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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 20, 1999
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NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19656 36-3939651
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2001 EDMUND HALLEY DRIVE, RESTON, VIRGINIA 20191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 433-4000
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(Former name, former address and former fiscal year, if changed since last
report)
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ITEM 5. OTHER EVENTS.
Recent Developments
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Third Quarter Results
Nextel recently announced its third quarter operating results.
Nextel ended the third quarter of 1999 with about 4,050,900 domestic
digital subscriber units in service on its digital mobile network, an increase
from 2,417,400 domestic digital subscriber units, or 68 percent, over the past
twelve months. Nextel also reported a net increase of about 458,000 domestic
digital subscriber units during the third quarter of 1999 and continued strength
in monthly average revenue per domestic digital subscriber unit of about $74.
In addition, domestic system usage during the third quarter of 1999
increased to about 4.9 billion minutes of use, up 82 percent over third
quarter 1998 total domestic system minutes of use of 2.7 billion.
Total consolidated revenue grew approximately 76 percent to $889 million
for the third quarter of 1999, as compared with $506 million in the third
quarter of 1998. Domestic revenue grew 73 percent over the third quarter of 1998
to $862 million during the third quarter of 1999. Consolidated earnings before
interest, taxes, depreciation and amortization, or "EBITDA", for the third
quarter of 1999 increased 61 percent over the second quarter of 1999 to $175
million. This improvement consists of $210 million in positive EBITDA from
domestic operations, a 36 percent increase over the second quarter, and a $35
million EBITDA loss from international operations, a 24 percent decrease over
the second quarter. EBITDA is a measure commonly used by analysts, investors and
others in the telecommunications industry. However, EBITDA is not a measure of
financial performance under generally accepted accounting principles and should
not be considered as an alternative to net income or loss as a measure of
performance, or to cash flow as a measure of liquidity.
The net loss attributable to common stockholders for the third quarter
of 1999 was $361 million, or $1.10 per share. Of this net loss, $.05 per share
is attributable to foreign currency transaction losses associated with Brazilian
currency weakness.
Nextel's consolidated capital expenditures during the third quarter of
1999 were $484 million, including $453 million for domestic operations and $31
million for international operations.
Third Quarter 1999 Management and Subsequent Board Developments
On July 17, 1999, Timothy M. Donahue, formerly Nextel's President and
Chief Operating Officer, succeeded Daniel F. Akerson as Nextel's Chief
Executive Officer. Mr. Akerson stepped down from his position at Nextel to
become Co-Chairman of Eagle River, Inc., an entity controlled by Craig O.
McCaw, a principal stockholder of Nextel. Mr. Akerson continues to serve as
Chairman of Nextel's board of directors and also as a member of the operations
committee of the board. On September 22, 1999, Mr. Akerson became Chairman and
Chief Executive Officer of NEXTLINK Communications, Inc., a publicly held
competitive local exchange carrier controlled by Mr. McCaw. NEXTLINK has
significant fiber optic network capacity currently under construction
nationwide and significant holdings of local multipoint distribution system
fixed wireless spectrum in many major metropolitan markets in the United
States.
In addition, on October 15, 1999, Mr. Keisuke Nakasaki resigned from his
position on Nextel's board of directors, reducing the board's size to nine. Mr.
Nakasaki had occupied his position on the board as a result of rights granted to
an affiliate of Nippon Telegraph and Telephone Corp. in connection with and
linked to that affiliate's equity investment in Nextel. The contractual rights
to representation on Nextel's board may continue in effect for some time under
the terms of the relevant agreement. Nippon Telegraph and Telephone Corp. has
advised Nextel that it does not intend to exercise those rights by designating a
replacement for Mr. Nakasaki to Nextel's board.
Bank Facility Increase
At September 30, 1999 Nextel had drawn about $1.8 billion of the $3.295
billion in secured borrowings available under its bank credit agreement as in
effect on that date. On September 23, 1999, Nextel obtained a commitment from a
group of lenders, including some of the lenders under the current bank
facility, to increase the borrowings available under the bank facility by
$1.705 billion to a total of $5.0 billion. The commitment also provides for the
extension of the maturity of the borrowings under the bank facility and
contemplates that the bank facility may be further increased by up to an
additional $1.0 billion in incremental borrowings. Availability of the
additional borrowings contemplated by the commitment is subject to a number of
conditions, including the successful syndication of the facility, the
negotiation and execution of definitive agreements and compliance with any
limitations imposed on Nextel's access to these borrowings under the indentures
pursuant to which some of Nextel's senior notes were issued.
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Activities Involving NextWave
On August 12, 1999, Nextel announced that it had reached agreement with
the United States Department of Justice and the Federal Communications
Commission concerning the terms and conditions that would apply to the
resolution of the claims of the United States government asserted against
NextWave Personal Communications, Inc. and some of its affiliates in the context
of a plan of reorganization for the NextWave entities contemplated to be
proposed and sponsored by Nextel. Information concerning these arrangements and
copies of the agreement and related term sheet between Nextel and the United
States government are included in Nextel's Current Reports on Form 8-K dated and
filed with the Securities and Exchange Commission on August 12, 1999 and August
18, 1999. NextWave and its affiliates hold personal communications services
spectrum licenses granted by the Federal Communications Commission. In June
1998, the NextWave entities holding such licenses commenced a voluntary
bankruptcy proceeding.
Since reaching that agreement, Nextel has engaged in negotiations with
representatives of the creditor and equity groups of the NextWave entities and
representatives of the Department of Justice and the Federal Communications
Commission regarding a potential Nextel-sponsored plan of reorganization. Nextel
has not yet reached agreement with these parties in interest, and Nextel cannot
predict whether or when it will do so. Even if such agreement were to be
reached, any plan of reorganization that ultimately may be developed and
sponsored by Nextel would be subject to various conditions to its successful
implementation, including consideration and approval of that plan in the
NextWave bankruptcy proceedings and receipt of all required regulatory
approvals, consents and waivers. Nextel does not intend to update its
disclosures concerning this matter unless and until it determines that future
developments, if any, warrant such updating disclosures or it determines that it
is required to do so to comply with its disclosure obligations under applicable
laws.
Liquidity and Need for Funding
Nextel and Nextel International, Inc. each are currently in the early
stages of developing their detailed business plans and related budgets for
calendar year 2000. These processes, and the resulting detailed business plans
and related budgets, are not likely to be finalized until late 1999 or early
2000. Moreover, any such plans and budgets that are developed and finalized by
Nextel and Nextel International, Inc. may later be revised by them in light of
competitive factors in the relevant markets, new business opportunities,
including additional spectrum acquisitions and other strategic or opportunistic
transactions or investments, prevailing conditions in domestic and
international debt and equity capital markets and the actual operating results
and apparent prospects of their respective businesses.
Currently, Nextel expects to increase the level of domestic and
international capital expenditures in the balance of 1999 and during 2000. This
increase is expected to be driven by several factors, including:
- the contemplated expansion of digital mobile network coverage around
most major domestic and selected international market areas;
- the contemplated construction of additional cell sites to increase
system capacity and improve system quality, and the installation of
related switching equipment, in the existing core market coverage
areas of Nextel and Nextel International, Inc., including the
installation of system infrastructure and cell sites sufficient to
meet expected increases in system demand four to six months ahead of
anticipated growth;
- the carrying over of certain planned system capital expenditures from
late 1999 to early 2000; and
- the installation of system capital hardware and software items in
connection with the planned initial commercial launch of the domestic
wireless data service offering nationwide in 2000.
Taking such anticipated capital expenditures into account in both the
Nextel and Nextel International, Inc., organizations, including an assumption
that the bulk of the Nextel International, Inc. funding needs for calendar year
2000 will be satisfied with funds invested or advanced by Nextel, and factoring
in anticipated operating cash flow performance of the existing and planned
wireless businesses, both domestic and international, Nextel believes that it
will be able to fully fund both its and Nextel International, Inc.'s operations
through calendar year 2000. This conclusion is premised on the availability of
funds from the following sources:
- consolidated cash on hand as of September 30, 1999 of approximately
$1.4 billion;
- the continued availability of the approximately $1.5 billion of
undrawn capacity as of September 30, 1999 under Nextel's bank credit
facility;
- an increase of at least $1.7 billion in additional available capacity
through an increase of the facility, which is, as of October 20,
1999, currently in syndication and is expected to be concluded in
November 1999; and
- net proceeds from a proposed registered public offering of 25 million
shares of Nextel common stock.
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Nextel cannot assure you that the conditions to accessing funding under
the current or contemplated increased bank facility will be satisfied, nor that
the proposed public equity offering will be successfully concluded or will
generate the estimated amount of net proceeds that Nextel currently
anticipates. In addition, if Nextel's and/or Nextel International, Inc.'s
business plans change, if economic conditions in either of their markets
generally or competitive practices in the mobile wireless telecommunications
industry change materially from those currently prevailing or from those now
anticipated in the next calendar year, or if other presently unexpected
circumstances are encountered that have a material effect on the cash flow
and/or profitability of the domestic or international mobile wireless
businesses conducted by Nextel and/or Nextel International, Inc., the
anticipated cash needs of those businesses, and the conclusions as to the
adequacy of the available sources, each also could change significantly.
Finally, the above estimates and conclusions specifically exclude the impact of
any significant acquisition transaction, or the pursuit of any significant new
business opportunity not now contemplated, by Nextel or Nextel International,
Inc. in the periods referenced above. Any such acquisition or new business
opportunity could involve significant additional funding needs in excess of the
identified currently arranged sources, and thus could require Nextel and/or
Nextel International, Inc. to raise additional equity and/or debt funding to
meet those needs.
Recent Regulatory Changes
Several recent actions taken or proposed by the Federal Communications
Commission may affect the business and operations of Nextel. The Federal
Communications Commission has:
- adopted rules mandating how wireless carriers locate customers dialing
911, provide access to telecommunications services for persons with
disabilities and make their networks accessible to law enforcement
authorities, all of which may require modifications to customer equipment
or the Nextel network;
- proposed rules that could restrict Nextel's access to telephone numbers
or require the use of more costly or less desirable numbering resources;
- adopted, in response to a decision of the Fifth Circuit Court of
Appeals, revised rules affecting universal service contributions of
wireless service providers like Nextel;
- adopted rules restricting the use of information on customers' use of
the wireless network and mandating how wireless service providers bill
their customers, together with proposals for additional billing disclosure
rules; and
- proposed rules requiring wireless service providers like Nextel
essentially to average, to some extent, the interstate long distance
rates charged to customers.
Additional information regarding government regulation can be found in Nextel's
Annual Report on Form 10-K for the year ended December 31, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEXTEL COMMUNICATIONS, INC.
Date: October 20, 1999 By: /s/ Thomas J. Sidman
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Thomas J. Sidman
Senior Vice President and General Counsel
