Mccaw Pledges To Invest Up To $1.1 Billion In Nextel

Cellular phone entrepreneur Craig McCaw on Wednesday said he would invest up to $1.1 billion during the next six years in Nextel Communications Inc., a mobile radio company that is building a nationwide digital network.

The action represents an endorsement of a relatively obscure niche in telecommunications by someone who built a multibillion-dollar fortune getting in at the start of the cellular business 14 years ago.

The news sent Nextel’s stock up $3.37 1/2 to $16.62 1/2, a 25 percent jump, on the Nasdaq Stock Market. Shares of other mobile radio firms posted sharp increases.

“We think it’s a brilliant coup on his part,” said Herschel Shosteck, president of Herschel Shosteck Associates Ltd., a cellular market research firm in Wheaton, Md. “He’s bought a system that is operating, has customers and is over a year into the maturation of a new technology.”

The investment comes about seven months after McCaw sold McCaw Cellular Communications Inc., the nation’s largest cellular telephone firm, to AT&T Corp. for $11.5 billion.

McCaw became AT&T’s largest individual shareholder in that deal and said Wednesday he would hang onto his AT&T stake, about 14 million shares worth $728 million. While Nextel and AT&T may compete for some customers, their broad strategies do not conflict, he said.

“I’m not pulling punches from AT&T,” the Seattle billionaire said. “I’m trying to find ways to do business opportunities that are less competitive with what other people would naturally do. I don’t see this as in (AT&T’s) interest as much, therefore I don’t feel I have that much conflict of interest.”

He declined a position on AT&T’s board so he could pursue outside investments. A year ago, he invested a few million dollars in a start-up firm that is developing a global communications satellite system.

“I view myself as flexible in places we might go,” McCaw said. “I’m not going to do too many things at once.”

McCaw and members of his family, through their private investment firm, will initially purchase about $300 million of Nextel preferred stock and $64 million of common stock, representing about 10 percent of the company. They will have options to purchase another approximately $700 million in common shares during the next six years.

Nextel’s executives have previously said they would like to push broadly into the consumer market and compete with cellular phone carriers. While that may happen sometime, they said Wednesday their first focus would be the existing market of vehicle fleets and mobile workers who use two-way radio.

McCaw encouraged the company in that direction, said Morgan O’Brien, chairman of Nextel. But market conditions, most importantly the lower cost of cellular to consumers, played a role in the strategic shift.

“We’re not immune to what’s going on in cellular,” O’Brien said. “There’s a lot of attention there. There’s not as much with this opportunity here. The technology, our customers, our heritage, everything suggests go for this strategy.”

Nextel is putting the finishing touches on a series of acquisitions that give it a nationwide presence. The Rutherford, N.J., company last year started offering an advanced mobile service that allows both twoway radio and cellular telephoning through the same handset.

It is one of the first to use digital signals that can intermingle voice, data and even video transmissions.

Nextel has 19,000 digital service customers and more than 750,000 customers on two-way systems.

MEMO: This sidebar appeared with the story: Cellular vs. wireless Craig McCaw’s investment of up to $1.1 billion in Nextel Communications Inc. throws the spotlight on the confusion surrounding cellular and wireless technology. Both cellular telephoning and mobile radio are often described with the umbrella term “wireless communication.” But there are notable differences in terminology and technology: Cellular - Handsets in many shapes and sizes, some with paging screens and some weighing just a few ounces, with traditional phone functions; Handset price folded into monthly service fee; Transmission relay sites form “cell” pattern that vary in size from a few blocks to several miles depending on geography; Customers include consumers and businesses. Mobile radio - Handsets in few sizes, weighing about a pound, all with paging screens and walkie-talkie as well as phone-dialing functions; Handset pricing generally separate from monthly service fees; Transmission relay sites also form “cell” pattern; Customers are chiefly businesses with fleets of vehicles or many mobile workers. -Associated Press