Nextel's Shine Highlights Rivals' Woes

Investors are finding more and more reasons to drool over the wireless sector's strength.

Exhibit A is Nextel (NXTL), whose hot streak only got hotter Thursday in an impressively broad show of strength.

Yep, there's nothing quite like a good old fashioned estimate-beating, target-raising performance like Nextel turned in Thursday to rekindle a warm glow among tech fans. And with Nextel the first of the six-pack of national wireless telcos to report earnings in coming weeks, Wall Street is reading the results with an eye for what may be in store for the group.

While Nextel and Verizon (VZ) appear to be some of the quarter's early winners, observers are growing concerned for players such as Sprint PCS (PCS) and AT&T Wireless (AWE), which may shake out as the laggards in the cell-phone services race.

Perhaps the biggest looming issue for the industry is the approach of number portability rules that allow users to keep their phone numbers as they change service providers. Come Nov. 24, when the rules are planned to go into effect, the spread between winners and losers is expected to widen.

Nextel says it welcomes number portability and expects to be a beneficiary as new subscribers consider alternatives and opt for snazzy services such as the company's two-way radio technology.

Nextel certainly hasn't felt any lapse in momentum so far. On Thursday the Reston, Va., service provider posted earnings of $346 million, or 32 cents a share, down from the year-ago $526 million, or 55 cents a share. The latest quarter included debt retirement charges of $132 million, or 13 cents a share, and the year-ago quarter included 44 cents in debt-retirement gains. On a so-called adjusted basis, latest-quarter earnings jumped to 46 cents, from 14 cents a year earlier.

Nextel's revenue rose 27% over the year-ago level to $2.89 billion, as the company added 646,000 subscribers. Average monthly revenue per subscriber hit $71 for the third quarter, up from $69 in the second quarter and highest in the industry. Churn, meanwhile, was 1.4%, its best mark since 1997.