Nextel's big eyes make investors blink
Preparing to spend billions, the once-hot wireless carrier scares off some fans.
By Stephanie N. Mehta

(FORTUNE Magazine) – When most other telecoms looked like clunkers, wireless carrier (and NASCAR sponsor) Nextel performed like, well, a racecar. In the two years since FORTUNE urged investors to take a closer look at the company (see fortune.com), its shares have surged more than 500%. But recently Nextel has begun to reverse course. The stock is down 20% from its high of $29 at the start of the year, at a time when other phone companies are actually beginning to rebound. Could it be that the Reston, Va., company is some kind of telecom contraindicator?

Not exactly. Investors right now are nervous about some big checks Nextel may be writing in coming years. For starters, the company has the opportunity to consolidate its wireless spectrum--Nextel has been operating on noncontiguous slivers of airwaves--at a cost of at least $2.5 billion. It's also thinking of upgrading its current network, designed to handle voice calls (including its nationwide walkie-talkie service), to a broadband network for data services. That upgrade could cost about $2.5 billion.

But so far Nextel has been coy about how and when it plans to go broadband. That has created uncertainty--and a bit of frustration--on Wall Street. "Analysts are looking for a statement from Nextel on what technology it will use and what it is going to cost," says Ken Leon, a wireless analyst with S&P Equity Research.

Nextel CFO Paul Saleh says the company has good reason to be deliberate. "You do not want to be putting $2.5 billion in capital to work too early if the demand isn't going to be there," he says. But he won't be goaded into revealing anything more about Nextel's plans: "It will serve everybody for us to go though our analysis, and in the end we'll give them the answers." In the absence of guidance from the company, investors are making their own assumptions--and apparently some are assuming they don't want to own Nextel. -- S.N.M.