Updated from 7:53 a.m. EST

Nextel ( NXTL) has yet to clear its name.

The wireless carrier hosted its quarterly conference call as the market opened Thursday, but investors weren't interested in its December quarter results. The market wanted to hear what Nextel had to say about its more than $16 billion debt load, a $1 billion to $2 billion charge involved with debt restructuring at its flailing international subsidiary, and its intentions, if any, to change its high-debt, money-losing ways.

Investors will be hard-pressed to get excited about Nextel management's Thursday morning vow to achieve positive free cash flow by 2004. In response to worries about its debt load and cash situation, Nextel responded that by outsourcing several internal and external support functions, generating higher revenues and using a technological advance in 2004 to cut capital spending, the company would finally make it to positive territory in 2004. Again, that's cash flow, not necessarily earnings.

Nextel CFO Paul Saleh sketched out the cash burn scenario for 2002, and it wasn't pretty. The company currently has $3.5 billion in cash and equivalents, as well as a $1.5 billion untapped line of credit. But using company projections for $2.5 billion in earnings before interest, taxes, depreciation and amortization coming in and about $2.5 billion going out as capital expenditures, Saleh estimated that "less than $2 billion" in cash will be spent in 2002. That's over half the company's available stash, not counting the addition of more debt to Nextel's books.

It is therefore not surprising that Saleh responded to prodding by stressing that the company would not use any of the $3.5 billion in cash and short-term investments it had left at the end of 2001 to buy back shares or debt at their depressed levels. "All of our securities, not just our debt, is selling at a significant discount from the intrinsic value," Saleh said, adding: "At this point the market is so unsettled, preserving our cash makes sense."

Turning to Nextel's fourth-quarter results, it confirmed that it met expectations by adding 501,000 domestic subscribers in the fourth quarter of 2001 and posting earnings before interest, taxes, depreciation and amortization to $539 million. The carrier's average revenue per user slipped slightly to $69, and the amount it spent on average to attract a customer remained high at $468. Nextel plans to reduce that amount slightly in 2002. Its level of customer churn per month is the lowest of the major operators at 2.2%. Working to counteract the downward pull of its competitors' fourth-quarter reports, on Feb. 5 Nextel prereleased some key fourth-quarter figures, as well as its projections for 2002.

Nextel said it lost $188 million in the fourth quarter on revenues of $1.88 billion compared with a loss of $96 million on revenues of $1.53 billion last year. The company said it wouldn't release consolidated per-share earnings until it files its results with the Securities and Exchange Commission, citing the debt restructuring at its international unit. Once Nextel International finalizes the amount of the restructuring charge it plans to take in an April 1 filing--estimated by the company to be between $1 billion and $2 billion -- Nextel Communications will present per-share figures.

In 2002, the carrier plans to lift EBITDA to $2.5 billion, nab 2 million new subscribers and spend less than $2.5 billion to build out its network. Nextel came in under budget in 2001, spending $2.38 billion to expand its network. The company has set an internal goal of $2.3 billion for 2002, slightly less than the $2.5 billion projection, which it expects to keep up in 2003 as well. By 2004, management is hopeful that new iDEN enhancements will cut $1 billion out of the capital spending budget.

Investors who momentarily were relieved to hear that Nextel debt levels dropped to $14 billion were disappointed, however, when management explained that it reported only domestic results and did not include Nextel International's debt in its Thursday presentation. On the bright side, Nextel International's debt was designed so that it can't be transferred to the Nextel Communications parent company. Should Nextel International go belly up, its parent's debt level would shrink to that $14 billion figure.

This is one company whose debt-fueled growth is most vulnerable to scrutiny in these days of Enron-initiated anxiety. During the past week, the company has been bombarded with doubts and selling. First, it was a victim of collateral damage from rumored liquidity issues at Qwest ( Q), causing investors to get hysterical over Nextel's high debt levels and ability to access debt markets. In recent trading Thursday, Nextel shares were up 0.8% on heaver-than-normal volume.

Next, the company filed a statement with the Securities and Exchange Commission on Friday saying it would take a $1 billion to $2 billion charge as the lagging Nextel International subsidiary considers its options for asset reorganization, given the struggling Latin American wireless market and limited IPO potential. Finally, over the weekend a Barron's article pegged Nextel as primed for debt restructuring based on the trading levels of its bonds.

The flurry of negative pressure whipsawed investors, who already have seen the stock price erode by 61% since the beginning of the year. On Tuesday, Nextel shares dropped 26%, only to surge back 23% in Wednesday's trading.

Nextel is pursuing a less expensive capital spending plan than several of its rivals, in part because it has a smaller base of customers to support and also because it hasn't undergone the costly upgrades to general packet radio service (GPRS) (as AT&T Wireless ( AWE) is currently pursuing) and other technologies. Nextel continues to run an unpopular network technology, iDEN, which holds down spending and already has some of the packet-switched wireless data capability that's leading other carriers to roll out 2.5G networks.

Still, there's no question that Nextel maintains one of the more aggressive balance sheets in a business that investors are starting to doubt. "The sector's out of favor, not just wireless, but telecom in general," W.R. Hambrecht's Peter Friedland says, adding: "Being out of favor doesn't last forever."

He believes investors are valuing Nextel and its peers on a continuum between the relative stability of monopolist cable companies and the long-distance business that is teeming with competitors. That may be reasonable because investors no longer consider the U.S. wireless market an unstoppable growth machine. Nextel management has to prove that it will be able to begin to show profits and pay off debts before its time runs out.

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