Updated from 9:17 a.m. EDT

With thoughts of insolvency now far in the background for the firsttime in months,



crashed through analyst estimates for its secondquarter and raised guidance for the year, driving wireless carrier shareshigher in the morning session and kicked off the earnings season to a goodstart, analysts said.

The nation's fifth-largest wireless carrier beat estimates by astaggering 61 cents, and achieved net profitability for the first time,earning $325 million, or 37 cents a diluted share, on improved revenues of$2.2 billion for its second quarter. Analysts polled by ThomsonFinancial/First Call expected the company to report a loss of 24 cents per share.

Those results compare favorably against the year ago period's net lossof $369 million, and 56 share loss, on revenues of $1.72 billion.

The company reported a year-over-year jump of 69% in earnings before interest, taxes, depreciation and amortization to $816million. Analysts expected the company to report in the $650 million range.

"This sets a positive tone for the wireless carriers reporting season,"wrote J.P. Morgan wireless services analyst Thomas Lee, following Nextel'sgood news. "More importantly, we believe that the convincingly strongresults from Nextel will substantially improve the credit environment forwireless carriers."

For a brief moment, investors dismissed long-standing issues afflictingthe wireless shares, with some seeing double-digit boost in morningtrading, led by Nextel. Nextel shares were up $1.32, or 26.40% to $6.32.

AT&T Wireless


was gaining, up 20 cents, or 3.35% to $6.20.

Sprint PCS


, which isprepared to report this Thursday, was ahead 45 cents, or 7.21% to $6.69.

Triton PCS

(TPC) - Get Report

rose 42 cents, or 10.42% to $4.45.

Western Wireless


also was up, gaining 24 cents,or 6.40% to $3.99.

All rational thought flew out the window with Leap Wireless also, whichmissed its own subscriber addition targets a week ago, gained 25 cents, or22.12% to $1.38.

Even the most somber of moods were lifted, from as far as Germany,where investors in Deutsche Telekom, which owns U.S.-based VoiceStream,also took a breather, bidding up shares by 11 cents, or 1.01% to $11.02.Nextel's surprise helped stave off Deutsche Telekom's freefall this week,after investors voiced displeasure over the German government's anointedsuccessor candidate, company veteran Gerd Tenzer, to current CEO RonSommer. A vote is expected today.

The Philadelphia Stock Exchange's wireless telecommunications indexgained 1 point, or 2.18%, to 46.96.

Possibly most important to Nextel's job to regain investor's confidencewas its efforts to reduce the company's debt. As part of this quarter'sactivities, the company also took steps to pare down its debt by $1.5billion, including the retirement of about $1.1 billion in debt andpreferred stock and an agreement to repurchase $400 million of itsindebtedness. Long-term debt now stands at approximately $13.4 billion. Thedebt activity will help the company save an estimated $2.5 billion over 9years in forgone interest, principal and dividends, the company said in astatement. Its debt-to-EBITDA ratio is now at 4.1, which falls below itsdebt covenant requirements.

"Strong customer demand for our unique and differentiated services anda keen focus on operational and capital efficiencies helped make this abreakthrough quarter for Nextel," said Nextel president and CEO Tim Donahuein a statement. "The combination of accelerated cash flow, reducedexpenditures and the gain from our significant debt reduction activitiesgenerated our first-ever positive quarterly net income.

Just a month ago, the debt-strapped wireless carrier reaffirmed itscash flow guidance of reaching at least $2.5 billion. Those projectionswere raised this morning to at least $3 billion for the year. Capitalexpenditures will be $2 billion or less. Nextel chief financial officerPaul Saleh also maintained the company would be likely to continue toreport postive EPS for the remainder of the year. Guidance for 2003 isexpected in the fourth quarter this year.

In particular, the company had much to cheer about when it came tosubscriber metrics. The company added an additional 471,000 new domesticsubscribers for the quarter, down 3% year-over-year, finishing the quarterwith 9.64 million subscribers in total. Churn, or the rate at whichcustomers leave the service remained flat at a relatively low 2.1%.Deflecting comments regarding slowing growth in the industry, companyexecutives pointed out that about 90% of its new subscribers defected fromother carriers, and were not first-time customers.

Nextel's average revenue per subscriber, or ARPU, has traditionallybeen among the highest in the industry. This quarter, ARPU surged evenhigher, up $3 sequentially to $71. Minutes of usage per customer also drovehigher to 650 minutes, compared to about 580 minutes year-over-year.Executives say the spring months generally bring in higher over-usageminutes with customers paying higher fees for breaking through the allottedminutes in their plans. Turns out that customers like to gab more when itgets warmer out.