BUSINESSWEEK ONLINE : APRIL 10, 2000 ISSUE
INFORMATION TECHNOLOGY Nextel Isn't "Next Who?" Anymore CEO Donahue talks about what sets his company apart in the wireless world When Timothy M. Donahue joined Nextel Communications Inc. in January, 1996, as president and COO, the Reston (Va.) company was an upstart in the mobile-phone industry. Today, Nextel has 4.9 million subscribers, the highest revenue-per-customer rate in the wireless world, and a high-flying stock price. Nextel has built a loyal following among business users. Its big draw: a walkie-talkie feature that, for example, lets a construction foreman talk to his entire crew at the push of a button. Donahue, who became CEO last August, plans to build on Nextel's momentum by rolling out a go-anywhere global-phone service and wireless Internet access, and by moving into the consumer market. He discussed his strategy, and the future of the wireless industry, with Business Week Correspondent Amy Borrus on Mar. 23. Edited excerpts follow: Q: A few years ago, Nextel was the Rodney Dangerfield of the wireless industry. Now, it's more like the Robin Williams -- everyone wants a piece of you. What's been critical to Nextel's success? A: Two to three years ago, it was "Next who?" It wasn't Nextel.... The technology was really flawed. It wasn't until 1996 that we were able to convince [phone supplier] Motorola to do a lot more work on the technology.... But what really has propelled us in terms of building a customer base is this very differentiated product we have, the three services in a single handset: interconnection, two-way radio, and short messaging. It is a unique product, no one else has it, and more importantly, we have laser focus on business [customers]. We're not in the consumer market. Q: What are the challenges ahead? A: We have to make sure the quality of the network is up to customers' expectations, and we have to continue to bring new and different products to the marketplace. Data is obviously our next big play.... For an access fee, you'll get a number of services that will come through our portal, which is co-branded with Microsoft. If you want to look at share prices, the weather, your e-mail, you can do all that for a flat fee. Then there will be much more robust vertical applications designed for a specific business segment. They will pay us for that particular application. For example, we will be able to provide sales organizations with salesforce automation, so they can go into an account and wirelessly enter all the information on an order form, transmit it over our network back to their host computer. The application revenues represent a lot of money to us.... Making sure we get applications to market on a timely basis and that they are applications customers want to pay for will be critical. Q: How does a global phone fit into your strategy? A: When you consider that our focus is business, how much travel there is around the world, that we will have the simplest-to-use wireless handset of anyone in the world, we think it has great potential. One phone, one bill, one number. Our corporate accounts can't wait to get this. International roaming is a hassle. We take all of the hassle out of it. It's going to be a sensation. Q: Nextel has done very well catering to business users. Why go into the consumer market? A: We'd like to be in the consumer biz, but we're not going to enter with a me-too cellular product. We're looking at a number of different products that offer a differentiated service, probably oriented toward the family. I don't anticipate being in the [consumer] business before '01. I like the business because there's so much opportunity out there. I don't like the economics. We've got to figure out a better way to do it. Q: What obstacles do you face? A: Distribution is always an issue, but I'm not sure it's going to be an obstacle because the consumer market will open its arms to us if we have something different. It clearly will be a challenge to make sure we get the appropriate returns on investment. If it doesn't prove out to us from a modeling perspective, I won't do it. Right now, we have 25% margins. Now, I think we could grow that to 40%. I don't know if on the consumer side you could get to 40%, but I think you should be able to get to 30% to 35%. Q: Is there still much growth ahead for wireless? A: The momentum we have on the voice side is tremendous. A third of our business is add-ons. Growth within an organization that's already a customer.... Wireless is the future. We have such a terrific opportunity because we have this wonderful, very large, all-digital network that spans the country. At the end of the day, there will be four or five players, and we'll be one of them.... There's so much business out there in the world of wireless that we clearly can stand alone. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Nextel: The Happy Loner TABLE: What's Next for Nextel ONLINE ORIGINAL: Nextel Isn't "Next Who?" Anymore INTERACT E-Mail to Business Week Online

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