NEXTEL COMMUNICATIONS INC.

Louise Philbrick

David Guerra

Keith Grant

Overview• Current Condition Possible Strategies• Vision and Mission Recommendations • External Factors Evaluation

– CPM– EFE

• Internal Factors– IFE

• Analysis– Key Ratios– SWOT Matrix– Space Matrix– BCG– IE Matrix– GSM– QSPM

Nextel Overview

Nextel Communications Inc. is a provider of communications services with three operating segments:

• Digital Cellular– Customers receive crystal clear calls and guaranteed

message delivery in a secure environment, within the Nextel National Network.

• Walkie-Talkie Services– Direct Connect®, Nationwide Direct Connect™, and

International Direct Connect™ services allow communication without having to dial a number.

Nextel OverviewContinued

• Wireless Data Services– Customers can access the wireless web, e-mail,

instant messages, text messages, and multimedia messages. They can also customize their phones with Java™ applications, wallpapers, ring tones, and alerts with sports, news, and weather information.

Nextel History

• Founded as Fleet Call in April of 1987

• Fleet Call was founded as a two-way radio service.

• Fleet Call issued their IPO in 1992

• Nextel first recorded profit in 2002

Stock Price Performance

Graphic source: cbs.marketwatch.com

Nextel Today

• 8.2% Market share

• 14.1% of new wireless subscribers

• Nextel Direct Connect®

• Nextel trades on the NASDAQ National Market under the symbol NXTL

Key Facts

• 95 % of Fortune 500 companies are Nextel customers

• Currently in 297of the top 300 US markets

• Nextel is tied with Verizon for the lowest customer churn rate.

• 36% sales growth over the past 5 years

• In 2003 Nextel won the naming rights to NASCAR racing series

Goals and Objectives

• Provide individualized packages of wireless services– combine multiple wireless communication

options in single wireless telephones

• Target Business Customers– focus on business customers will emanate a

higher monthly average revenue per unit and lower average monthly service cancellations or terminations

Goals and Objectives Concluded

• Rapid deployment of robust networks– create vigorous wireless systems that cover all

key areas of a given market before introduction of network in that market.

• Operate in Mid-sized and smaller markets– this strategy would allow Nextel to impulsively

increase penetration within our targeted segment

Vision Statement

Enhancing the diversity of Nextel’s workforce and promoting an inclusive work environment to better serve our diverse employees, customers, suppliers, and business partners.

Graphic obtained from: Nextel.com Source: Nextel. COM

Nextel Mission statement

• We will achieve our vision statement by incorporating inclusion into all that we do.– Recruiting and retaining a talented, diverse

employee base– Recognizing and appreciating all employee’s

perspective and talents– Fostering an environment that enables all employees

to reach their highest potential– Building diversity awareness throughout the

organization– Promoting supplier diversity

Source: Nextel. COM

Nationwide Direct Connect® Coverage

Graphic obtained from: Nextel.com

External Audit

1. 141 million possible investors in Europe, UK, and Germany.2. Low P/E ratio which should attract value investors.3. Sports marketing can be luring for younger customers.4. Growing Hispanic population in the US.5. Increased desire for wirelsss service.

Opportunities

1. New regulatory complaints (new phone # portability).

2. Rising costs of healthcare.3. Global unrest- economic monetary and financial.4. Consumer privacy rights being attacked.5. Weak Consumer spending.6. Decreasing demand for traditional voice lines and fixed lines.7. Increasing overlap of telecommunication territories.8. Increasing competition for providers of web search directories.9. Increasing providers of wireless services.10. Brand recognition.

Threats

EFE Matrix

Opportunities Weight Rating Weighted Score1. 141 million possible investors in Europe, UK, and Germany. 0.06 1 0.062. Low P/E ratio which should attract value investors. 0.06 3 0.183. Increased desire for wirelsss service. 0.02 2 0.044. Growing Hispanic population in the US. 0.06 2 0.125. Sports marketing can be luring for younger customers. 0.10 3 0.30

External Factor Evaluation Matrix (EFE)

Threats Weight Rating Weighted Score1. New regulatory complaints (new phone # portability). 0.10 3 0.302. Rising costs of healthcare. 0.07 2 0.143. Global unrest- economic monetary and financial. 0.12 3 0.364. Consumer privacy rights being attacked. 0.02 4 0.085. Weak Consumer spending. 0.10 2 0.206. Decreasing demand for traditional voice lines and fixed lines. 0.05 3 0.157. Increasing overlap of telecommunication territories. 0.06 3 0.188. Increasing competition for providers of web search directories. 0.02 2 0.049. Increasing providers of wireless services. 0.06 4 0.2410. Brand recognition. 0.10 4 0.40

1.00 2.79TOTALS

Competitive Profile Matrix

Weight Rating Score Rating Score Rating Score0.10 4 0.40 2 0.20 3 0.30

Price 0.25 3 0.75 4 1.00 2 0.50Financial Position 0.20 4 0.80 3 0.60 4 0.80Consumer Loyalty 0.30 3 0.90 3 0.90 3 0.90Brand Awareness 0.15 4 0.60 3 0.45 3 0.45

1.00 2.75 3.15 2.95Totals

Critical Success Factors

Nextel

Competitive Profile Matrix (CPM)

Alltel SBC

Market Share

Internal Audit

1. 36 percent sales growth over 5 years compaired to 12 percent for the industry.

2. ROA, ROI and ROE are all twice as attractive as the industry year-end 2003.3. Sports marketing contracts.4. Good brand awarness.5. Known for product innovation like their coast to coast walkie talkie.6. Net income increased over 12 percent in 2003.

Strengths

1. Stock's beta is over 2, which is twice as volitle as the S&P 500.

2. Historically have returned negative net income.3. Only major supplier is Motorola.

Weaknesses

IFE MatrixInternal Factor Evaluation Matrix (IFE)Strengths Weight Rating Weighted Score

1. 36 percent sales growth over 5 years compaired to 12 percent for the industry.

0.15 4 0.60

2. ROA, ROI and ROE are all twice as attractive as the industry year-end 2003.

0.15 4 0.60

3. Sports marketing contracts. 0.05 3 0.154. Good brand awarness. 0.10 4 0.405. Known for product innovation like their coast to coast walkie talkie. 0.10 4 0.406. Net income increased over 12 percent in 2003. 0.15 4 0.60

Weaknesses Weight Rating Weighted Score1. Stock's beta is over 2, which is twice as volitle as the S&P 500. 0.05 1 0.052. Historically have returned negative net income. 0.10 2 0.203. Only major supplier is Motorola. 0.15 1 0.15

1.00 3.15TOTALS

Key Ratios

Growth Rates Nextel Industry Sector S&P 500

Sales (MRQ) vs. Qtr 1yr ago

28.96 2.36 14.39 13.40

Sales (TTM) vs. TTM 1yr ago

24.07 3.55 15.92 11.90

Sales- 5yr growth rate

36.36 12.49 17.25 9.30

EPS (MRQ) vs. Qtr 1yr ago

-59.68 -17.21 15.43 28.69

EPS (TTM) vs. TTM 1yr ago

-9.51 -4.84 16.37 21.92

EPS- 5yr growth rate

NM -1.81 15.23 12.15

Capital spending- 5yr growth rate

-4.35 -2.37 2.61 4.06

Nextel Industry Sector S&P 500

Valuation Ratios

P/E Ratio (TTM) 18.27 27.90 28.90 24.01

P/E 5 yr high N/A 36.84 48.47 45.41

P/E 5 yr low N/A 10.16 16.09 16.26

Beta 2.14 1.28 .96 1.00

Price to sales (TTM)

2.47 1.93 2.80 3.33

Price to Book (MRQ)

4.63 2.59 3.89 4.29

Price to tangible book (MRQ)

N/A 4.36 6.60 7.56

Price to cash flow (TTM)

8.43 6.92 17.03 17.32

Price to free cash flow (TTM)

21.18 16.18 33.11 28.97

% Owned institutions

76.07 38.23 50.48 64.19

Dividends Nextel Industry Sector S&P 500

Dividend Yield N/A 4.20 2.14 2.04

Dividend yield 5yr Average

0.00 2.34 1.43 1.48

Dividend 5yr Growth rate

NM -0.87 -0.89 6.48

Pay out ratio (TTM)

0.00 33.73 15.54 26.78

Financial Strengths

Quick ratio (MRQ) 1.15 1.01 0.93 1.26

Current ratio (MRQ)

1.31 1.22 1.47 1.76

LT Debt to equity (MRQ)

1.64 0.84 0.74 0.68

Total debt to equity (MRQ)

1.72 0.95 0.82 0.85

Interest coverage (TTM)

2.70 3.18 7.84 11.86

Profitability Ratios %

Nextel Industry Sector S&P 500

Gross Margin (TTM)

70.88 60.97 42.84 47.32

Gross Margin-% Yr Average

65.00 54.17 42.06 47.01

EBITD Margin (TTM)

36.70 31.75 22.32 20.79

EBTID 5 Yr Average

22.30 30.70 21.97 20.82

Operating Margin (TTM)

21.04 12.99 12.90 20.33

Operating Margin- 5Yr Average

1.24 13.72 11.21 18.35

Pre-tax Margin (TTM)

15.25 10.68 10.37 17.27

Pre-tax Margin 5yr Average

-9.88 10.57 11.77 17.54

Net Profit Margin (TTM)

14.21 7.03 7.54 13.12

Net Profit Margin 5 Yr Average

-10.37 5.18 7.62 11.59

Effective tax Rate (TTM)

6.85 29.08 32.18 31.31

Effective Tax Rate 5Yr Average

14.43 35.99 36.04 34.20

Management Effectiveness %

Nextel Industry Sector S&P 500

Return on assets (TTM)

7.24 3.21 5.91 6.40

Return on assets 5yr Average

-2.10 2.87 5.49 6.79

ROI (TTM) 8.44 3.84 7.98 9.97

ROI 5Yr Avg -2.46 3.70 7.59 10.93

ROE (TTM) 36.82 13.28 13.51 18.71

ROE 5Yr Avg -4.79 9.79 13.18 19.22

Efficiency

Revenue/Employee (TTM)

636,471 405,314 479,338 622,866

NI/Employee (TTM) 90,412 102,467 90,606 81,707

Receivable Turnover (TTM)

9.45 7.39 17.23 9.76

Inventory Turnover (TTM)

14.39 21.63 17.53 10.46

Asset Turnover (TTM)

0.51 0.47 1.17 0.29

Strengths - S Weaknesses - W1. 36 percent sales growth over 5 years

compaired to 12 percent for the industry.

1. Stock's beta is over 2, which is twice as volitle as the S&P 500.

2. ROA, ROI and ROE are all twice as attractive as the industry year-end 2003.

2. Historically have returned negative net income.

3. Sports marketing contracts. 3. Only major supplier is Motorola.4. Good brand awarness.5. Known for product innovation like their

coast to coast walkie talkie.6. Net income increased over 12 percent

in 2003.

Opportunities - O SO Strategies WO - Strategies1. 141 million possible investors in

Europe, UK, and Germany.1. Expand wireless services into Europe,

UK and/or Germany (S1, S4, O1, O5)1. Purchase international wireless

providers such as MMO2 (W3, O5)

2. Low P/E ratio which should attract value investors.

2. Form new contracts with professional athelties to market products (S1, S2, S3, O3).

3. Sports marketing can be luring for younger customers.

3. Acquire small domestic wireless providers such as Powertel or Aerial (S1, O5)

4. Growing Hispanic population in the US.

5. Increased desire for wirelsss service.

Threats - T ST Strategies WT - Strategies1. New regulatory complaints (new phone

# portability).1. Expand to overseas markets to hedge

the falling price of the dollar (S1, O5)1. Layoff part of the workforce to reduce

overhead costs. (W2, T3, T5)2. Rising costs of healthcare.3. Global unrest- economic monetary and

financial.4. Consumer privacy rights being attacked.

5. Weak Consumer spending.6. Decreasing demand for traditional

voice lines and fixed lines.7. Increasing overlap of

telecommunication territories.8. Increasing competition for providers of

web search directories.9. Increasing providers of wireless

services.10. Brand recognition.

Space Matrix

Y axis: Financial Strength +3.2 +1 worst to +6 best Y axis: 1.2

Environmental Stability -2 -1 best to -6 worst X axis: 2

X axis: Industry Strength -2 +1 worst to +6 best

Competitive Advantage +4 -1 best to -6 worst

6

5

4

3

2

1

-6 -5 -4 -3 -2 -1 1 2 3 4 5 6-1

-2

-3

-4

-5

-6

IS

ES

CA

FSConservative Aggressive

Defensive Competitive

BCG

Stars Question Marks18% New Subscribers

10% Wireless

Cash Cows Dogs

High Medium Low

1.0 0.5 0.0High +20

Medium 0

Low -20

IE Matrix

4.0 I II III

High

3.0 IV V VI

TheEFETotal Medium NextelWeightedScores

2.0 VII VIII IX

Low

1.0

Strong Average Weak4.0 to 3.0 2.99 to 2.0 1.99 to 1.0

The Total IFE Weighted Scores

Grand Strategy Matrix

Rapid Market Growth

Quadrant II Quadrant I

Strong Competitive

Position

Slow Market Growth

Weak Competitive

Position

Quadrant III Quadrant IV

1. Market Development

2. Market Penetration

3. Product Development

4. Forward Integration

5. Backward Integration

6. Horizontal Integration

7. Concentric Diversification

QSPM

Opportunities Weight AS TAS AS TAS1. 141 million possible investors in Europe, UK, and Germany. 0.06 4 0.24 1 0.062. Low P/E ratio which should attract value investors. 0.06 0 0.00 0 0.003. Increased desire for wirelsss service. 0.02 4 0.08 2 0.044. Growing Hispanic population in the US. 0.06 1 0.06 4 0.245. Sports marketing can be luring for younger customers. 0.10 3 0.30 4 0.40

Increase Domestic Prescence

Expand into International

Markets

Threats Weight AS TAS AS TAS1. New regulatory complaints (new phone # portability). 0.10 2 0.20 1 0.102. Rising costs of healthcare. 0.07 0 0.00 0 0.003. Global unrest- economic monetary and financial. 0.12 1 0.12 3 0.364. Consumer privacy rights being attacked. 0.02 3 0.06 2 0.045. Weak Consumer spending. 0.10 2 0.20 1 0.106. Decreasing demand for traditional voice lines and fixed lines. 0.05 3 0.15 1 0.057. Increasing overlap of telecommunication territories. 0.06 4 0.24 2 0.128. Increasing competition for providers of web search directories. 0.02 3 0.06 2 0.049. Increasing providers of wireless services. 0.06 3 0.18 1 0.0610. Brand recognition. 0.10 3 0.30 4 0.40

QSPM

Strengths Weight AS TAS AS TAS1. 36 percent sales growth over 5 years compaired to 12 percent for the

industry.0.15 3 0.45 4 0.60

2. ROA, ROI and ROE are all twice as attractive as the industry year-end 2003.

0.15 3 0.45 4 0.60

3. Sports marketing contracts. 0.05 3 0.15 4 0.204. Good brand awarness. 0.10 3 0.30 4 0.405. Known for product innovation like their coast to coast walkie talkie. 0.10 4 0.40 2 0.206. Net income increased over 12 percent in 2003. 0.15 2 0.30 3 0.45

Expand into International

Markets

Increase Domestic Prescence

Weaknesses Weight AS TAS AS TAS1. Stock's beta is over 2, which is twice as volitle as the S&P 500. 0.05 0 0.00 0 0.002. Historically have returned negative net income. 0.10 1 0.10 2 0.203. Only major supplier is Motorola. 0.15 0 0.00 0 0.00

4.34 4.66TOTALS

Possible Strategies

• Expand coverage in underdeveloped rural areas

• Expand and strengthen international markets i.e. Latin America

• Penetrate the foreign market• Use advertising leverage with NASCAR to

diversify markets• Focus on retaining current customers

while attracting new customers

Decisions

• Primary– Concentrate on gaining more market share in

the U.S. by achieving a merger with another wireless provider such as Sprint.

• Possibilities– Progress into Foreign Market– Expand Target Market

Implementation

• Aims– Increase income by 55% within the next 3

years• Increase revenue by 25% within the next 3 years

– Decrease long-term debt by 30% within the next 3 years

• Match industry averages within the next 3 years

– Increase research and development in order to maintain competitive advantage

2004 Financial Statistics

• Operating Revenues $3,000.0 million• Net Income $3,000.0 million• EPS $2.62• Capital Expenditures $(2513.0) million• Total Debt $13,336.0 million• Cash Flow from Operating Activities

$4,288.0 million• Weighted Average Shares Outstanding

$1,124.0 million

Press Releases

• November 12, 2004– Nextel Gets Perfect Score

• November 29, 2004– Nextel Awarded With The Best Sports Business Integr

ation• December 7, 2004

– Boost Mobile Passes One Million Customer Mark• December 15, 2004

– Sprint and Nextel to Combine in Merger of Equals