Looking for a flashpoint in a hot wireless earnings week? Keep an eye on Nextel ( NXTL). The Reston, Va., cell-phone service provider has made plenty of believers with its performance over the last two years. But as is the case throughout tech, the company finds itself facing rising expectations this summer -- a situation that Wall Street knows can be fraught with peril. To be sure, a lot of things clearly are going well for Nextel, whose shares have surged fivefold since the summer of 2002. The company has posted blowout numbers quarter after quarter over the past year. A new credit line, a favorable spectrum swap decision and the continued popularity of walkie-talkie service all seem to bode well for a strong second-quarter report Wednesday morning. But the ranks of Nextel skeptics have been growing steadily as well, as the company approaches some expensive decisions. In fact, any weakness in Nextel's key performance areas -- namely subscriber growth and average revenue per user -- could sharpen the questions management faces. For all its well-chronicled gains, after all, the company still faces heavy debts, increasing competition and costly upgrades. These concerns have weighed on the stock this year. Unlike last year, when its shares doubled, Nextel has spent 2004 sputtering. It was up 13 cents Monday at $25.92, putting it down 7% for the year.
Such has been the case with Nextel. Last week, the company refinanced some of its $10 billion in debt by replacing a secured loan and credit line worth $2.6 billion with a new $4 billion credit line. Earlier this month, aiming to help clear up interference in emergency services' air waves, the Federal Communications Commission approved a radio frequency swap that gives Nextel a swath of 1.9 megahertz spectrum in exchange for $4.3 billion worth of 800 megahertz licenses. Both those deals were largely positive for Nextel, but investors couldn't get past the caveats. In the case of the spectrum swap, Wall Street sent Nextel shares lower because the agency's decision could cost the company some $1.5 billion beyond the amount it had budgeted for the move.