Nextel's business connection

Headnote

Tim Donahue, chief executive of Nextel, says that there is no rush to take a decision on 3G technology: the company's existing system handles data efficiently and it is about to be upgraded to increase capacity for the company's business users

Nextel is an unusual sort of mobile phone operator. It is more like a network of private mobile radio systems, the sort of services used by delivery drivers, construetion firms and even taxi operators, that have been developed into a US-wide digital phone network.

Even in the technological anarchy that is the US mobile phone industry -- where different operators use CDMA, TDMA, GSM and even still analogue radio systems - Nextel is an oddity: it uses a digital technique invented by Motorola called iDEN. The initials stand for Integrated Digital Enhanced Network, and the technology is close to, but different enough from, TDMA and GSM.

The result is that Nextel, backed by its 14% shareholder and dominant supplier, Motorola, is a bit like the Apple Macintosh of the mobile phone world. The phones are technologically advanced - able to make dialled calls, work like two-way radios, and operate like data terminals - and the users are clearly pleased with them. But they won't work in most of the world, where GSM rules. However, there are now dual-standard handsets to work outside iDEN territory.

On the positive side, Nextel has clearly identified a market for its services - and the users spend more on mobile communications than the average US customer. The average monthly revenue per user for Nextel in the US in the third quarter of 2001 was $71.05, the highest of all operators. Chum was also lowest of the six US national wireless networks too. But in terms of sheer numbers Nextel stood fifth out of six, with just 8.1 million customers - less than a third of Verizon's 28 million.

Meanwhile, Nextel is facing the same problems as all wireless carriers worldwide: the challenge of upgrading to the third generation. However, in this interview chief executive officer Tim Donahue thinks that this is not an urgent task for Nextel: its technology is already advanced, he says, and the upgrade is still a few years away.

What's the current position...