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Updated from 7:56 a.m.

Solid execution and a unique technology helped Nextel deliver some of the best financial results in the wireless-services sector for the fourth quarter and full year.

For the quarter, the company swung to a profit on strong sales in the corporate sector. It also managed to achieve free cash flow of $122 million a year, ahead of its own target.

Investors applauded the results, sending shares up 32 cents, or 2.4%, to $13.80 in early trading. Before the market opened, the company's stock briefly broke through its 52-week high of $14.67.

The nation's fifth-largest carrier earned $1.46 billion, or $1.38 cents a diluted share, in the quarter, compared with a loss of $1.88 billion, or $2.25 a share, in the year-ago period. Sales improved to $2.33 billion from $1.88 billion in the same period a year ago. Net income included a one-time gain from the separation of NII Holdings of $1.2 billion, or $1.24 a share, and a gain of $35 million, or 4 cents a share, from the retirement of debt in the quarter.

Excluding the one-time gains, the company achieved a 21 cent a share net income for the quarter.

For the full year, the company earned $1.66 billion, or $1.88 a share, compared with a net loss of $2.8 billion, or $3.67 a share, last year. Net revenue improved to $8.72 billion from $7.01 billion in the prior year. Excluding the one-time gains, the company earned 27 cents a share for the year.

Wall Street had expected earnings of 11 cents a share on sales of $2.3 billion for the quarter, and a full-year net loss of 14 cents a share on sales of $8.73 billion, according to Thomson Financial/First Call.

Earnings before depreciation and taxes in the quarter were $886 million, up from $539 million in the year-ago period. Operating cash flow improved 67% for the year to $3.13 billion.

The company grabbed approximately 503,000 net additional customers in the quarter, brining its grand total to 10.61 million. Each customer spent on average about $69 in the quarter and about $70 during the year, exceeding industry figures. Moreover, customers seemed more content than most, leaving at a 2.1% rate, again, below industry averages.

Nextel retired $588 million in debt in the fourth quarter and about $3.2 billion of debt in 2002, whittling its total debt to $12.2 billion. It said such activities helped it avoid about $5.4 billion in interest and dividend payments. It ended the year with $2.7 billion in cash and $1.4 billion in undrawn credit facilities.

Looking ahead, the company sees profit of at least 75 cents a share for the full year 2003, and free cash flow of $500 million or more. It also expects to reach earnings before interest, taxes, depreciation and amortization of $3.8 billion or more. Capital expenditure is expected to be $1.8 billion or less. The company expects to gain an additional 1.7 million new customers this year.

Yet despite the rosy outlook, some Wall Street analysts wonder if developments in the industry, announced this quarter by Nextel's competitors, will some day chip away at its competitive advantage.

Verizon Wireless

and

Sprint PCS

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(PCS)

both have affirmed plans to launch competing services for the consumer market. Separately, handset manufacturers

Nokia

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,

Ericsson

(ERICY)

and

Siemens

are teaming up to try to hash out a technology standard for wireless carriers to offer services that would compete with Nextel's push-to-talk service, which lets users connect with each other by pushing a button rather than dialing a number. The connection usually takes less than a second.

It's a question that has haunted the company for several years, said Nextel executives, but the firm isn't too concerned for now. "There have been discussion from the

code division multiple access folks for years," said Nextel Chief Operating Officer Tom Kelly in an interview, referring to wireless services competitors including Verizon Wireless and Sprint PCS. "We believe there are technologies out there that can provide a two-way product on the CDMA platform,

but will they perform like ours? No."

Indeed, the company's technology, which is developed by Motorola exclusively for Nextel, remains the leader in the market for such features. Longer latency time, or the time it takes to connect from the moment a user hits the button, is one problem that competitors continue to face, according to analysts. Also, by the second half of this year, Nextel plans to roll out a nation-wide "direct-connect" service that will let subscribers on one coast chat with subscribers on the other almost instantly at the push of a button.

Nonetheless, Kaufman Brothers telecom analyst Vik Grover, who is a harsh critic of Nextel, said, "The partnership to develop an open standard platform for PTT

push to talk across different networks supports our views that the differentiator for PTT exhibited by Nextel will fade." He added, "Against this backdrop, we recommend investors exit positions in PTT forerunner Nextel." Kaufman Brothers has a sell rating on the stock.

Nextel Chief Financial Officer Paul Saleh said, "A lot of people would like to emulate what we're doing. It may be a response from our competitors to pre-empt an attempt of a migration of their customers to us."