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Wireless Carriers Find Some Reasons to Cheer

Cue the crowing rooster.

Let's start this Monday off right, with a thick slab of positive news from the wireless sector. When it came to a downturn, wireless carriers exhibited a continued ability to rise above the fray last week. While Motorola (MOT) and Ericsson (ERICY) 'fessed up to slim possibilities for growth in the second half of 2001 and on into 2002, Sprint PCS (PCS) and Nextel (NXTL) pleasantly surprised the market by staying on target.

Friday, wireless carrier Nextel wowed the Street with news that it was still on target to add 500,000 new subscribers in the third quarter. Nextel caters to business customers specifically and in a tough corporate spending environment onlookers had been expecting the carrier to run into resistance from thrifty managers. Then again, the same doubts plagued Nextel in the second quarter, before it managed to turn in strong additions of 485,900 customers. Nextel added that operating cash-flow numbers would improve from second-quarter results as well. Investors rewarded these good words with a 5.58% gain to $10.60 in Friday training.

Sprint PCS achieved a similar benefit from RadioShack's August retail report. The consumer electronics chain offers both Sprint PCS and Verizon Wireless (VZ) service in its stores, with RadioShack sales composing a full 25% of Sprint PCS' new customer adds. Sprint PCS added 843,000 new subscribers in a towering second quarter, a figure analysts expect it to match in the third quarter. Robertson Stephens responded to the RadioShack news by upping its estimate from 825,000 subscribers to 875,000 new phone callers. Sprint PCS was up less than 1% to $22.76 heading into the weekend.

Nextel added to its positive news by inching closer to better financial health with the appointment of a new CFO, Paul Saleh. Saleh held the same position at Walt Disney International, a division of Walt Disney. Previous CFO John Brittain will remain with the company in the treasurer's spot. Somewhat less auspicious, Nextel informed investors that Standard & Poors had upgraded the company's debt outlook from negative to stable. Find joy in small pleasures. At the end of the second quarter, Nextel stressed that the company had enough capital to build out its network through 2003.

Nextel is expected to undergo a costly network revamping from its current technology, integrated digital enhanced network, or iDEN, which is supplied only by Motorola. Onlookers believe Nextel will install a CDMA network, which would carry a hefty price tag. Sprint PCS joined Nextel in the unlucky category of companies in need of funding to build their networks. Sprint recently sold over $2 billion in shares of PCS stock to keep the company capitalized through 2003. The wireless carriers have defied the odds so far in 2001, and it looks like they could be able to add a good third quarter to their fame.

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