Foes Still Gunning for Nextel

Sure, Nextel (NXTL) packs a mean wallop. But some observers are starting to wonder if the fast-growing wireless company can go 10 rounds.

The company's one-two punch has taken on legendary proportions. First, you hook users on walkie-talkie service. Then, you charge as much as you can for as long as you can. Thursday's blowout earnings report showed that Nextel continues to hammer its point home with a growing group of users.

Still, skeptics note that behind the industry's great success story of the last two years is a debt-laden company facing huge spectrum- and network-upgrade bills. Also potentially worrisome: Nextel's strides in cornering its market haven't gone unnoticed by antitrust regulators.

Perhaps the biggest question is how long the company, in the face of rising competition, will be able to keep charging a steep premium. Nextel defends its prices, saying its services make business users more productive. But with the wireless industry growing like gangbusters and deep-pocketed rivals pushing to take bigger slices of the walkie-talkie pie, the pressure is clearly building at Nextel.

The company's shares advanced 70 cents Thursday to $25.50.

Captive Audience

For now, investors have no complaints. They openly marvel at the tech edge that helped transform the teetering Reston, Va., niche player into the most profitable wireless telco in the nation.

Specifically, Nextel's push-to-talk feature has helped it run away with a prize portion of the market. Business sales groups, field technicians, medical teams, taxi fleets and security squads have found Nextel's instant radio connections an important communications tool. The phones have become so embedded into government agencies and corporate work groups that price has hardly been a consideration.

"They have the ideal captive audience and that lets them charge about 30% more than the rest of their competitors," says Friedman Billings Ramsey analyst Susan Kalla, who rates Nextel a buy.

In an interview Thursday, Nextel Finance Chief Paul Saleh turned a question about how much the company was charging into one about how much the company was delivering. "We offer our customers a lot of value and that helps them become more productive," said Saleh.

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