unit, Boost Mobile, which targets younger customers. Boost started expanding into Ohio, Phoenix and Detroit during the quarter and has 800,000 total subscribers in 11 markets. Its operations should break even next year, the company said.

"Financially it was a solid quarter," said Jonathan Atkin, an analyst with RBC Capital Markets. The only unpleasant surprise was that the average monthly revenue Nextel gets from a customer was down to $69 from $71, he said.

Paul Saleh, Nextel's chief financial officer, said the company signed up more government and large corporate clients during the quarter, which pay a little less than other customers on their monthly bills but tend to stay with the service longer.

Still, most of Nextel's base is high-paying business customers who pay a premium to use its popular walkie-talkie feature. Average revenue for other carriers is about $50 a customer.

Growth among government customers, young customers, and data-users has been stronger this year than anyone expected, Saleh said. "We believe that momentum is going to spill over into 2005."

The company plans to increase spending on its network this year to $2.4 billion, up from $2.2 billion previously announced in order to expand coverage. It is testing a new very high-speed Internet service in Raleigh, N.C., as well as other technologies, and will decide early next year which technology it will use to upgrade the entire network, chief executive Timothy Donahue said in a conference call.

Nextel is also waiting for final rules from the Federal Communications Commission that will allow it to swap out some of its airwaves with those of public-safety groups in order to reduce cellular interference with police and fire radios. Those rules should be clarified within 60 days of the government's release of the proposed rules, Donahue said.

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