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As filed with the Securities and Exchange Commission on January 5, 1998
Registration No. 333-1290
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEXTEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4812 36-3939651
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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1505 Farm Credit Drive
McLean, Virginia 22102
(703) 394-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Thomas J. Sidman, Esq.
Vice President
and General Counsel
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
(703) 394-3000
(Name, Address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Lisa A. Stater, Esq.
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
(404) 521-3939
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Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please check
the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering: [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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EXPLANATORY NOTE
This Post-Effective Amendment No. 1 amends a Registration Statement
on Form S-4 (No. 333-1290) relating to 10,000,000 shares of Class A Common
Stock, par value $.001 per share, and/or certain Warrants of Nextel
Communications, Inc. (the "Company") that may be issued from time to time by the
Company in connection with its acquisitions of other businesses, properties or
securities in business combination transactions. Such Registration Statement was
declared effective by the Securities and Exchange Commission on April 26, 1996.
The purpose of this Post-Effective Amendment No. 1 is to update the information
set forth in the prospectus in such Registration Statement.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT (INCLUDING AMENDMENT NO. 1 THERETO) RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT (INCLUDING AMENDMENT NO. 1 THERETO) BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION DATED JANUARY 5, 1998
NEXTEL COMMUNICATIONS, INC.
CLASS A COMMON STOCK
PAR VALUE $.001 PER SHARE
AND
WARRANTS TO ACQUIRE CLASS A COMMON STOCK
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This Prospectus is part of a registration statement that relates to
10,000,000 shares of Class A Common Stock, par value $.001 per share (the
"Common Stock"), and/or certain Warrants (the "Warrants," and collectively with
the Common Stock, the "Securities") of Nextel Communications, Inc. ("Nextel" or
the "Company") that may be issued from time to time by the Company in connection
with its acquisition of other businesses, properties or securities in business
combination transactions in accordance with Rule 415(a)(1)(viii) of Regulation C
under the Securities Act of 1933, as amended (the "Securities Act"). It is
expected that the terms of acquisitions involving the issuance by the Company of
Securities covered by this Prospectus will be determined by direct negotiations
with the owners or controlling persons of the businesses, properties or
securities to be acquired. Shares of Common Stock or Warrants issued in exchange
for assets or securities in business combination transactions will be valued at
prices reasonably related to market prices of the Common Stock or the value of
the assets to be received, respectively, at the time the terms of an acquisition
are agreed upon. Shares of Common Stock issued pursuant to Warrants will be
valued at or about the time of delivery of such shares.
No underwriting discounts or commissions will be paid, although
finder's fees may be paid from time to time in connection with specific
acquisitions. Any person receiving such fee may be deemed to be an underwriter
within the meaning of the Securities Act.
This Prospectus also may be used by persons ("Securityholders") who
received Securities covered by this Prospectus in transactions described above
and who wish to resell such Securities in transactions to be registered under
the Securities Act. No consideration will be received by the Company in
connection with sales by Securityholders. Any such Securityholders who are
participating in a resale of their Securities in a transaction to be registered
hereunder pursuant to the Securities Act, and the terms of the sales of their
Securities, will be set forth in a Supplement to this Prospectus.
As of the date hereof, an aggregate of 438,972 shares of the Common
Stock and none of the Warrants have been issued in connection with acquisitions
covered by the registration statement of which this Prospectus is a part.
See "Securities Covered By This Prospectus."
The Common Stock is quoted on the Nasdaq National Market ("NNM")
under the symbol "NXTL." On January 2, 1998, the last reported sale price of the
Common Stock on the NNM was $26.1875 per share.
SEE "RISK FACTORS," BEGINNING ON PAGE 10 OF THIS PROSPECTUS, FOR
A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is _____________, 1998.
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TABLE OF CONTENTS
AVAILABLE INFORMATION...............................................................................................3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...................................................................3
THE COMPANY ........................................................................................................5
Overview................................................................................................5
Business Plan...........................................................................................6
Recent Developments.....................................................................................6
RISK FACTORS.......................................................................................................10
History of and Future Expectations of Losses and Negative Cash Flow....................................10
Risks of Implementation of Digital Mobile Networks.....................................................11
Implementation of Digital Mobile Networks Subject to Risks of Developing Technology....................11
Nextel to Require Additional Financing.................................................................13
Success of Nextel is Dependent on its Ability to Compete...............................................16
Ability to Manage Growth...............................................................................18
Reliance on One Principal Supplier in Implementation of Digital Mobile Networks........................19
Nextel's Prospects Are Dependent on Governmental Regulation............................................20
Nextel's Assets Primarily Consist of Intangible FCC Licenses...........................................20
Nextel Susceptible to Control by Significant Stockholders..............................................20
Potential Dilution from Pending and Future Transactions................................................21
Shares Eligible for Future Sale........................................................................22
Dividend Policy Limits Expectation of Future Dividends.................................................22
Potential Conflict of Interest Relationship With Motorola..............................................22
Concerns About Mobile Communications Health Risk May Affect Prospects of Nextel........................22
Forward Looking Statements.............................................................................23
USE OF PROCEEDS....................................................................................................23
SELECTED FINANCIAL DATA............................................................................................23
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................26
SECURITIES COVERED BY THIS PROSPECTUS..............................................................................28
DESCRIPTION OF WARRANTS TO ACQUIRE COMMON STOCK....................................................................29
VALIDITY OF SECURITIES.............................................................................................29
EXPERTS............................................................................................................29
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may be
obtained by mail from the Public Reference Section of the Commission, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Additionally, the Commission maintains a Web site on the Internet (located at
http://www.sec.gov.) that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement
on Form S-4 (including the exhibits and amendments thereto, the "Registration
Statement") pursuant to the requirements of the Securities Act with respect to
the Securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the rules and regulations of the Commission and
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement or as an exhibit to documents incorporated by reference in this
Prospectus (see "Incorporation of Certain Information By Reference"), reference
is made to the respective exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Copies of the Registration Statement together with exhibits may
be inspected at the office of the Commission in Washington, D.C. without charge,
and copies thereof may be obtained therefrom upon payment of a prescribed fee.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION
TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE
DIRECTED TO NEXTEL COMMUNICATIONS, INC., 1505 FARM CREDIT DRIVE, MCLEAN,
VIRGINIA 22102, ATTENTION: INVESTOR RELATIONS, TELEPHONE: (703) 394-3500.
The information in the following documents filed by the Company with
the Commission (File No. 0-19656) pursuant to the Exchange Act is incorporated
by reference in this Prospectus:
(i) Annual Report on Form 10-K for the year ended
December 31, 1996 filed with the Commission on March 31, 1997;
(ii) Quarterly Reports on Form 10-Q for the quarters
ended (a) March 31, 1997 dated and filed with the Commission on May
15, 1997, (b) June 30, 1997 dated and filed with the Commission on
August 12, 1997, and (c) September 30, 1997 dated and filed with the
Commission on November 14, 1997;
(iii) Current Reports on Form 8-K: (a) dated and filed
with the Commission on January 21, 1997, (b) dated and filed with
the Commission on February 7, 1997, (c) dated and filed with the
Commission on March 18, 1997, (d) dated and filed with the
Commission on April 15, 1997, (e) dated June 2, 1997 and filed with
the Commission on June 3, 1997, (f) dated and filed with the
Commission on June 17, 1997, (g) dated and filed with the Commission
on July 9, 1997, (h) dated and filed with the Commission on July 16,
1997, (i) dated July 21, 1997 and
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filed with the Commission on July 22, 1997, (j) dated and filed with
the Commission on September 5, 1997, (k) dated and filed with the
Commission on September 9, 1997, (l) dated and filed with the
Commission on September 22, 1997 and (m) dated and filed with the
Commission on October 23, 1997;
(iv) Proxy Statement, dated as of April 18, 1997, filed
in definitive form on April 21, 1997 with the Commission with
respect to the information required to be included herein by Items
401 (management), 402 (executive compensation) and 404 (certain
relationships and related transactions) of Regulation S-K
promulgated under the Securities Act and the Exchange Act; and
(v) Registration Statement on Form S-1, as amended,
dated as of January 27, 1992 (No. 33-43415), with respect to the
information contained under the heading "Description of Capital
Stock" which was incorporated by reference into the Registration
Statement on Form 8-A, dated January 16, 1992.
All documents filed by Nextel pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statements made herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus and any Prospectus Supplement to the
extent that a statement contained herein, in a Prospectus Supplement, or in any
other subsequently filed document which is also incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or any Prospectus
Supplement.
The information relating to Nextel contained in this Prospectus
should be read together with the information in the documents incorporated by
reference.
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THE COMPANY
On July 28, 1995, NEXTEL Communications, Inc., a corporation
organized under the laws of the State of Delaware in 1987 ("Old Nextel"), was
merged with ESMR, Inc. ("ESMR"), until then a wholly owned subsidiary of
Motorola, Inc. ("Motorola"). ESMR was the surviving corporation in the merger
(the "Motorola Transaction") and succeeded to Old Nextel's assets and
liabilities. ESMR changed its name to Nextel Communications, Inc., effective
upon consummation of the Motorola Transaction. References herein to Nextel or
the Company for periods prior to July 28, 1995 refer to Old Nextel as the
predecessor to the business and operations of Nextel. Unless the context
otherwise requires, references to the Company or to Nextel are intended to
include Nextel Communications, Inc. and its consolidated subsidiaries.
Information contained herein gives effect to the acquisition of
approximately 1,220,000 shares of Common Stock by Digital Radio L.L.C. (the
"McCaw Investor") on April 5, 1995, an additional acquisition of 8,163,265
shares of Class A Convertible Redeemable Preferred Stock of Nextel and 82 shares
of Class B Convertible Preferred Stock of Nextel by the McCaw Investor and the
consummation of related transactions on July 28, 1995 (the "McCaw Transaction"),
the merger of OneComm Corporation ("OneComm") with and into Nextel on July 28,
1995 (the "OneComm Transaction"), the consummation of the Motorola Transaction
on July 28, 1995, the merger of a subsidiary of Nextel with American Mobile
Systems Incorporated ("AMS") on July 31, 1995 (the "AMS Transaction"), and the
merger of Dial Page, Inc. ("Dial Page") with and into Nextel on January 30, 1996
(the "Dial Page Transaction").
OVERVIEW
Nextel's business consists principally of providing a wide array of
digital and analog wireless communications services to its customers in the
United States, in each case utilizing frequencies licensed to its subsidiaries
by the Federal Communications Commission ("FCC"). Nextel provides a
differentiated package of integrated digital wireless communications services
under the Nextel brand name to customers of the various networks constructed and
operated by Nextel's subsidiaries in and around major metropolitan population
centers throughout the country. Collectively, Nextel's operations constitute one
of the largest integrated wireless communications networks utilizing a single
digital transmission technology currently offering commercial service in the
United States. Through its digital and analog wireless communications networks,
Nextel is the leading provider of specialized mobile radio ("SMR") wireless
communications services in nearly all 48 states in the continental United States
and in Hawaii. Nextel has significant SMR spectrum holdings in and around every
major business and population center in the country, including all of the top 50
metropolitan market areas in the United States.
Nextel's operating revenues primarily arise from its digital and
analog wireless communications businesses in the United States, particularly the
mobile telephone service and two-way radio service and, to a lesser extent, from
sales and maintenance of related equipment. Nextel's business plans and efforts
are to a large extent directed toward replacing the remaining traditional analog
SMR systems that it currently operates with advanced mobile communications
systems employing digital technology with a multi-site configuration permitting
frequency reuse ("Digital Mobile networks"). A customer using Nextel's Digital
Mobile network is able to access mobile telephone services, two-way dispatch
(marketed as Nextel's Direct Connect(SM) service), paging and alphanumeric
short-messaging service, and in the future is expected to be able to access data
transmission. Nextel is implementing its Digital Mobile networks utilizing
digital technology developed by Motorola (such technology is referred to as the
"integrated Digital Enhanced Network" or "iDEN"). As of September 30, 1997,
Nextel's Digital Mobile networks were operating in major metropolitan market
areas throughout the United States in which approximately 60% of the total
United States population lives or works.
Prior to the second quarter of 1996, Nextel implemented its Digital
Mobile networks in its market areas using Motorola's first generation iDEN
technology. During that time frame, Nextel encountered certain technology and
system performance issues relating primarily to the voice transmission quality
of the mobile telephone service. In response to these issues, Nextel and
Motorola took action on several fronts to address system performance issues in
general, and voice transmission quality concerns in particular. See "Risk
Factors -- Implementation of Digital Mobile Networks Subject to Risks of
Developing Technology." Additionally, Nextel, together with Motorola, in 1995
began pursuing a program directed toward the development and deployment of
modifications to the first generation iDEN technology platform, which
modifications were targeted specifically at improving the voice transmission
quality of the mobile telephone service. Nextel commenced the full-scale
commercial launch of its first Digital Mobile networks incorporating the
modified iDEN technology (referred to herein as "Reconfigured iDEN") in the
Chicago metropolitan market late in the third quarter of 1996 and has since
deployed the Reconfigured iDEN technology throughout its Digital Mobile
networks. To date, the Company's Digital Mobile network is operational in
markets in which approximately 60% of the United States population lives or
works, providing coverage in and around major metropolitan areas, including New
York, Los Angeles, Chicago, Washington, D.C., Atlanta, Boston, Denver,
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Detroit, Dallas/Fort Worth, Houston, San Francisco, Miami/Fort Lauderdale,
Tampa/St. Petersburg, Orlando, Jacksonville, Pittsburgh, Cleveland, Columbus,
Salt Lake City/ Provo, Phoenix, Tucson, Spokane, Cincinnati, Dayton, San Antonio
and Austin.
Since December 31, 1994, the number of subscriber units in service
on Nextel's Digital Mobile network has increased significantly, reflecting the
commencement of Digital Mobile network service in certain markets, increased
sales in markets in which Digital Mobile network services are provided and, to a
limited extent, acquisitions. As a result, the number of subscriber units in
service on Nextel's Digital Mobile network increased from 13,500 at December 31,
1994, to 85,000 at December 31, 1995, to 300,300 at December 31, 1996 and to
946,600 at September 30, 1997. Nextel's business and marketing strategy for its
Digital Mobile networks continues to be based on, and reflect, a principal focus
on multi-service business users in its markets with Digital Mobile networks.
During 1996 and 1997, Nextel significantly expanded its business
activities to include operations and investments involving wireless
communications service providers outside of the United States that are conducted
under or are coordinated by or through Nextel International, Inc. (formerly
known as McCaw International, Ltd., "Nextel International"), an indirect, wholly
owned subsidiary of Nextel. With the exception of the equity interests held by
Nextel and by Nextel International in Clearnet Communications, Inc.
("Clearnet"), a major provider of analog and digital SMR wireless communications
services throughout Canada, and the holder of one of the two nationwide 30 MHz
personal communications services ("PCS") licenses awarded in Canada, Nextel
International's subsidiaries or other entities in which Nextel International
holds equity or equivalent interests own and operate wireless communications
systems in Latin America and Asia. Nextel International's operating companies
currently provide a variety of analog or digital wireless communications
services in certain metropolitan areas in Argentina, Brazil, Mexico, the
Philippines and Shanghai, China.
Nextel's principal executive and administrative facility is located
at 1505 Farm Credit Drive, McLean, Virginia 22102, and its telephone number is
(703) 394-3000.
BUSINESS PLAN
Nextel is implementing its revised business plan that contemplates
an accelerated deployment during 1997 and 1998 of the Reconfigured iDEN
technology platform throughout markets in the United States in which the Company
intends to establish Digital Mobile networks (including primary connecting
routes between certain markets) in its domestic markets during 1997 and 1998.
Nextel has estimated that system infrastructure and other system capital costs
to be incurred during the period from March 31, 1997 through the end of 1998 to
implement the business plan would be approximately $1,450,000,000. Such estimate
is based on a significant number of assumptions and may be increased in
connection with Nextel's development of its capital and operating budgets for
1998 based, in part, on Nextel's experience in 1997, including its rapid
subscriber growth and increased demand for its services. Nextel currently
expects that the 1998 budgeting process will not be finalized until early 1998.
See "Risk Factors -- Nextel to Require Additional Financing." Nextel believes
that the implementation of the accelerated build-out contemplated by its
business plan will better position Nextel both to achieve its strategic
objectives relating to its U.S. operations and to prepare for emerging
competition in the wireless communications industry, especially from certain
current operators that, on their existing cellular frequencies or on PCS
frequencies, are in the process of converting their wireless communications
systems to digital technology formats and are moving to provide "nationwide
coverage" on the resulting systems. Furthermore, Nextel believes that, assuming
the Company successfully concludes its nationwide Digital Mobile network
build-out plan and develops a sufficient customer base in its markets, a
significant strategic advantage may exist in being "first to market,"
particularly in comparison to the new "entrepreneur block" PCS licensees and
other existing or potential regional wireless communications service providers
that may encounter significant financial and other challenges in replicating or
overtaking Nextel's industry position. Nextel already has taken a number of
significant steps to implement this business plan (including obtaining
modifications to certain terms contained in the Old Indentures (as defined
herein) to provide the flexibility required to assemble and utilize the
necessary financing for such business plan), and further actions currently are
underway to reach that objective. Nextel's ability to fully implement its
business plan will depend, among other things, on certain actions by third
parties, which cannot be assured. See "Risk Factors -- Nextel to Require
Additional Financing" and "-- Forward Looking Statements."
RECENT DEVELOPMENTS
800 MHz SMR Auction. As a result of the conclusion of the 800 MHz
auction by the FCC on December 8, 1997, Nextel acquired 475 Economic Area ("EA")
licenses. In the auction, the Company bid approximately $88,800,000 for 475 of
the 525 EA licenses being awarded by the FCC. Nextel won rights to almost 10 MHz
of spectrum in areas covering all 50 states and approximately 98% of the United
States population. In order to gain full use of the license blocks won in the
auction,
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the Company must relocate certain incumbent licensees to other portions of the
800 MHz band pursuant to established FCC rules.
PCI Merger. Nextel entered into an Agreement of Merger and Plan of
Reorganization dated as of October 2, 1996, as amended, with Pittencrieff
Communications, Inc. ("PCI") providing for the merger of PCI with a wholly-owned
indirect subsidiary of Nextel. PCI has approximately 6,000 800 MHz SMR channels
covering a total population of over 27 million people, predominantly in the
states of Texas, Oklahoma, New Mexico and Arizona. The closing of such merger
transaction occurred on November 12, 1997, resulting in the issuance (or
reservation for issuance) of approximately 6,235,000 shares of Common Stock.
October Notes Issuance. On October 22, 1997, Nextel completed the
sale of $1,129,100,000 principal amount at maturity of Senior Serial Redeemable
Discount Notes due 2007 (such securities issued originally and any securities
issued in exchange therefor in the October Notes Exchange Offer (as defined
herein) collectively, the "October Notes"). The issue price of the October
Notes, which mature on October 31, 2007, was $619.96 per $1,000 principal amount
at maturity (generating approximately $700,000,000 in aggregate gross proceeds),
representing a yield to maturity of 9.75% computed on a semi-annual bond
equivalent basis from the date of issuance. Nextel received approximately
$682,000,000 in net cash proceeds from the sale of the October Notes (the
"October Notes Proceeds"). Such proceeds may be used for general corporate
purposes, including either to refinance a portion of the indebtedness
outstanding under the Old Senior Notes (as defined herein) (which the Company
may effect through repurchases, by way of a tender offer, open market or
privately negotiated purchases, redemption of the Old Senior Notes pursuant to
their terms, or any combination thereof) or to refinance a portion of the cost
of implementing its business plan that would otherwise have been funded by
borrowings pursuant to the Bank Credit Facility, the Vendor Credit Facility
and/or the Second Vendor Financing Agreement (each as defined herein).
Cash interest will not accrue on the October Notes prior to October
31, 2002 and will be payable on April 30 and October 31 of each year, commencing
April 30, 2003, at a rate of 9.75% per annum. The October Notes are redeemable,
at the option of Nextel at any time, in whole or in part, on or after October
31, 2002, at specified redemption prices plus accrued and unpaid interest. In
addition, in the event of one or more sales by Nextel prior to October 31, 2000
of at least $125,000,000 of its capital stock, a portion of the October Notes
not to exceed a maximum of 33 1/3% of the aggregate accreted value of the
outstanding October Notes may be redeemed at Nextel's option within 180 days
after such sale from the net cash proceeds thereof at 109.75% of such accreted
value on the date of redemption. The October Notes are senior unsecured
indebtedness of Nextel and rank pari passu in right of payment with all
unsubordinated, unsecured indebtedness of Nextel, including indebtedness
evidenced by the Old Senior Notes and the September Notes (as defined herein)
and will be senior in right of payment to all subordinated indebtedness of
Nextel.
The October Notes were issued in a private placement transaction and
have not yet been exchanged for substantially identical notes that have been
registered with the Commission under the Securities Act. On December 17, 1997,
the Commission declared effective Nextel's registration statement with respect
to a registered offer to exchange the then outstanding October Notes for an
equal principal amount at maturity of 9.75% Senior Serial Redeemable Discount
Notes due October 31, 2007 that have been registered pursuant to the Securities
Act (the "October Notes Exchange Offer"). In the event that the October Notes
Exchange Offer is not consummated prior to specified dates, additional
incremental interest on the accreted value of the October Notes will accrue
until the October Notes Exchange Offer is consummated or certain other
requirements are met.
The terms of the October Notes are set forth in the related
indenture (the "October Indenture") which has been filed with the Commission and
is incorporated by reference herein.
September Notes Issuance. On September 17, 1997, Nextel completed
the sale of $840,000,000 in principal amount at maturity of its 10.65% Senior
Redeemable Discount Notes due September 15, 2007 (such securities issued
originally and any securities issued in exchange therefor in the September Notes
Exchange Offer (as defined herein) collectively, the "September Notes" and
together with the October Notes, the "New Senior Notes"). Nextel received
approximately $486,000,000 in net cash proceeds from the sale of the September
Notes (the "September Notes Proceeds"). Such proceeds were principally used to
repay a portion of the outstanding borrowings under the Bank and Vendor Credit
Facilities (as defined herein) with the remaining proceeds available for general
corporate purposes.
Cash interest will not accrue on the September Notes prior to
September 15, 2002 and will be payable on March 15 and September 15 of each
year, commencing March 15, 2003, at a rate of 10.65% per annum. The September
Notes are redeemable, at the option of Nextel at any time, in whole or in part,
on or after September 15, 2002, at specified redemption prices plus accrued and
unpaid interest. In addition, in the event of one or more sales by Nextel prior
to September 15, 2000 of
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at least $125,000,000 of its capital stock, a portion of the September Notes not
to exceed a maximum of 33 1/3% of the aggregate accreted value of the
outstanding September Notes may be redeemed at Nextel's option within 180 days
after such sale from the net cash proceeds thereof at 110.65% of such accreted
value on the date of redemption. The September Notes are senior unsecured
indebtedness of Nextel and rank pari passu in right of payment with all
unsubordinated, unsecured indebtedness of Nextel, including indebtedness
evidenced by the Old Senior Notes and the October Notes, and will be senior in
right of payment to all subordinated indebtedness of Nextel.
The September Notes were initially issued in a private placement
transaction and have not yet been exchanged for substantially identical notes
that have been registered with the Commission under the Securities Act. On
December 8, 1997, the Commission declared effective Nextel's registration
statement with respect to a registered offer to exchange the then outstanding
September Notes for an equal principal amount at maturity of 10.65% Senior
Redeemable Discount Notes due September 15, 2007 that have been registered
pursuant to the Securities Act (the "September Notes Exchange Offer"). In the
event that the September Notes Exchange Offer is not consummated prior to
specified dates, additional incremental interest on the accreted value of the
September Notes will accrue until the September Notes Exchange Offer is
consummated or certain other requirements are met.
The terms of the September Notes are set forth in the related
indenture (the "September Indenture") which has been filed with the Commission
and is incorporated by reference herein. The October Indenture and the September
Indenture are referred to collectively as the "New Indentures."
Additional Credit Facilities. Nextel, Nextel Finance Company, a
wholly owned subsidiary of Nextel ("NFC"), and certain subsidiaries of Nextel
have entered into definitive agreements which became effective on September 4,
1997 with respect to $500,000,000 in additional financing, increasing Nextel's
total secured financing capacity under its financing agreements to
$2,500,000,000. These agreements provided for (i) amendments to the existing
secured credit facility with certain banks (as so amended, the "Bank Credit
Facility") pursuant to which $250,000,000 in additional term loans (the
"Additional Bank Borrowings") were made to the Company, (ii) amendments to the
existing secured credit facility with Motorola, NTFC Capital Corporation and
certain other lenders (as so amended, the "Vendor Credit Facility") pursuant to
which $50,000,000 in additional term loans (the "Additional Vendor Borrowings")
will be made available to the Company, subject to the satisfaction or waiver of
applicable borrowing conditions, and (iii) a new credit facility pursuant to
which up to $200,000,000 in additional secured term loans (that are to be second
in ranking to the borrowings made pursuant to the Bank Credit Facility and the
Vendor Credit Facility) will be made available to the Company by Motorola
through March 31, 1999 (the "Second Secured Borrowings"), subject to the
satisfaction or waiver of applicable borrowing conditions. Borrowings under the
Bank Credit Facility and the Vendor Credit Facility (together, the "Bank and
Vendor Credit Facilities") are ratably secured by liens on assets of Nextel's
domestic operating subsidiaries. The Second Secured Borrowings are secured (on a
second priority basis) by the same collateral package securing amounts
outstanding under the Bank Credit Facility and the Vendor Credit Facility.
Giving effect to these amendments and to the agreement relating to
Second Secured Borrowings (the "Second Vendor Financing Agreement"), the
agreement related to the Bank Credit Facility (the "Bank Credit Agreement")
provides for up to $1,905,000,000 of secured financing (consisting of a
$1,085,000,000 revolving loan and $820,000,000 in term loans), the agreement
related to the Vendor Credit Facility (the "Vendor Credit Agreement") provides
for up to $395,000,000 of secured financing (consisting of a $195,000,000
revolving loan and $200,000,000 in term loans), and the Second Vendor Financing
Agreement provides for up to $200,000,000 of Second Secured Borrowings, for a
total of up to $2,500,000,000 in secured financing. The indebtedness incurred
upon issuance of the October Notes may, under certain circumstances described
elsewhere herein, limit the Company's ability to incur indebtedness otherwise
available for incurrence pursuant to the Bank Credit Facility, the Vendor Credit
Facility and/or the Second Vendor Financing Agreement. See "Risk Factors --
Nextel to Require Additional Financing."
Exercise of First Motorola Option by McCaw Investor. On September 3,
1997, the McCaw Investor acquired 2,000,000 shares of Common Stock from Motorola
pursuant to the exercise of an option granted by Motorola, at a per share price
of $15.50 (the "First Motorola Option"). The First Motorola Option was granted
to the McCaw Investor by Motorola in 1995 in connection with the consummation of
the McCaw Transaction.
Issuance of Series D Preferred Stock. On July 21, 1997, Nextel
completed the sale of 500,000 shares of its 13% Series D Exchangeable Preferred
Stock (the shares of such stock so issued originally, any shares of such stock
issued in exchange therefor in the Preferred Stock Exchange Offer (as defined
herein) and any shares of such stock issued as payment in kind dividends
thereon, collectively, the "Series D Preferred Stock") with a liquidation
preference of $1,000 per share. Nextel
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received approximately $482,000,000 in net cash proceeds from the sale of the
Series D Preferred Stock (the "Preferred Stock Proceeds").
Dividends on the Series D Preferred Stock accrue at an annual rate
of 13% of the liquidation preference, are cumulative from the date of issuance
and are payable quarterly in cash or, on or prior to July 15, 2002, at the sole
option of Nextel, in additional shares of Series D Preferred Stock. Nextel
elected to pay the first quarterly dividend on the Series D Preferred Stock in
kind, resulting in the issuance of an additional 15,167 shares of Series D
Preferred Stock on October 15, 1997. The Series D Preferred Stock is mandatorily
redeemable on July 15, 2009 at the liquidation preference plus accrued and
unpaid dividends, and is redeemable in whole or in part, at the option of
Nextel, at any time after December 15, 2005, at a price equal to the liquidation
preference plus accrued and unpaid dividends, and, in certain circumstances,
after July 15, 2002 at specified redemption prices. Up to 35% of the Series D
Preferred Stock may be redeemed on or prior to July 15, 2000, in whole or in
part, at the option of Nextel, in certain circumstances, at 113% of the
liquidation preference plus accrued and unpaid dividends from the proceeds of
one or more sales of Common Stock. The Series D Preferred Stock is also
exchangeable, in whole but not in part, at the option of Nextel, at any time
after December 15, 2005 and in certain circumstances sooner, into Nextel
subordinated debentures.
The shares of Series D Preferred Stock were initially issued in a
private placement transaction, and Nextel completed a registered offer to
exchange the then outstanding shares of Series D Preferred Stock for an equal
number of shares of 13% Series D Exchangeable Preferred Stock that had been
registered pursuant to the Securities Act (the "Preferred Stock Exchange Offer")
on December 18, 1997.
Terms of the Series D Preferred Stock are set forth in the related
Certificate of Designation, which has been filed with the Commission and is
incorporated by reference herein.
Consent Solicitation. Under the terms of Nextel's five outstanding
issues of Senior Redeemable Discount Notes outstanding prior to 1997 (the "Old
Senior Notes"), issued pursuant to respective public indentures as in effect
prior to June 13, 1997 (the "Former Version Indentures"), Nextel and its
subsidiaries that are "restricted subsidiaries" for purposes of such indentures
(the "restricted subsidiaries") could not have incurred debt (other than certain
categories of "Permitted Debt" (as defined in such indentures)) unless certain
tests were met. Because such terms of the Former Version Indentures could have
had the effect of limiting Nextel's ability to borrow the funds necessary to
implement its business plan, Nextel sought the consent of the holders of the Old
Senior Notes to certain amendments to the Former Version Indentures pursuant to
a consent solicitation (the "Consent Solicitation"). On June 13, 1997, Nextel
obtained the consent of the requisite number of holders of the Old Senior Notes
to certain amendments and waivers to specific provisions of the Former Version
Indentures. Also on that date, Nextel and the trustee under such Former Version
Indentures executed supplemental indentures (the "Supplemental Indentures") to
each of the Former Version Indentures implementing such amendments and waivers.
The Former Version Indentures, as amended and modified by their respective
Supplemental Indentures, are referred to herein as the "Old Indentures" and are
referred to collectively with the New Indentures as the "Nextel Indentures." The
Old Senior Notes are referred to collectively with the New Senior Notes as the
"Nextel Notes." The amendments include, among other things, certain
modifications to the debt incurrence limitations of such indentures to allow
Nextel to incur additional indebtedness, by (i) increasing the amount of
permitted debt by $350,000,000 and providing additional flexibility to allocate
the total amount of permitted debt among the existing categories of permitted
debt, (ii) allowing Nextel to incur indebtedness in excess of such permitted
debt, in the period prior to January 1, 2000, based on the amount and timing of
any net cash proceeds received by Nextel from new equity issuances (such
proceeds of new equity issuances include the Preferred Stock Proceeds, but would
exclude equity funds from several identified sources, including most
significantly equity investment proceeds received from affiliates of Craig O.
McCaw ("Mr. McCaw") in connection with the exercise of the First Option (as
defined herein) and also the Subscription Proceeds (as defined herein) received
by Nextel), and (iii) making Nextel's ability to incur additional indebtedness
on and after January 1, 2000 a function of satisfaction of a new interest
coverage ratio test. See "Risk Factors--Nextel to Require Additional Financing."
The Supplemental Indentures also authorize Nextel to transfer to its
unrestricted subsidiary group the equity interest in Clearnet currently held
directly by Nextel and implemented certain technical amendments.
The foregoing statements relating to the Old Indentures are
summaries of the relevant provisions and do not purport to be complete. Where
reference is made to particular provisions of the Old Indentures, such
provisions, including the definitions of certain terms, are incorporated by
reference as part of such summaries, and are qualified in their entirety by such
reference. Each of the Former Version Indentures and the Supplemental Indentures
has previously been filed with the Commission, and each of the Former Version
Indentures, as amended and supplemented by the appropriate Supplemental
Indenture, is incorporated by reference herein.
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In connection with the Consent Solicitation, Nextel made consent
payments totaling approximately $67,151,000 to validly consenting holders of the
Old Senior Notes (the "Consenting Holders"). On August 8, 1997, the Commission
declared effective Nextel's registration statement on Form S-3 relating to the
offering of approximately 4,161,000 shares of Common Stock exclusively to
Consenting Holders. Pursuant to such registration statement, Nextel offered such
Common Stock to the Consenting Holders at a per share cash price of $16.14.
Approximately 3,945,000 of the offered shares of Common Stock were subscribed
for by Consenting Holders for an aggregate purchase price of approximately
$63,700,000 (the "Subscription Proceeds").
McCaw Investor Option Exercise. In April 1997, Nextel and the McCaw
Investor reached a preliminary agreement (which was confirmed in definitive
agreements entered into in June 1997) pursuant to which the McCaw Investor
committed to exercise in full the outstanding option that was scheduled to
expire on July 28, 1997 (the "First Option") to purchase 15,000,000 shares of
Common Stock for an aggregate purchase price of $232,500,000 (the "McCaw Option
Proceeds"). The McCaw Investor exercised the First Option on July 28, 1997. In
connection with the foregoing, the McCaw Investor also agreed to provide up to
$50,000,000 in debt financing (subject to certain conditions) to Nextel (the
"McCaw Investor Borrowings"). See "Risk Factors -- Nextel to Require Additional
Financing." At the present time, however, Nextel is not taking steps to meet the
conditions to access the McCaw Investor Borrowings.
On March 20, 1997, Nextel completed the purchase from an affiliate
of Comcast Corporation of an option to acquire 25,000,000 shares of Common
Stock, at an exercise price of $16.00 per share (the "Comcast Option"), for an
aggregate purchase price of $25,000,000. In connection with the agreements
relating to the commitment to exercise the First Option, Nextel reached an
agreement with an affiliate of Mr. McCaw (such affiliate, the "Purchaser"),
pursuant to which the Purchaser acquired, for an aggregate purchase price of
$25,000,000, an option, in replacement of the Comcast Option, to purchase, at
any time through July 28, 1998, 25,000,000 shares of Common Stock (the "New
Option"), 15,000,000 shares of which are purchasable at an exercise price of
$16.00 per share and the remaining 10,000,000 shares of which are purchasable at
an exercise price of $18.00 per share. The New Option, and any shares of Common
Stock issued upon exercise thereof, are transferable subject to certain
limitations. In addition, one direct transferee of the Purchaser will be
entitled to designate one nominee for election to Nextel's Board of Directors,
provided that such transferee (i) has exercised the transferred portion of the
New Option and continues to own at least 10,000,000 shares of Common Stock
obtained on such exercise, (ii) is not an affiliate of Mr. McCaw and (iii) does
not hold a 5% or greater equity ownership interest in any entity that provides
terrestrial-based wireless communications services in competition with Nextel in
any of its markets. Shares issuable upon exercise of the New Option will be
entitled to certain demand and piggyback registration rights, that would be
assignable to transferees in certain circumstances. There can be no assurance
that the Purchaser or any transferee will elect to exercise the New Option. See
"Risk Factors -- Forward Looking Statements." The arrangements pertinent to the
New Option, the exercise of the First Option, and the McCaw Investor Borrowings
are set forth in definitive agreements entered into among the relevant parties
which definitive agreements have been filed with the Commission and are
incorporated herein by reference.
RISK FACTORS
THE FOLLOWING RISK FACTORS MAY AFFECT THE VALUE OF THE SECURITIES
AND THEREFORE SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, IN CONJUNCTION WITH
THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
BEFORE MAKING AN INVESTMENT DECISION. SEE ALSO "-- FORWARD LOOKING STATEMENTS."
HISTORY OF AND FUTURE EXPECTATIONS OF LOSSES AND NEGATIVE CASH FLOW
The activities of Nextel since its inception in 1987 have been
concentrated on the acquisition and operation of SMR businesses and the
development of Digital Mobile networks. Nextel has incurred net losses since its
inception, including net losses of approximately $556,020,000 for the year ended
December 31, 1996 and approximately $788,607,000 for the nine months ended
September 30, 1997. Nextel had an accumulated deficit totaling approximately
$1,923,858,000 at September 30, 1997. Nextel anticipates that it will continue
to experience significant net losses and significant negative net cash flow
during the ongoing start up phase of the Digital Mobile networks over the next
several years. Nextel's ability to arrange sufficient equity and/or debt
financing or to generate sufficient revenue to cover its operating and capital
needs is subject to a number of risks and contingencies. Accordingly, there can
be no assurance as to whether or when Nextel's operations will become
profitable. See "-- Nextel to Require Additional Financing" and "-- Forward
Looking Statements."
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RISKS OF IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
The implementation of Digital Mobile networks involves systems
design, site procurement, construction, electronics installation, receipt of
necessary FCC and other regulatory approvals, channel recovery (freeing a
certain number of 800 MHz frequencies from SMR analog traffic) and initial
systems optimization prior to commencing commercial service. Each stage can take
from several weeks to several months and involves various risks and
contingencies, the outcome of which cannot be predicted. There can be no
assurance that Nextel will be able to implement Digital Mobile networks (where
such networks are not already in commercial operation) in any particular market
in accordance with its current plans and schedules. See "-- Forward Looking
Statements."
IMPLEMENTATION OF DIGITAL MOBILE NETWORKS SUBJECT TO RISKS OF DEVELOPING
TECHNOLOGY
Currently, there are three principal digital technology formats that
are being assessed or proposed for deployment or deployed currently by providers
of cellular telephone service or by certain entities that have been awarded PCS
licenses to provide wireless communications services in the United States. Such
formats are known as Time Division Multiple Access ("TDMA") digital transmission
technology, Code Division Multiple Access ("CDMA") digital transmission
technology and GSM-PCS, which is an updated, upbanded PCS version of the
TDMA-based digital technology format known as Global System for Mobile
Communications ("GSM"). Although TDMA, CDMA and GSM-PCS are digital transmission
technologies, and thus share certain basic characteristics and areas of contrast
to analog transmission technology, TDMA, CDMA and GSM-PCS are not compatible or
interchangeable with each other.
The Motorola proprietary first generation iDEN technology originally
incorporated in Nextel's Digital Mobile networks is known as "six-time slot
TDMA." Although based on the TDMA technology format, this first generation iDEN
technology differs in a number of significant respects from the TDMA technology
versions being assessed or deployed by cellular operators and PCS licensees in
the United States, which differences may have important consequences.
Additionally, unlike the three-time slot TDMA technology format being utilized
for the mobile telephone function in the Reconfigured iDEN technology platform
or the three-time slot TDMA technology format being utilized by certain cellular
providers, the first generation iDEN technology, as well as the "six-time slot
TDMA" technology utilized for the two-way dispatch function in the Reconfigured
iDEN technology platform, can carry up to six (rather than three) voice and/or
control paths per channel.
Although Nextel believes that TDMA technology, on balance, is
superior to analog technology that is used in traditional SMR systems, the use
of digital technology in general involves certain performance trade-offs, for
example, in various characteristics affecting voice quality and fidelity. These
trade-offs have had and may in the future have an effect on customer acceptance
of iDEN technology. The use of six-time and three-time slot TDMA technology in
combination with Nextel's re-use of its licensed frequencies in a cellular-type
system design permits Nextel to utilize its current holdings of spectrum more
efficiently. Efficient utilization of spectrum is an important objective
generally because less spectrum is available in the SMR band than is or will be
licensed to each cellular and certain PCS operators in each market. Reconfigured
iDEN, which is designed to use three time slots per channel for the mobile
telephone service, results in a reduction in channel capacity compared to the
capacity achievable using first generation iDEN technology for mobile telephone
service.
Any difference that may from time to time exist between the
technology deployed in Nextel's Digital Mobile networks and competitive
technologies then deployed by other wireless communications service providers,
such as analog, CDMA, TDMA, GSM-PCS or other transmission technology formats
that may be developed in the future, may affect customer acceptance of the
services offered by Nextel. In the future, a digital transmission technology
other than TDMA may gain acceptance sufficient to adversely affect the resources
devoted by third parties to developing or improving TDMA-based technologies and
the market acceptance of TDMA-based technologies, such as iDEN. In addition,
existing digital cellular technology formats including cellular TDMA cannot
currently be utilized on Nextel's present SMR spectrum holdings. Accordingly, if
any improvements were to be made to such currently existing digital cellular
technology formats, the prospect of achievement of parallel improvements in the
TDMA-based iDEN technology presently utilized by Nextel is not certain. See "--
Forward Looking Statements."
Customer acceptance of the services offered by Nextel will be
affected not only by technology-based differences, but also by the operational
performance and reliability of system transmissions on Nextel's Digital Mobile
networks. Nextel implemented Digital Mobile networks in its market areas using
Motorola's first generation iDEN technology prior to the second quarter of 1996.
During that time frame, Nextel encountered certain technology and system
performance issues with
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respect to system reliability (the percentage of time the system is operating),
system access (how often a user can gain access to the system) and various
characteristics affecting voice transmission quality of mobile telephone
services utilizing Nextel's Digital Mobile networks. Nextel provided discounts
and gave credits to customers in an effort to foster satisfactory customer
relations and delayed both its planned deployment of its Digital Mobile networks
and commencement of aggressive product and service marketing efforts pending
resolution of such system performance and voice quality issues. During this
period Nextel and Motorola also took actions to address system performance
issues in general, and voice transmission quality concerns in particular. These
actions consisted of efforts to enhance the performance of the first generation
iDEN networks in a number of areas that were believed to adversely affect system
performance, perceived voice transmission quality and customer satisfaction, and
included measures as diverse as improvements in system infrastructure and
subscriber equipment design and interaction, adjustments in cell site locations
and in radio frequency planning, development of enhanced network load and
traffic management and control systems and development and deployment of more
sophisticated diagnostic and error correction software. These and other
measures, most of which can be categorized as systems optimization, are expected
to be ongoing activities connected with Nextel's operation of its Digital Mobile
networks. Moreover, Nextel expects that systems optimization, software loading
and planned maintenance activities will be ongoing components of its operation
of the Digital Mobile networks that will periodically require the scheduled
turndown of selected subsystems in Nextel's Digital Mobile networks during
periods of very low system traffic, typically at night or on weekend days. See
"-- Forward Looking Statements."
Nextel's objectives in carrying out the initial phase of system
development and technology enhancements were to achieve satisfactory performance
levels in the areas of system reliability and system access. Nextel believes
that its existing Digital Mobile networks, as operated at September 30, 1997,
were demonstrating acceptable performance levels in these areas. Nextel also
believes that the successful national deployment throughout Nextel's Digital
Mobile networks of the Reconfigured iDEN technology, with its accompanying
improvements in the voice quality of the mobile telephone service provided on
Nextel's Digital Mobile networks, should enable Nextel to aggressively market
such services as part of a competitive wireless communications services
alternative to existing cellular telephone and PCS wireless communications
services in its markets. See "-- Forward Looking Statements."
Motorola has advised Nextel that it contemplates continuing to
install software upgrades and Nextel anticipates it will continue to advise and
consult with Motorola concerning potential measures that could be taken to
address any issues concerning system performance and/or expressed customer
satisfaction levels as revealed by Nextel's continuing system testing and
customer surveys. To the extent Nextel's experience has been derived based on
customers in its markets employing the first generation iDEN technology, who are
primarily oriented to the two-way dispatch service, such experience should not
necessarily be regarded as an accurate predictor of Nextel's experience in the
future, particularly as Nextel continues to implement its planned nationwide
roll-out of the Reconfigured iDEN technology and as Nextel's customer base
expands beyond such group of initial customers. Any inability to address and
resolve satisfactorily performance issues that affect customer acceptance of
Digital Mobile network service could delay or adversely affect the successful
commercialization of the Digital Mobile networks and could adversely affect the
business and financial prospects of Nextel. If Nextel for any reason is unable
to implement Digital Mobile networks and provide service to its target customers
that is competitive with the services of other wireless communications
providers, Nextel would be unable, utilizing its existing analog SMR systems, to
provide mobile telephone services comparable to those provided by other wireless
communications services providers or to achieve significant further subscriber
growth. See "-- Forward Looking Statements."
Nextel anticipates that there will be an ongoing focus on systems
and technology optimization activities directed at achieving improvements in the
overall performance of the Digital Mobile networks and such technology
optimization activities will be a continuing component of normal Digital Mobile
network operation. Moreover, the satisfactory resolution of certain system
performance issues in a particular market or at a particular stage of operation
will not necessarily preclude the need to address those issues again, for
example, as a result of a significant increase in the number of subscribers
using the Digital Mobile networks, and future upgrades or modifications to the
Digital Mobile networks may have unexpected adverse effects on performance
issues previously addressed and resolved. Each of Motorola and Nextel believes,
however, that a large portion of the hardware and software adjustments developed
in the course of system development and technology optimization activities to
address particular issues, and the resulting system performance improvements
realized, should be applicable to similar issues in different markets.
Nevertheless, as is often the case in the deployment of wireless communications
networks, it should be expected that there will be market-specific
characteristics, such as local terrain, topography, the number of licensed
frequencies, the utilization of adjacent radio frequencies and other factors,
that will require customized optimization activities to address related system
performance issues successfully. See "-- Forward Looking Statements."
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Pursuant to the second amendment to the existing equipment purchase
agreements between Nextel and Motorola entered into in connection with the McCaw
Transaction (the "Second Equipment Agreement Amendment"), Motorola agreed to use
its best efforts to develop, and Nextel agreed to implement, Reconfigured iDEN.
The Reconfigured iDEN development and deployment activities to date have
proceeded in a timely and satisfactory manner, and Nextel believes that the
Reconfigured iDEN development program contemplated by the Second Equipment
Agreement Amendment is substantially complete. However, no assurance can be
given that any further modifications or enhancements to the Reconfigured iDEN
technology will be developed successfully, or that any such modifications or
enhancements, if developed, would be deployed in Nextel's Digital Mobile
networks or, if deployed, would perform successfully. Moreover, no assurance can
be given that the Reconfigured iDEN technology, as it currently exists or as it
may be further modified or enhanced in the future, will satisfy customer
requirements, or that Nextel's mobile telephone services utilizing such
Reconfigured iDEN technology will be regarded as competitive in the wireless
communications services markets as such markets currently exist and as they are
expected to develop in the future. See "-- Forward Looking Statements."
NEXTEL TO REQUIRE ADDITIONAL FINANCING
Nextel anticipates that, for the foreseeable future, it will be
utilizing significant amounts of its available cash for capital expenditures for
the construction of Digital Mobile networks, operating expenses relating both to
the Digital Mobile networks and to the analog SMR networks, potential
acquisitions (including the acquisition of rights to spectrum through the FCC's
800 MHz spectrum auction process), debt service requirements and other general
corporate expenditures. Nextel anticipates that its cash utilization for capital
expenditures and other investing activities and operating losses will continue
to exceed its cash flows from operating activities over the next several years.
During fiscal year 1996, Nextel's average monthly cash utilization rate for
investing activities (principally attributable to capital expenditures for the
build-out of the Digital Mobile networks) was approximately $33,390,000, and its
average monthly operating losses (exclusive of non-cash items) was approximately
$20,400,000. Such average monthly amounts are not necessarily representative of
Nextel's anticipated experience in such areas and are expected to increase
during 1997 and 1998 in connection with the implementation of Nextel's business
plan and the related accelerated construction of its Digital Mobile networks.
During the ongoing start up phase of its Digital Mobile networks, Nextel expects
that it will need to utilize its existing cash and funding from outside sources
to meet its cash needs resulting from such activities and losses. Nextel's
aggregate cash, cash equivalents and marketable securities at September 30, 1997
totaled approximately $563,300,000 (however, approximately $379,600,000 of such
amount represents cash, cash equivalents and marketable securities held by
Nextel International and its subsidiaries, which items are not available to fund
any of the cash needs of Nextel's domestic Digital Mobile and analog SMR
businesses due to restrictions contained in the provisions of the indenture (the
"NI Indenture") related to the 10-year discount notes (the "NI Notes") issued by
Nextel International).
The Company is currently implementing its business plan to
accelerate and expand the deployment of its Digital Mobile networks in domestic
markets during 1997 and 1998. Nextel has estimated that the external funding
required to meet the cash needs of its domestic business activities during the
period from March 31, 1997 through the end of 1998, including principally the
funding of anticipated capital expenditures and potential acquisitions
(including potential acquisitions of licenses in the FCC's 800 MHz spectrum
auction) and operating losses, will be approximately $2,500,000,000, which
includes approximately $1,450,000,000 of system infrastructure and other system
capital costs expected to be incurred during the period. Such estimates were
based on a number of significant assumptions. The Company currently is in the
process of developing its capital and operating budgets for 1998, and as part of
such process will be reviewing a number of such matters in light of its
experience with respect to the Digital Mobile system construction and
commercialization efforts during 1997. Nextel currently expects that the 1998
budgeting process will not be finalized until early 1998. However, based on the
results of that process to date, the Company anticipates that both its aggregate
domestic business cash needs and its domestic capital expenditure requirements
will be in excess of those previously estimated amounts. Such expected increase
likely will be necessary to accommodate increased system capacity requirements
resulting from the Company's rapid subscriber growth (which exceeded the levels
of assumed growth used in developing the prior estimates) and increased demand
for the Company's wireless services and to make improvements to existing Digital
Mobile system infrastructure to expand and improve systems coverage and
performance to address competitive pressures faced by the Company. Because such
budgeting process is not yet completed, the Company is not currently able to
estimate the extent of the impact that these factors or any other factors may
have on its level of domestic system capital expenditures and/or overall
domestic financing requirements during 1998. See "-- Forward Looking
Statements."
To fully implement an accelerated deployment of its Digital Mobile
networks in the period between March 31, 1997 and December 31, 1998 as described
under "The Company -- Business Plan," Nextel would need to obtain additional
amounts of debt or equity financing beyond that available under the Bank and
Vendor Credit Facilities and the Second
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Vendor Financing Agreement currently in place. The Bank Credit Agreement
currently provides for up to $1,905,000,000 of secured financing, the Vendor
Credit Agreement currently provides for up to $395,000,000 of secured financing
and the Second Vendor Financing Agreement currently provides for up to
$200,000,000 in Second Secured Borrowings, for an aggregate availability of
$2,500,000,000, subject in each case to the satisfaction or waiver of applicable
borrowing conditions. At September 30, 1997, Nextel had drawn $820,000,000 of
its available financing under the Bank Credit Facility and had drawn
$150,000,000 of its available financing under the Vendor Credit Facility. Prior
to September 30, 1997, Nextel applied the aggregate of approximately
$1,494,800,000 in Preferred Stock Proceeds, September Notes Proceeds, McCaw
Option Proceeds, the portion of the Subscription Proceeds received to such date
and the proceeds of the Additional Bank Borrowings to repay a portion of the
borrowings outstanding under the Bank and Vendor Credit Facilities (to the
extent the amounts so repaid would be available for future borrowings
thereunder) with the balance of such aggregate net proceeds remaining available
for general corporate purposes. Disregarding any limitations imposed pursuant to
the Old Indentures on the Company's ability to incur debt under the Bank and
Vendor Credit Facilities and/or the Second Vendor Financing Agreement by reason
of the indebtedness incurred upon issuance of the October Notes, as of September
30, 1997, a total of $1,530,000,000 (giving effect to the repayment of all
revolving, but no term, loan amounts outstanding under the Bank and Vendor
Credit Facilities) of such $2,500,000,000 in aggregate availability would be
available for future borrowings by the Company. The remaining funds available
for borrowing under the Bank and Vendor Credit Facilities may be drawn upon
prior to the final maturity date of such facilities in 2003, although the amount
available under such facilities will be reduced to reflect scheduled
amortization commencing in 2001. The $200,000,000 in additional funds available
under the Second Vendor Financing Agreement may be drawn as term loans prior to
March 31, 1999 and will mature in 2003.
Nextel also has reached an understanding with Motorola regarding the
terms and conditions pursuant to which Nextel could access up to an additional
$200,000,000 in borrowings that would be required to be ratably secured on an
equal ranking with borrowings pursuant to the Bank Credit Agreement and the
Vendor Credit Agreement (the "Senior Secured Borrowings"). The availability of
the Senior Secured Borrowings is subject to a number of conditions, including
the unanimous approval of the secured parties under the Bank Credit Agreement
and the Vendor Credit Agreement. Nextel is not currently taking steps to meet
such additional conditions and, accordingly, Nextel has assumed for planning
purposes that none of the funds constituting the Senior Secured Borrowings will
be available during 1998.
The availability of all of the above-described existing and
additional financing is subject to Nextel's satisfying certain requirements
under the Old Indentures, which require Nextel to issue new equity for cash as a
condition to obtaining access to all amounts not constituting "permitted debt"
(as such term is defined in the Old Indentures) under the Bank Credit Facility,
the Vendor Credit Facility and the Second Vendor Financing Agreement referred to
above. Nextel's receipt of the $482,000,000 in Preferred Stock Proceeds and
option and warrant exercise proceeds in the period from June 1, 1997 (the
"Exercise Proceeds") enabled Nextel to issue the September Notes and still have
access to the full $2,500,000,000 in funding available under the Bank Credit
Facility, the Vendor Credit Facility and the Second Vendor Financing Agreement
under the limitations on indebtedness contained in the Old Indentures. However,
under such limitations the issuance of the October Notes will restrict the
Company's ability to access, on approximately a dollar for dollar basis, the
amount of additional funding that would be available under the Bank and Vendor
Credit Facilities and the Second Vendor Financing Agreement unless either (i)
the proceeds from the issuance of the October Notes are applied to refinance a
portion of the Old Senior Notes in accordance with the Old Indentures (in which
case the indebtedness under the October Notes, to the extent the proceeds
thereof are applied to effect such refinancing, would constitute "permitted
debt" under the Old Indentures that would not reduce the amounts available under
the Bank and Vendor Credit Facilities or the Second Vendor Financing Agreement)
or (ii) the Company issues additional equity for cash that would support the
incurrence of additional debt under the Old Indentures. In the event the
proceeds from the issuance of the October Notes are not applied to refinance a
portion of the Old Senior Notes, such proceeds may be utilized to meet the
Company's funding requirements for the implementation of its business plan to
replace a portion of the borrowings available under the Bank and Vendor Credit
Facilities and/or the Second Vendor Financing Agreement, to the extent such
borrowings would be limited by the Old Indentures.
To the extent any of the aforementioned proceeds from equity
issuances or financing arrangements are not available or are not sufficient to
meet Nextel's funding needs, it will be necessary for Nextel to obtain alternate
sources of financing. See "-- Forward Looking Statements." Subject to the
determination of the potential impact on financing requirements associated with
an increase in the Company's overall domestic cash needs, including its domestic
capital expenditures as described above, and assuming (i) that Nextel secures
access to all of the available funds under the Bank Credit Facility, the Vendor
Credit Facility and the Second Vendor Financing Agreement (or such funds are
replaced with the October Notes Proceeds as described above) and (ii) that the
New Option is exercised and Nextel receives the
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$420,000,000 in proceeds therefrom (the "New Option Proceeds"), the Company
believes that such amounts, coupled with the Company's available cash and cash
equivalents (including the Preferred Stock Proceeds, the McCaw Option Proceeds,
the September Notes Proceeds and the Subscription Proceeds), will provide funds
that in the aggregate are expected to be sufficient to implement the Company's
business plan and meet the other currently anticipated cash needs of its
domestic business activities through the end of 1998. Thereafter, Nextel may
require substantial additional financing. See "--Forward Looking Statements."
The availability of borrowings pursuant to the Bank Credit Facility,
the Vendor Credit Facility and the Second Vendor Financing Agreement is subject
to certain conditions, and there can be no assurance that such conditions will
be met. Moreover, there can be no assurance that the New Option will be
exercised and that Nextel will receive the proceeds therefrom, or that any of
the other outstanding options will be exercised. The Bank Credit Facility, the
Vendor Credit Facility, the Second Vendor Financing Agreement, the Nextel
Indentures and the terms of the Certificate of Designation relating to the
Series D Preferred Stock contain and will continue to contain provisions that
operate to limit the amount of borrowings that may be incurred by Nextel. In
addition, Nextel's capital needs, and its ability to adequately address those
needs through debt or equity funding sources, are subject to a variety of
factors that cannot presently be predicted with certainty, such as the
commercial success of Nextel's Digital Mobile networks incorporating the
Reconfigured iDEN technology, the amount and timing of Nextel's capital
expenditures and operating losses and the market price of the Common Stock. See
"-- Forward Looking Statements."
Nextel currently is aware of numerous factors and considerations,
any one or more of which could have a material effect on the timing and/or
amount of the future funding to be required by Nextel, but Nextel cannot
currently quantify with precision either the magnitude or the certainty of the
effects associated with any such factors. These factors include: (i) the
uncertainty of legal challenges lodged against the 800 MHz SMR auction that was
completed on December 8, 1997; (ii) the possibility that other parties may
challenge Nextel's applications for licenses on which Nextel was the high bidder
at the 800 MHz auction; (iii) the amounts that will be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks for
which Nextel was the high bidder at the 800 MHz auction; (iv) the possibility
that Nextel will have to obtain geographic area licenses on the lower 800 MHz
channels through an auction; (v) the uncertainty with respect to the success
and/or timing of the continuing development and deployment activities relating
to the Reconfigured iDEN technology format and, assuming successful and timely
completion of such efforts, the uncertainty with respect to the success of
commercial introduction and customer acceptance of Nextel's Digital Mobile
network services in new market areas using such technology; (vi) the potential
commercial opportunities and risks associated with implementation of Nextel's
accelerated business plan; and (vii) the net impact on Nextel's capital budget
of certain developments currently expected to increase capital needs (e.g., the
additional capital needed if Nextel acquires for cash additional spectrum in
certain markets to increase the capacity and/or efficiency of Nextel's operating
Digital Mobile networks in such markets, the additional capital needed for more
extensive construction of Digital Mobile networks in additional market areas
acquired or that may be acquired in the future and the expenditures associated
with analog SMR station construction requirements under the currently effective
FCC 800 MHz channel licensing approach) that may be offset (whether wholly or
partially) by other developments anticipated to (or to have the potential to)
reduce capital needs (e.g., co-location of antenna and/or transmitter sites with
other providers of wireless services in the relevant markets, reductions in
infrastructure and subscriber unit prices obtained from Motorola pursuant to the
Second Equipment Agreement Amendment and an agreement entered into on March 27,
1997, alternative and more economical means for increasing system capacity,
other than constructing additional cell sites and/or installing additional base
radios, such as use of so-called "smart antennas," mini-cells and
software-driven and/or system design performance enhancements). Many of the
foregoing involve elements wholly or partially beyond Nextel's control or
influence. Other considerations in addition to the factors identified above may
significantly affect Nextel's decisions to seek additional financing, including
general economic conditions, conditions in the telecommunications and/or
wireless communications industry and the feasibility and attractiveness of
structuring particular financings for specific purposes (e.g., separate
capital-raising activities with respect to international activities and
opportunities). See "-- Forward Looking Statements."
Nextel has had and may in the future have discussions with third
parties regarding potential equity investments and debt financing arrangements
to satisfy actual or anticipated financing needs. Pursuant to the Motorola
Transaction, Nextel has agreed, under certain circumstances, not to grant
superior governance rights to any third-party investor without Motorola's
consent, which may make securing equity investments more difficult. The ability
of Nextel to incur additional indebtedness (including, in certain circumstances,
indebtedness incurred under the Bank Credit Agreement, the Vendor Credit
Agreement and/or the Second Vendor Financing Agreement) is and will be limited
by the terms of the Nextel Indentures, the Certificate of Designation relating
to the Series D Preferred Stock, the Bank Credit Agreement, the Vendor Credit
Agreement and the Second Vendor Financing Agreement. The Bank Credit Agreement,
the Vendor Credit
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Agreement and the Second Vendor Financing Agreement also require Nextel and its
relevant subsidiaries at specified times to maintain compliance with certain
financial covenants or ratios including certain covenants and ratios
specifically related to leverage.
At present, other than the existing equity or debt financing
arrangements that have been consummated and/or disclosed, Nextel has no
commitments or understandings with any third parties to obtain any material
amount of additional equity or debt financing. Moreover, no assurances can be
made that Nextel will be able to obtain any such additional financing in the
amounts or at the times such financing may be required, or that, if obtained,
any such financing would be on acceptable terms. Nextel also anticipates that it
will continue to experience significant operating losses and negative net cash
flows during the ongoing start up phase of the Digital Mobile networks over the
next several years. Accordingly, there can be no assurances as to whether or
when the operations of Nextel will become profitable. As a result of Nextel's
anticipated continuing losses, the uncertainty regarding the exercise of options
and warrants, the availability of financing under the Bank and Vendor Credit
Facilities and the Second Vendor Financing Agreement and the impact of
Reconfigured iDEN and other matters discussed above, there can be no assurance
that Nextel will have adequate capital to implement the nationwide build-out of
its Digital Mobile networks in accordance with its business plan. Failure to
obtain such financing could result in the delay or abandonment of some or all of
the Company's acquisition, development and expansion plans and expenditures,
which could have a material adverse effect on its business prospects and limit
the Company's ability to make principal and interest payments on its
indebtedness, including the amounts from time to time outstanding under the Bank
and Vendor Credit Facilities and the Second Vendor Financing Agreement and
amounts due on or in respect of any or all of the Nextel Notes. See "-- Forward
Looking Statements."
SUCCESS OF NEXTEL IS DEPENDENT ON ITS ABILITY TO COMPETE
Nextel's success depends on its Digital Mobile networks' ability to
compete with other wireless communications systems in each relevant market and
its ability to successfully market integrated wireless communications services.
Nextel is continuing to focus its marketing efforts on attracting customers from
its previously identified targeted groups of potential subscribers, chiefly its
existing analog SMR subscribers and other business users, including current
users of multiple wireless communications services and those new users who may
be attracted to the combination of services made possible by its Digital Mobile
networks.
Following implementation of its Digital Mobile networks and
completion of related system optimization activities, Nextel's Digital Mobile
networks will compete with established and future wireless communications
operators in its efforts to attract customers, dealers and possibly resellers to
its service in each of the markets in which it operates a Digital Mobile
network. Nextel believes that following software upgrades and additional system
optimization efforts and equipment and technology enhancements that occurred
during 1996 and the commercial deployment of the Reconfigured iDEN technology,
Nextel's Digital Mobile networks will have the capacity, functionality and
quality of service necessary to be competitive with current wireless
communications services in the markets in which Nextel operates Digital Mobile
networks. Nextel's ability to compete effectively with other wireless
communications service providers, however, will depend on a number of factors,
including the successful deployment of the Reconfigured iDEN technology platform
in its market areas, the continued satisfactory performance of such technology,
the establishment of roaming service among such market areas and the development
of cost effective direct and indirect channels of distribution for its products
and services. Although Nextel has made significant progress in these areas to
date, no assurance can be given that such objectives will be achieved. See "--
Ability to Manage Growth" and "-- Forward Looking Statements."
While Nextel believes that the mobile telephone service provided on
its Digital Mobile networks utilizing the Reconfigured iDEN technology is
similar in function to and achieves performance levels competitive with those
being offered by other current wireless communications services providers in
Nextel's market areas, there are (and will in certain cases continue to be)
differences between the services provided by Nextel and by cellular and/or PCS
system operators and the performance of their respective systems. As a result of
these differences, there can be no assurance that services provided on Nextel's
Digital Mobile networks will be competitive with those available from other
providers of mobile telephone services. As part of its marketing strategy,
Nextel will continue to emphasize the benefits to its customers of obtaining an
integrated package of services consisting of mobile telephone service, two-way
dispatch, paging and alphanumeric short-messaging service and, in the future,
data transmission. Neither PCS system operators nor cellular operators currently
provide such integrated services, but recent FCC rulings permit cellular
operators to offer two-way dispatch services. If either PCS system or cellular
operators do provide two-way dispatch services in the future, Nextel's
competitive advantage from using such a marketing strategy may be impaired.
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Nextel currently offers its mobile telephone customers the ability
to "roam" among Nextel's existing Digital Mobile network market areas, which as
of September 30, 1997, represented coverage of areas in which approximately 60%
of the United States population lives or works. Accordingly, Nextel will not be
able to provide roaming service comparable to that currently available from
cellular operators, which have roaming agreements covering each other's markets
throughout the United States, unless and until nationwide Digital Mobile
networks build-out is substantially completed. Additionally, certain PCS
operators throughout the United States have announced their intention to
implement agreements to permit roaming among their markets. Moreover, the
cellular systems in each of Nextel's markets, as well as in the markets in which
Nextel expects to provide services in the future, have been operational for a
number of years, currently service a significant subscriber base and typically
have significantly greater financial and other resources than those available to
Nextel. As is true for cellular operators, the interconnection of subscriber
units with the public switched telephone network requires Nextel to purchase
certain exchange and inter-exchange services from telephone companies and
certain other common carriers.
Subscriber units on the Digital Mobile networks are not compatible
with cellular or PCS systems, and vice versa. This lack of interoperability may
impede Nextel's ability to attract cellular or PCS subscribers or those new
mobile telephone subscribers that desire the ability to access different service
providers in the same market. Nextel currently markets a multi-function
subscriber unit that is (and is likely to remain) significantly more expensive
than analog handsets and is (and is likely to remain) somewhat more expensive
than digital cellular or PCS handsets that do not incorporate a comparable
multi-function capability. Accordingly, the prices expected to be charged to
Nextel for the subscriber handsets to be used by Nextel's customers will be
higher than those charged to operators for analog cellular handsets and may be
higher than those charged to operators for digital cellular handsets. Nextel's
multi-function subscriber units, however, are competitively priced compared to
multi-function (mobile telephone service and alphanumeric short-text messaging)
digital cellular and PCS handsets. During the transition to digital technology,
certain participants in the United States cellular industry are offering
subscriber units with dual mode (analog and digital) compatibility.
Additionally, certain analog cellular system operators that directly or through
their affiliates also are constructing and operating digital PCS systems, have
announced their intention to make available to their customers dual mode/dual
band (800 MHz cellular/1900 MHz PCS) subscriber units, to combine the enhanced
feature set available on digital PCS systems within their digital service
coverage areas with the broader wireless coverage area available on the analog
cellular network. Nextel does not currently have comparable hybrid subscriber
units available to its customers.
There can be no assurances that existing analog SMR customers will
be willing to invest in new subscriber equipment necessary to migrate to the
Digital Mobile networks, nor can there be any assurance that a sufficient number
of customers or potential customers of Nextel's Digital Mobile systems will be
willing to accept system coverage limitations as a trade-off for the enhanced
multi-function wireless communications package provided by the Company on its
nationwide network. Over the past several years as the number of wireless
communications providers in Nextel's market areas has increased, the prices of
such providers' wireless service offerings to customers in those markets have
generally been decreasing. The Company may encounter further market pressures to
reduce its service offering prices to respond to particular short term, market
specific situations (such as special introductory pricing packages that may be
offered by new providers launching their service in a market) or to remain
competitive in the event that wireless service providers generally continue to
reduce the prices charged to their customers. Moreover, because many of the
cellular operators and certain of the PCS operators in Nextel's markets have
substantially greater financial resources than Nextel, such operators may be
able to offer prospective customers equipment subsidies or discounts that are
substantially greater than those, if any, that could be offered by Nextel and
may be able to offer services to customers at prices that are below prices that
Nextel is able to offer for comparable services. Thus, Nextel's ability to
compete based on the price of subscriber units and service offerings will be
limited. Nextel cannot predict the competitive effect that any of these factors,
or any combination thereof, will have on Nextel. See "-- Forward Looking
Statements."
Cellular operators and certain PCS operators and entities that have
been awarded PCS licenses each control more spectrum than is allocated for SMR
service in each of the relevant market areas. Each cellular operator is licensed
to operate 25 MHz of spectrum and certain PCS licensees have been licensed for
30 MHz of spectrum in the markets in which they are licensed, while no more than
21.5 MHz is available in the 800 MHz band to all SMR systems, including Nextel's
systems, in those markets. The control of more spectrum gives cellular operators
and such PCS licensees the potential for more system capacity, and, therefore,
more subscribers, than SMR operators, including Nextel. Nextel believes that it
generally has adequate spectrum to provide the capacity needed on its Digital
Mobile networks currently and for the reasonably foreseeable future. See "--
Forward Looking Statements."
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Each of the markets in which Nextel's Digital Mobile networks
operate or will operate is serviced by multiple other wireless communications
service providers. In each of the markets where Nextel's Digital Mobile networks
operate, Nextel may compete with the two established cellular licensees in such
market and as many as six PCS licensees. The FCC has described PCS as a digital,
wireless communications system consisting of a variety of new mobile and
portable services and technologies, using small, lightweight units. PCS services
may include portable, two-way voice and data services. A substantial number of
the entities that have been awarded PCS licenses are current cellular
communications service providers and joint ventures of current and potential
wireless communications service providers, many of which have financial
resources, subscriber bases and name recognition greater than Nextel. PCS
operators will likely compete with Nextel in providing some or all of the
services available through Nextel's Digital Mobile networks. Additionally,
Nextel expects that existing cellular service providers, some of which have been
operational for a number of years and have significantly greater financial and
technical resources, subscriber bases and name recognition than Nextel, will
continue to upgrade their systems to provide digital wireless communications
services competitive with Nextel's Digital Mobile networks. Nextel also expects
to face competition from other technologies and services developed and
introduced in the future. Nextel cannot predict how these technologies will
develop or what impact, if any, they will have on Nextel's ability to compete
for wireless communications services customers. See "-- Forward Looking
Statements."
The Company currently anticipates that it will rely more heavily on
indirect distribution channels to achieve greater market penetration for its
digital wireless service offerings. As the Company expands its retail subscriber
base through increased reliance on indirect distribution channels, the average
revenue per subscriber unit may decrease.
ABILITY TO MANAGE GROWTH
As a result of the commencement of Digital Mobile network service in
certain markets and increased sales in markets in which Digital Mobile network
services are provided and, to a limited extent, acquisitions, the number of
subscriber units in service on Nextel's Digital Mobile network has increased
substantially over the past several years.
The ability of Nextel to continue to add increasing numbers of
subscribers on its Digital Mobile network is dependent on a variety of factors.
Among the more important of such factors is Nextel's ability to successfully
plan for additional system capacity in its market areas at levels adequate to
accommodate anticipated new subscribers and the related increases in system
usage. One important factor influencing system capacity is the amount of
spectrum available to Nextel in a particular market area. Although Nextel
continues to pursue opportunities to acquire additional SMR spectrum in its
market areas, Nextel believes that its present holdings of 800 MHz spectrum are
generally adequate for the current and reasonably foreseeable operation of its
Digital Mobile network.
Additionally, Nextel requires that a sufficient quantity of cell
sites, system infrastructure equipment and subscriber units, of the appropriate
models and types, be available to meet the demands and preferences of potential
subscribers to the Digital Mobile network. To date, Nextel has been able to
secure sufficient cell sites at appropriate locations in its markets to meet
planned system coverage and capacity targets, and also has been able to obtain
adequate quantities of base radios and other system infrastructure equipment
from Motorola and other suppliers, and adequate volumes and mix of subscriber
units and related accessories from Motorola, to meet subscriber and system
loading rates. Although Nextel does not currently foresee (based on, among other
factors, its scheduled system construction and expansion activities and its
anticipated rates of customer and service usage growth) any significant supply
problems in the near term, Motorola is the sole supplier of subscriber units and
certain system infrastructure equipment and most of the related equipment
required by the Company to construct and operate its Digital Mobile network, and
there can be no assurance that such supply problems or related issues will not
occur in the future.
Nextel's ability to successfully add customers on its Digital Mobile
network depends upon the adequacy and efficiency of its information systems,
business processes and related support functions. Nextel relies on its own
fulfillment processes and related information system resources to accomplish
tasks necessary to initiate service for prospective customers, such as
identifying and provisioning from inventory appropriate subscriber units and
desired accessories, programming subscriber units to support desired functions
and features, registering subscriber units to appropriate authorized users of
the Digital Mobile network, and setting up appropriate customer accounts and
other billing records and data.
Due to the multiple wireless service offering packages and the need
to create customized applications (for instance, programming multiple talk
groups for the Direct Connect service), the length of time from customer order
to commencement of service (the "activation cycle") on the Digital Mobile
network has been longer than the activation cycle
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typically encountered for "off the shelf" cellular and PCS wireless service
offerings. The Company is continuing to take steps to refine, improve and
scale-up its customer and service information reporting, subscriber unit
fulfillment, service activation and billing systems and processes to meet the
increased demands that have been experienced as a result of the increases in
subscriber growth and Digital Mobile network wireless systems and service
utilization that have occurred and are currently anticipated to continue. The
Company also is exploring alternatives to shorten its Digital Mobile network
activation cycle, such as "pre-programming" subscriber units with standardized
talk groups and potential development with Motorola of an "over the air"
programming capability for digital subscriber units. Finally, the Company's
customer service functions must continue to improve the efficiency and speed of
their processes to adequately respond to the needs of a growing customer base on
the Digital Mobile network. Customer reliance on Nextel's customer service
functions may increase as more Digital Mobile network customers are added
through indirect distribution channels.
There can be no assurance that the back-office and support systems
and processes discussed above will achieve levels of capacity, or improvements
in speed and efficiency, sufficient to meet actual or anticipated customer and
network growth and demands, or will be able to do so on a timely basis. Any
inability of the Company to timely meet Digital Mobile network capacity needs,
to have access to suitable cell sites and infrastructure and subscriber
equipment in any one or more of its market areas, or to develop when and as
required improvements or expansions to its systems and processes adequate to
meet desired levels of customer activation and demand for wireless services on
the Digital Mobile network could decrease or postpone subscriber growth, thereby
adversely affecting Nextel's revenues, business and prospects. See "-- Forward
Looking Statements."
RELIANCE ON ONE PRINCIPAL SUPPLIER IN IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
Pursuant to existing equipment purchase agreements first entered
into in 1991, as subsequently amended (such equipment purchase agreements, as
amended, being referred to herein as the "Equipment Purchase Agreements"),
between Nextel and Motorola, Motorola provides the iDEN infrastructure and
subscriber handset equipment to Nextel throughout its markets. Nextel expects
that it will need to rely on Motorola for the manufacture of a substantial
portion of the equipment necessary to construct its Digital Mobile networks and
handset equipment for the foreseeable future. The Equipment Purchase Agreements
include a commitment from Nextel to purchase from Motorola a significant amount
of system infrastructure equipment. Nextel has, among other things, agreed
(subject to certain conditions) to purchase and install iDEN equipment during
the four-year and six-year periods beginning on August 4, 1994 sufficient to
cover 70% and 85%, respectively, of the United States population. In addition,
subject to the applicable terms and conditions under the Second Equipment
Agreement Amendment, Nextel has agreed to deploy Reconfigured iDEN technology
and, until August 4, 1999 and subject to certain conditions, to purchase from
Motorola at least 50% of the base radios Nextel purchases in any calendar year.
See "-- Success of Nextel is Dependent on its Ability to Compete" and "--
Forward Looking Statements." Such commitments are in addition to amounts
purchased from Motorola or for which Nextel or companies acquired by Nextel had
placed orders with Motorola prior to August 4, 1994, which orders have become
obligations of Nextel.
The Second Equipment Agreement Amendment limits Nextel's ability to
deploy a "Switch in Technology" which, under the Second Equipment Agreement
Amendment, is defined to mean a decision by Nextel before August 4, 1999 to
install and use digital radio frequency technology as an alternative to iDEN on
more than 25% of its SMR channels in the 806-824 MHz band in one or more of its
top 20 domestic markets, or the utilization by Nextel of any of its SMR channels
for voice interconnect on certain United States cellular and/or PCS radio
telephony standards. Nextel may not implement such a Switch in Technology unless
(i) Nextel determines that the iDEN or Reconfigured iDEN equipment fails to meet
certain performance specifications established in the Second Equipment Agreement
Amendment, which failure materially adversely affects the commercial viability
of the technology to provide reliable services as intended by Motorola and
Nextel, and Motorola does not cure such failure within six months after
receiving notice thereof, or (ii) Nextel or the McCaw Investor offers to acquire
the remainder of Motorola's shares of Common Stock at a per share price of at
least 110% of the average of the closing prices of the Common Stock over the 30
trading days preceding the public announcement by Nextel of the decision to
implement such a Switch in Technology. In either case, if Motorola manufactures
(or elects to manufacture) the alternate technology Nextel elects to deploy,
Nextel must purchase 50% of its infrastructure requirements and 25% of its
subscriber equipment requirements from Motorola for three years, provided such
equipment is competitive in price and performance to the equipment utilizing or
incorporating such alternate technology then offered by other manufacturers.
It is expected that for the next few years of Digital Mobile network
operations by Nextel, Motorola and competing manufacturers who are licensed by
Motorola will be the only manufacturers of subscriber equipment that is
compatible with Nextel's Digital Mobile networks. The Equipment Purchase
Agreements between Nextel and Motorola first entered into in
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1991, as subsequently amended by, among others, the amendment entered into in
connection with the Motorola Transaction (the "Prior Equipment Agreement
Amendment") provide for the licensing by Motorola of interfaces relating to
infrastructure and subscriber equipment and of additional manufacturers for
subscriber equipment. In connection with the Second Equipment Agreement
Amendment, Motorola further agreed to negotiate to enter into licenses with at
least one alternative manufacturer of iDEN infrastructure equipment. Currently,
however, there are no arrangements in effect with any additional manufacturers
to supply Nextel with alternative sources for either iDEN system infrastructure
or subscriber equipment.
NEXTEL'S PROSPECTS ARE DEPENDENT ON GOVERNMENTAL REGULATION
The licensing, operation, acquisition and sale of Nextel's SMR
businesses are regulated by the FCC. FCC regulations have undergone significant
changes during the last three years and continue to evolve as new FCC rules and
regulations are adopted pursuant to the Omnibus Budget Reconciliation Act of
1993 and the Telecommunications Act of 1996. Nextel's ability to conduct its
business is dependent, in part, on its compliance with FCC rules and
regulations. Future changes in regulations or legislation affecting Digital
Mobile network service and Congress' and the FCC's recent allocation of
additional Commercial Mobile Radio Services spectrum could materially adversely
affect Nextel's business. See "-- Forward Looking Statements."
NEXTEL'S ASSETS PRIMARILY CONSIST OF INTANGIBLE FCC LICENSES
Nextel's assets consist primarily of intangible assets, principally
FCC licenses, the value of which will depend significantly upon the success of
Nextel's business and the growth of the SMR and wireless communications
industries in general. In the event of default on indebtedness or liquidation of
Nextel, there can be no assurance that the value of these assets will be
sufficient to satisfy its obligations. Nextel had a net tangible book value
deficit of approximately $1,829,581,000 as of September 30, 1997.
NEXTEL SUSCEPTIBLE TO CONTROL BY SIGNIFICANT STOCKHOLDERS
Based on securities ownership information relating to Nextel as of
September 30, 1997, giving effect to the November 1997 amended Schedule 13D
filings by Mr. McCaw and Wendy P. McCaw, and giving effect (on such date) to the
conversion of the outstanding shares of Nextel's preferred stock and Class B
Non-Voting Common Stock, par value $0.001 per share (the "Non-Voting Common
Stock"), and the exercise in full of (i) two separate options held by the McCaw
Investor exercisable for periods of four and six years, respectively, from July
28, 1995, to acquire an aggregate of up to 15,082,722 shares of Common Stock at
exercise prices ranging from $18.50 to $21.50 per share (the "McCaw Options"),
(ii) the option held by Eagle River, Inc., an affiliate of the McCaw Investor
("Eagle River"), to purchase an aggregate of 1,000,000 shares of Common Stock at
an exercise price of $12.25, which option vests over a five-year period from
April 4, 1995 (the "Incentive Option"), (iii) the New Option issued to an
affiliate of Mr. McCaw to acquire 15,000,000 shares at $16.00 per share and
10,000,000 shares at $18.00 per share prior to July 29, 1998, (iv) the options
granted on July 28, 1995 to the McCaw Investor by Motorola to purchase up to
5,430,803 shares of Common Stock over a six-year period and (v) a warrant held
by Motorola to purchase 2,890,000 shares of Common Stock, entities controlled by
the McCaw Investor would hold approximately 25.2% and Motorola would hold
approximately 15.6% of the Common Stock that would be outstanding as of such
date.
In connection with the consummation of the McCaw Transaction and
pursuant to the Securities Purchase Agreement dated as of April 4, 1995, as
amended, among Nextel, the McCaw Investor and Mr. McCaw (the "McCaw Securities
Purchase Agreement"), the McCaw Investor has the right to designate not less
than 25% of the Board of Directors of Nextel. Additionally, the McCaw Investor
is entitled to have a majority of the members of the Operations Committee of the
Board of Directors selected from the McCaw Investor's representatives on the
Board of Directors. The Operations Committee has the authority to formulate key
aspects of Nextel's business strategy, including decisions relating to the
technology used by Nextel (subject to existing equipment purchase agreements),
acquisitions, the creation and approval of operating and capital budgets and
marketing and strategic plans, approval of financing plans, endorsement of
nominees to the Board of Directors and committees thereof and nomination and
oversight of certain executive officers. As a result, based upon the McCaw
Investor's stock ownership position, as well as its ability to designate at
least 25% of the members of the Board of Directors and control the Operations
Committee, the McCaw Investor is in a position to exert significant influence
over Nextel's affairs. The Board of Directors retains the authority to override
actions taken or proposed to be taken by the Operations Committee, subject, in
certain circumstances, to certain financial consequences. The creation and
existence of the Operations Committee does not change the normal fiduciary
duties of the Board of Directors,
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23
including fiduciary duties in connection with any proposal to override any
action of or to terminate the Operations Committee, whether or not such action
would give rise to such financial consequences. Although Motorola is entitled to
nominate two directors to the Board of Directors, presently only one person
designated by Motorola is a Nextel director. Pursuant to an amendment to the
Agreement and Plan of Contribution and Merger dated as of April 4, 1995, by and
among Nextel, Motorola and certain subsidiaries of Motorola (the "Motorola
Amendment"), Motorola has agreed to support the decisions and recommendations of
the Operations Committee and to vote the shares of Common Stock held by it
accordingly, subject to (i) the right of any Motorola-designated Nextel
directors to vote in a manner consistent with their fiduciary duties and (ii)
the right of Motorola to vote its shares as it determines necessary with respect
to issues that conflict with Motorola's corporate ethics or that present
conflicts of interest, or in order to protect the value or marketability of the
shares of Common Stock held by it.
Based upon their respective ownership positions, if the McCaw
Investor and Motorola chose to act together, such parties could have a
sufficient voting interest in Nextel, among other things, to (i) exert effective
control over the approval of amendments to the Certificate of Incorporation,
mergers, sales of assets or other major corporate transactions as well as other
matters submitted for stockholder vote, (ii) defeat a takeover attempt and (iii)
otherwise control whether particular matters are submitted for a vote of the
stockholders of Nextel. Although Motorola has made certain commitments as
described in the last sentence of the preceding paragraph, Nextel is not aware
of any current agreements among the McCaw Investor and Motorola with respect to
the ownership or voting of Common Stock and neither Motorola nor the McCaw
Investor has indicated to Nextel that it has any present intention to seek to
exercise such control. Pursuant to the McCaw Securities Purchase Agreement, the
McCaw Investor has agreed that it will not vote for any nominee to the Board of
Directors other than persons it is entitled to designate under the terms of the
securities it owns or of the McCaw Securities Purchase Agreement. Upon request
of Nextel, the McCaw Investor has also agreed to cause shares of Common Stock,
the voting of which is controlled by it or its affiliates, to be voted in a
manner proportionate to the votes of other holders of Common Stock in the
election of directors so designated by the Board of Directors.
Each of the McCaw Investor and Motorola has and (subject to the
terms of applicable agreements between such parties and Nextel) may have an
investment or interest in entities that provide wireless telecommunications
services that could potentially compete with Nextel. Under the McCaw Securities
Purchase Agreement, the McCaw Investor, Mr. McCaw and their Controlled
Affiliates (as defined in the McCaw Securities Purchase Agreement) may not, for
a period of time after consummation of the McCaw Transaction, participate in
other two-way terrestrial-based mobile wireless communications systems in the
region that includes any part of North America or South America unless such
opportunities have first been presented to and rejected by Nextel in accordance
with the provisions of the McCaw Securities Purchase Agreement. Such limitation
is subject to certain limited exceptions, including certain existing securities
holdings and relationships (and expressly including Mr. McCaw's investment in
AT&T Corp. ("AT&T") resulting from AT&T's acquisition of McCaw Cellular
Communications, Inc., which investment may not exceed 3% of the outstanding
stock of AT&T). Such restrictions terminate on the later to occur of July 28,
2000 or one year after the termination of the Operations Committee. See "--
Potential Conflict of Interest Relationship with Motorola."
POTENTIAL DILUTION FROM PENDING AND FUTURE TRANSACTIONS
As indicated elsewhere in this Prospectus, Nextel has commitments,
and from time to time may enter into additional commitments, to issue a
substantial number of new shares of Common Stock. The shares that are subject to
such issuance commitments, to a large degree, either will be issued in
registered transactions and thus will be freely tradeable, or will be subject to
grants of registration rights which, if and when exercised, would result in such
shares becoming freely tradeable. Additionally, to incur debt in excess of
permitted debt levels prior to January 1, 2000, pursuant to the amendments to
the Old Indentures as described above (see "The Company - Recent Developments -
Consent Solicitation"), Nextel could be required to issue new equity beyond the
shares of Common Stock currently subject to issuance commitments.
As of September 30, 1997, there were approximately 282,760,597
shares of Common Stock outstanding (assuming the conversion of the outstanding
shares of Nextel's Non-Voting Common Stock and Nextel's preferred stock), on a
primary, rather than a fully diluted, basis, and approximately 331,650,597
shares of Common Stock would have been outstanding assuming the exercise of all
options (excluding employee options and including warrants initially issued to
Motorola to purchase 3,000,000 shares, the options to purchase an aggregate of
21,000,000 shares pursuant to the McCaw Options and the Incentive Option and an
aggregate of 25,000,000 shares pursuant to the New Option), warrants and other
existing rights to acquire Common Stock outstanding on such date.
21
24
Pursuant to the McCaw Securities Purchase Agreement, the McCaw
Investor was granted anti-dilutive rights with respect to certain Nextel share
issuances (the "McCaw Purchase Right"). An increase in the number of shares of
Common Stock that will become available for sale in the public market may
adversely affect the market price of Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Existing holders of Common Stock generally may freely resell their
shares except to the extent that they are deemed to be affiliates of Nextel or
certain predecessor companies for purposes of Rule 144 or Rule 145 promulgated
under the Securities Act. Nextel has also granted registration rights with
respect to a significant number of its shares outstanding on a fully diluted
basis, including shares of Common Stock issuable upon conversion of securities
issued in, or upon exercise of options granted in, the Motorola Transaction and
the McCaw Transaction, as well as shares issuable pursuant to the New Option.
The exercise of registration rights by persons entitled thereto would permit
such persons to sell such shares without regard to the limitations of Rule 144.
An increase in the number of shares of Common Stock that will become available
for sale in the public market may adversely affect the market price of Common
Stock.
DIVIDEND POLICY LIMITS EXPECTATION OF FUTURE DIVIDENDS
Nextel has not paid any dividends on Common Stock and does not plan
to pay dividends on Common Stock for the foreseeable future. The Nextel
Indentures, the Bank Credit Agreement, the Vendor Credit Agreement and the
Second Vendor Financing Agreement presently prohibit, and are expected to
operate so as to continue to prohibit, Nextel from paying dividends. In
addition, the collateral security mechanisms and related provisions associated
with the Bank and Vendor Credit Facilities and the Second Vendor Financing
Agreement limit the amount of cash available to make dividends, loans and cash
distributions to Nextel from Nextel's subsidiaries that operate Digital Mobile
networks in Nextel's markets. Accordingly, while such restrictions are in place,
any profits generated by such subsidiaries will not be available to Nextel for,
among other purposes, payment of dividends.
POTENTIAL CONFLICT OF INTEREST RELATIONSHIP WITH MOTOROLA
Motorola and its affiliates have and currently are engaged in
wireless communications businesses, and may in the future engage in additional
such businesses, which are or may be competitive with some or all of the
services offered by Nextel's Digital Mobile networks, although the Motorola Land
Mobile Products Sector ("Motorola LMPS") may not, prior to July 28, 1998, make
use (with certain limited exceptions) of the customer lists conveyed by Motorola
to ESMR in connection with the Motorola Transaction to solicit subscribers for
any 800 MHz SMR commercial mobile voice business owned or managed by Motorola
LMPS in the continental United States. Pursuant to the Second Equipment
Agreement Amendment, Motorola has agreed that until July 1998, Motorola LMPS
will not solicit other iDEN customers and neither Motorola LMPS nor Motorola's
credit corporation subsidiary will make any equity investment in, or provide
equipment/vendor financing to, certain iDEN customers with respect to purchases
of iDEN equipment.
In light of the competitive posture of Motorola, Nextel and Motorola
have agreed that any information relating to Nextel's business plans and
projections will be used by Motorola only for purposes of ensuring compliance
with Nextel's obligations under the various equipment purchase agreements and
financing agreements between Nextel and Motorola. Motorola has designated one
director to the Board of Directors and, hence, such director has access to
Nextel's business plans subject to certain confidentiality restrictions.
Although Nextel believes that its equipment purchase and financing
relationship with Motorola has been structured to reflect the realities of
purchasing and borrowing from a competitor, there can be no assurance that the
potential conflict of interest will not adversely affect Nextel in the future.
Moreover, Motorola's role as a significant stockholder of Nextel, in addition to
its role as a major creditor and supplier, also creates potential conflicts of
interest, particularly with regard to significant transactions.
CONCERNS ABOUT MOBILE COMMUNICATIONS HEALTH RISK MAY AFFECT PROSPECTS OF NEXTEL
Allegations have been made, but not proven, that the use of portable
mobile communications devices may pose health risks due to radio frequency
emissions from such devices. Studies performed by wireless telephone equipment
manufacturers have investigated these allegations, and a major industry trade
association and certain governmental agencies have stated publicly that the use
of such phones poses no undue health risk. The actual or perceived risk of
mobile
22
25
communications devices could adversely affect Nextel through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber or through reduced financing available to the mobile communications
industry.
FORWARD LOOKING STATEMENTS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: A number of the matters and subject areas discussed in the
foregoing "Risk Factors" section of this Prospectus that are not historical or
current facts deal with potential future circumstances and developments. The
discussion of such matters and subject areas is qualified by the inherent risks
and uncertainties surrounding future expectations generally, and also may
materially differ from Nextel's actual future experience involving any one or
more of such matters and subject areas. Nextel has attempted to identify, in
context, certain of the factors that it currently believes may cause actual
future experience and results to differ from Nextel's current expectations
regarding the relevant matter or subject area. The operation and results of
Nextel's wireless communications business also may be subject to the effect of
other risks and uncertainties in addition to the relevant qualifying factors
identified elsewhere in the foregoing "Risk Factors" section, including, but not
limited to, general economic conditions in the geographic areas and occupational
market segments that Nextel is targeting for its Digital Mobile network service,
the availability of adequate quantities of system infrastructure and subscriber
equipment and components to meet Nextel's service deployment and marketing plans
and customer demand, the success of efforts to improve and satisfactorily
address any issues relating to Digital Mobile system performance, the successful
nationwide deployment of the Reconfigured iDEN technology, the ability to
achieve market penetration and average subscriber revenue levels sufficient to
provide financial viability to the Digital Mobile network business, Nextel's
ability to timely and successfully accomplish required scale-up of its billing,
customer care and similar back-room operations to keep pace with customer growth
and increased system usage rates, access to sufficient debt or equity capital to
meet Nextel's operating and financing needs, the quality and price of similar or
comparable wireless communications services offered or to be offered by Nextel's
competitors, including providers of cellular and PCS service, future legislative
or regulatory actions relating to SMR services, other wireless communications
services or telecommunications generally and other risks and uncertainties
described from time to time in Nextel's reports filed with the Commission,
including the Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997.
USE OF PROCEEDS
All of the Securities offered hereby by the Company may be issued
from time to time by the Company in connection with the Company's acquisition of
other businesses, properties or securities in business combination transactions.
See "Securities Covered by This Prospectus."
SELECTED FINANCIAL DATA
The selected financial data set forth below for the periods
indicated should be read in conjunction with the consolidated financial
statements, related notes and other financial information appearing in Nextel's
Annual Report on Form 10-K for the year ended December 31, 1996 and Nextel's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997,
incorporated herein by reference. The financial information for the fiscal years
ended March 31, 1993 and 1994, the nine months ended December 31, 1994, and the
years ended December 31, 1995 and 1996 have been derived from the audited
consolidated financial statements of Nextel. The report of Deloitte & Touche
LLP, independent auditors, for the nine months ended December 31, 1994 and the
years ended December 31, 1995 and 1996 has been incorporated by reference. See
"Experts." The financial information for the nine months ended September 30,
1996 and 1997 is derived from the unaudited financial statements of Nextel and,
in the opinion of Nextel, includes all adjustments, consisting only of normal
recurring accruals, considered necessary for the fair presentation of such
information. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. See "Incorporation
of Certain Information By Reference."
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26
FISCAL YEAR NINE MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, DECEMBER 31, DECEMBER 31,
----------------------------- ------------ ---------------------------
1993 1994 1994(1) 1995 1996
----------- ----------- ------------ -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
INCOME STATEMENT DATA(2):
Revenues...................... $ 53,002 $ 67,928 $ 74,857 $ 171,703 $ 332,938
Cost of operations............ 20,979 28,666 51,406 151,718 247,717
Selling, general and
administrative
expenses..................... 18,971 41,107 85,077 193,321 330,256
Expenses related to
corporate
reorganization(3)............ -- -- -- 17,372 --
Depreciation and
amortization................. 25,942 58,398 94,147 236,178 400,831
----------- ----------- ------------ ------------- ------------
Operating loss................ (12,890) (60,243) (155,773) (426,886) (645,866)
Interest income
(expense), net............... 1,324 (18,101) (41,454) (89,509) (206,480)
Other income (expense),
net(4)(5).................... 924 3 33 (15,372) (10,866)
Income tax benefit............ 1,027 21,437 71,345 200,602 307,192
Series D Preferred
Stock Dividends.............. -- -- -- -- --
----------- ----------- ------------ -------------- -------------
Net loss attributable
to common
stockholders................. $ (9,615) $ (56,904) $ (125,849) $ (331,165) $ (556,020)
=========== =========== ============ ============== =============
Net loss per share
attributable to common
stockholders................. $ (0.16) $ (0.73) $ (1.25) $ (2.31) $ (2.50)
Number of shares used
in computations(6) .......... 58,736,000 78,439,000 100,639,000 143,283,000 222,779,000
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------------------
1996 1997
-------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
INCOME STATEMENT DATA(2):
Revenues...................... $ 236,977 $ 463,838
Cost of operations............ 187,631 195,077
Selling, general and
administrative
expenses..................... 224,650 568,112
Expenses related to
corporate
reorganization(3)............ -- --
Depreciation and
amortization................. 291,698 361,757
------------- -------------
Operating loss................ (467,002) (661,108)
Interest income
(expense), net............... (147,571) (258,387)
Other income (expense),
net(4)(5).................... -- 5,486
Income tax benefit............ 216,944 125,402
Series D Preferred
Stock Dividends.............. -- (12,822)
------------- -------------
Net loss attributable
to common
stockholders................. $ (397,629) $ (801,429)
============= =============
Net loss per share
attributable to common
stockholders................. $ (1.80) $ (3.28)
Number of shares used
in computations(6) .......... 221,309,000 244,221,000
AS OF MARCH 31, AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997
------------------------- ---------------------------------------- ----------------------------
1993 1994 1994 1995 1996 ACTUAL AS ADJUSTED(7)
---------- ---------- ---------- ---------- ---------- ---------- ---------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash
equivalents(8) .......... $ 17,083 $ 483,483 $ 301,679 $ 340,826 $ 139,681 $ 475,370 $1,176,762
Marketable
securities(9) ........... 14,768 426,113 172,313 68,443 5,012 87,924 87,924
Current assets ........... 39,932 921,983 504,248 504,661 309,097 892,785 1,594,177
Intangible assets, net....
144,666 889,912 1,451,780 3,549,622 4,076,300 4,414,642 4,414,642
Total assets.............. 333,557 2,229,832 2,918,985 5,547,256 6,472,439 8,462,029 9,181,421
Long-term debt(10) ....... 55,024 1,113,268 1,193,096 1,687,829 2,783,041 4,229,765 4,929,762
Series D Preferred
Stock ................... -- -- -- -- -- 512,822 512,822
Stockholders'
equity (11) ............. 255,224 846,304 1,268,575 2,945,141 2,808,138 2,585,061 2,604,456
(footnotes on following page)
24
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- ----------
(1) Effective December 31, 1994, Nextel changed its fiscal year end from
March 31 to December 31. Accordingly, the income statement data is
presented for the transition period from April 1, 1994 to December 31,
1994.
(2) See Note 2 to the Notes to Nextel's consolidated financial statements
for the year ended December 31, 1996 for a description of acquisitions.
(3) See Note 2 to the Notes to Nextel's consolidated financial statements
for the year ended December 31, 1996.
(4) Other expenses in 1995 include a $15,000,000 write-down of the
investment in Corporacion Mobilcom S.A. de C.V. as a result of the
devaluation of the Mexican peso.
(5) Other expenses in 1996 primarily reflect equity in the losses of
certain foreign investments accounted for under the equity method.
(See Note 2 to the Notes to Nextel's consolidated financial statements
for the year ended December 31, 1996.)
(6) Weighted average number of shares of Common Stock outstanding during the
respective periods.
(7) Gives pro forma effect to the receipt of (i) approximately $19,400,000
representing a portion of the Subscription Proceeds received after
September 30, 1997, and (ii) approximately $682,000,000 in October Notes
Proceeds as if they occurred on September 30, 1997. Such proceeds are
available for general corporate purposes. See "The Company - Recent
Developments -- October Notes Issuance."
(8) Includes approximately $294,429,000 of cash and cash equivalents held by
Nextel International and its subsidiaries as of September 30, 1997 from
the offering of the NI Notes completed in March 1997, which are not
available to fund any of the cash needs of Nextel's domestic Digital
Mobile and analog SMR businesses due to the restrictions contained in
the NI Indenture.
(9) Includes approximately $85,121,000 of marketable securities held by
Nextel International and its subsidiaries as of September 30, 1997 from
the offering of the NI Notes, which are not available to fund any of the
cash needs of Nextel's domestic Digital Mobile and analog SMR businesses
due to the restrictions contained in the NI Indenture.
(10) Excludes the current portions of long-term debt. See Note 6 to the Notes
to Nextel's consolidated financial statements for the year ended
December 31, 1996.
(11) See Notes 10 and 11 to the Notes to Nextel's consolidated financial
statements for the year ended December 31, 1996.
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 1997 (the
"Ownership Date"), the amount and percentage of shares of each class of Nextel's
capital stock that are deemed under the rules of the Commission to be
"beneficially owned" by (i) each director of Nextel (except that the table
reflects the November 1997 amended Schedule 13D filings by Craig O. McCaw and
Wendy P. McCaw), (ii) the Chief Executive Officer and each of the four other
most highly compensated executive officers of Nextel for the year ended December
31, 1996, who continued to be executive officers of Nextel at the Ownership
Date, (iii) all directors and executive officers of Nextel as a group and (iv)
each person or "group" (as such term is used in Section 13(d)(3) of the Exchange
Act) known by Nextel to be the beneficial owner of more than five percent of the
outstanding shares of each class of Nextel's capital stock.
TITLE OF CLASS OF THE AMOUNT AND NATURE
COMPANY'S CAPITAL OF BENEFICIAL APPROXIMATE %
NAME OF BENEFICIAL OWNER STOCK OWNERSHIP(1) OF CLASS(2)
- ------------------------------------------ ----------------------------- ---------------------- ------------
Daniel F. Akerson......................... Class A Common Stock 200,000(3) *
Morgan E. O'Brien......................... Class A Common Stock 926,476(4) *
Keith J. Bane............................. Class A Common Stock --(5) *
Frank M. Drendel.......................... Class A Common Stock 10,167(6) *
Timothy M. Donahue........................ Class A Common Stock 76,000(7) *
William E. Conway, Jr..................... Class A Common Stock 96,325(8) *
Craig O. McCaw............................ Class A Common Stock 77,658,786(9) 24.0%
Keisuke Nakasaki.......................... Class A Common Stock --(10) *
Masaaki Torimoto.......................... Class A Common Stock --(11) *
Dennis M. Weibling........................ Class A Common Stock 77,658,786(12) 24.0
Robert S. Foosaner........................ Class A Common Stock 242,000(13) *
All directors and executive officers
as a group (18 persons)................. Class A Common Stock 79,476,221(14) 24.5
5% STOCKHOLDERS (NOT LISTED ABOVE)
Motorola, Inc............................. Class A Common Stock 58,890,000(15) 20.6
1303 East Algonquin Road Class B Common Stock 17,830,000 100.0
Schaumburg, Illinois 60196
Digital Radio, L.L.C...................... Class A Common Stock 52,258,786(16) 17.5
2300 Carillon Point Class A Preferred Stock 7,905,981 100.0
Kirkland, Washington 98033 Class B Preferred Stock 82 100.0
Option Acquisition, L.L.C................. Class A Common Stock 25,000,000(17) 8.1
2300 Carillon Point
Kirkland, Washington 98033
Putnam Investments, Inc................... Class A Common Stock 15,340,145(18) 5.4
1 Post Office Square
Boston, Massachusetts 02109
Wendy P. McCaw ........................... Class A Common Stock 14,824,937(19) 5.2
c/o Lasher, Holzapfal, Sperry &
Ebberson, PLLC
2600 Two Union Square
601 Union Street
Seattle, Washington 98101
- ----------
* Less than one percent (1%).
(1) Under the rules of the Commission, a person is deemed to be the
beneficial owner of a security if such person, directly or indirectly,
has or shares the power to vote or direct the voting of such security or
the power to dispose or direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities if that
person has the right to acquire beneficial ownership within 60 days of
the Ownership Date. Accordingly, more than one person may be deemed to
be a beneficial owner of the same securities. Unless otherwise indicated
by footnote, the named individuals have sole voting and investment power
with respect to the shares of Nextel's capital stock beneficially owned.
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29
(2) Represents the voting power of the number of shares of each of class of
capital stock beneficially owned as of the Ownership Date by each named
person or group, expressed as a percentage of (a) all shares of Nextel's
capital stock of the indicated class actually outstanding as of such
date (in the case of the Common Stock, giving effect to the conversion
of Nextel's preferred stock and Nextel's Non-Voting Common Stock), plus
(b) all other shares of capital stock deemed outstanding as of such date
pursuant to Rule 13d-3(d)(1) under the Exchange Act.
(3) Includes 200,000 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. Akerson upon the exercise of
non-qualified stock options.
(4) Includes 553,477 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. O'Brien upon the exercise of
non-qualified stock options.
(5) Mr. Bane, who is Executive Vice President, and President Americas
Region, of Motorola, disclaims beneficial ownership of all securities of
Nextel held by Motorola. See note 15.
(6) Includes 1,667 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. Drendel upon the exercise of
non-qualified stock options.
(7) Includes 75,000 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. Donahue upon the exercise of
non-qualified stock options.
(8) Includes 1,667 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. Conway upon the exercise of
non-qualified stock options.
(9) Reflects the conversion of 257,284 shares of Class A Preferred Stock and
the transfer of 9,907,659 shares of Common Stock and options to purchase
4,917,278 shares of Common Stock obtainable as of the Ownership Date to
Wendy P. McCaw pursuant to an agreement dated November 3, 1997, as
reflected in an amendment to her Schedule 13D dated November 3, 1997 and
in an amendment to the Schedule 13D of Mr. McCaw. Comprised of (i)
52,258,786 shares of Common Stock beneficially owned by the McCaw
Investor, (ii) 400,000 shares of Common Stock obtainable as of the
Ownership Date upon the exercise of a portion of the Incentive Option
granted to Eagle River, an affiliate of the McCaw Investor, and (iii)
25,000,000 shares of Common Stock beneficially owned by Option
Acquisition, L.L.C. Mr. McCaw, who is an equity owner and controlling
person of the McCaw Investor and Option Acquisition, L.L.C., disclaims
beneficial ownership of all securities of Nextel held by the McCaw
Investor and Option Acquisition, L.L.C., except to the extent of his
pecuniary interest therein. See notes 16 and 17.
(10) Mr. Nakasaki, who is President and Chief Executive Officer of NTT
America, Inc., a subsidiary of Nippon Telegraph and Telephone
Corporation ("NTT"), disclaims beneficial ownership of all shares of
Common Stock held by NTT. As of the Ownership Date, NTT held 1,532,959
shares of Common Stock.
(11) Mr. Torimoto, who is Vice President of Panasonic Communications and
Systems Company, disclaims beneficial ownership of all shares of Common
Stock held by Matsushita Communication Industrial Co., Ltd.
("Matsushita"). As of the Ownership Date, Matsushita held 3,000,000
shares of Common Stock.
(12) Mr. Weibling, who is an officer of Option Acquisition, L.L.C. and
President of Eagle River, an affiliate of the McCaw Investor, disclaims
beneficial ownership of all securities of Nextel held by the McCaw
Investor and by Option Acquisition, L.L.C., except to the extent of his
pecuniary interest therein. See notes 16 and 17.
(13) Includes 192,000 shares of Common Stock obtainable as of the Ownership
Date or within 60 days thereafter by Mr. Foosaner upon the exercise of
non-qualified stock options.
(14) Includes an aggregate of 1,243,061 shares of Common Stock obtainable as
of the Ownership Date or within 60 days thereafter by directors and
executive officers as a group upon the exercise of non-qualified stock
options or other stock purchase rights. See also notes 15, 16 and 17.
(15) Assuming conversion of the Non-Voting Common Stock held by Motorola.
Comprised of (i) 38,170,000 shares of Common Stock beneficially owned by
Motorola, (ii) 17,830,000 shares of Non-Voting Common Stock beneficially
owned by Motorola and (iii) 2,890,000 shares of Common Stock obtainable
as of the Ownership Date or within 60 days thereafter upon exercise of a
warrant.
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(16) Comprised of (i) 13,458,039 shares of Common Stock beneficially owned by
the McCaw Investor, (ii) 15,082,722 shares of Common Stock obtainable as
of the Ownership Date or within 60 days thereafter upon the exercise of
certain options and (iii) 23,718,025 shares of Common Stock, which
represents the conversion of the 7,905,981 shares of Class A Preferred
Stock and the 82 shares of Nextel's Class B Preferred Stock held by the
McCaw Investor. Eagle River Investments, L.L.C., the manager of the
McCaw Investor, also reports beneficial ownership of the shares
beneficially owned by the McCaw Investor. Excludes 4,917,278 shares of
Common Stock obtainable as of the Ownership Date upon the exercise of
certain options currently held by Wendy P. McCaw that the McCaw Investor
has the right to exercise in the event Wendy P. McCaw does not elect to
exercise such options. See note 19.
(17) Includes 25,000,000 shares of Common Stock obtainable as of the
Ownership Date upon the exercise of the New Option.
(18) As reported in the most recent Schedule 13G filed by Putnam Investments,
Inc. ("Putnam"), Putnam does not have sole voting power over the shares
of Common Stock beneficially owned by Putnam.
(19) Comprised of 9,907,659 shares of Common Stock beneficially owned by
Wendy P. McCaw and 4,917,278 shares of Common Stock obtainable as of the
Ownership Date or within 60 days thereafter upon the exercise of certain
options. Excludes 7,619,677 shares of Common Stock obtainable as of the
Ownership Date upon the exercise of certain options currently held by
the McCaw Investor that Wendy P. McCaw has the right to exercise in the
event the McCaw Investor does not elect to exercise such options. See
note 16.
SECURITIES COVERED BY THIS PROSPECTUS
This Prospectus may be used by the Company for the offer and sale
of up to 10,000,000 shares of Common Stock, and/or the Warrants, either directly
or indirectly acting through its affiliates, from time to time in connection
with the acquisition of other businesses, properties or securities in business
combination transactions to the extent not issued prior to the date hereof. To
date, 438,972 shares of such Common Stock and none of the Warrants covered by
the Registration Statement have been issued in connection with such
acquisitions. In addition, Nextel has entered into agreements to issue an
estimated maximum of up to approximately 3,900,000 additional shares of Common
Stock pursuant to the Registration Statement. To the extent required by
applicable law or regulations, the Company will file supplements to this
Prospectus from time to time. The consideration offered by the Company in such
acquisitions, in addition to any shares of Common Stock or Warrants offered by
this Prospectus, may include cash, debt or other securities (which may be
convertible into shares of Common Stock of the Company covered by this
Prospectus), or assumption by the Company of liabilities of the business being
acquired, or a combination thereof. The terms of acquisitions are typically
determined by negotiations between the Company and the owners or controlling
persons of the businesses, properties or securities to be acquired, with the
Company taking into account the quality of management, the past and potential
earning power and growth of the businesses, properties or securities to be
acquired and other relevant factors. Shares of Common Stock or Warrants issued
to the owners of the businesses, properties or securities to be acquired will
generally be valued at a price reasonably related to the market value of the
Common Stock or the value of the assets to be received, respectively, at the
time the terms of the acquisition are agreed upon. Shares of Common Stock issued
pursuant to Warrants will be valued at or about the time or times of delivery of
the shares. Securities issued under this Prospectus will be freely transferrable
under the Securities Act, except for securities issued to persons who may be
deemed to be an "underwriter" within the meaning of Section 2(11) of the
Securities Act. Securities issued in connection with such transactions to
persons who constitute "underwriters" within the meaning of Section 2(11) may
not be publicly reoffered or resold by such persons except pursuant to an
effective registration statement under the Securities Act covering such
Securities or, in certain circumstances, pursuant to Rule 145(d) or any other
applicable exemption under the Securities Act. Persons receiving Securities
covered by this Prospectus should seek the advice of their own legal counsel
with respect to the legal requirements of such resales.
This Prospectus has also been prepared for use by persons who may
receive from the Company shares of Common Stock (either by direct issuance or
indirectly pursuant to the terms of the Warrants) and Warrants covered by the
Registration Statement in acquisitions and who may be entitled to offer such
Securities under circumstances requiring the use of a Prospectus (such persons
being referred to under this caption as "Securityholders"); provided, however,
that no Securityholder will be authorized to use this Prospectus for any offer
of such Common Stock or Warrants without first obtaining the consent of the
Company. The Company may consent to the use of this Prospectus for a limited
period of time by the Securityholders and subject to limitations and conditions
that may be varied by agreement between the Company and the Securityholders.
Resales of such shares of Common Stock may be made on the NNM or such other
exchange on which
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the Common Stock may be listed, in the over-the-counter market, in private
transactions or pursuant to underwriting agreements. Nextel will receive none of
the proceeds from any such sales. There is no market for the Warrants and it is
unlikely that any market will develop. However, holders of Warrants may resell
such Warrants, in compliance with applicable federal and state securities laws
and otherwise as may be provided pursuant to the terms of the relevant
transaction agreement governing the issuance and redemption of such Warrants, in
private transactions.
Agreements with Securityholders permitting use of this Prospectus
may provide that any such offering be effected in an orderly manner through
securities dealers, acting as broker or dealer, selected by the Company; that
Securityholders enter into custody agreements with one or more banks with
respect to such shares; and that sales be made only by one or more of the
methods described in this Prospectus, as appropriately supplemented or amended
when required. The Securityholders may be deemed to be underwriters within the
meaning of the Securities Act.
When resales are to be made through a broker or dealer selected by
the Company, the broker or dealer may act solely as agent and/or may acquire
such Securities as principal. Brokers or dealers participating in such
transactions as agent may be entitled to commissions (including negotiated
commissions to the extent permissible). Any such sales may be by block trade.
Any commission paid or concessions allowed to any broker-dealer and, if any
broker-dealer purchases such Securities as principal, any profits received on
the resale of such Securities, may be deemed to be underwriting discounts and
commissions under the Securities Act.
In addition to the shares of Common Stock offered hereby, the
Company may from time to time issue additional shares of Common Stock through
public offerings or private placements. The Company may make such future
issuances of Common Stock in connection with its acquisition of other
businesses, properties or securities in business combination transactions or for
other purposes.
DESCRIPTION OF WARRANTS TO ACQUIRE COMMON STOCK
Nextel may from time to time, as consideration in connection with
its acquisition of other businesses, properties or securities in business
combination transactions, issue to the owners or controlling persons of such
businesses, properties or securities to be acquired, Warrants to acquire shares
of Common Stock having a specified redemption price (the "Redemption Price").
The Warrant would entitle the holder thereof to receive from Nextel, at a
specified date in the future (generally up to one year from the date of
issuance) (the "Conversion Date"), a number of shares of Common Stock determined
by dividing the Redemption Price by the average closing sales price for the
Common Stock, as reported by the NNM, during a specified period of generally up
to 30 trading days prior to the Conversion Date. Nextel shall have the right,
however, in its sole discretion, to redeem the Warrant for cash on or before the
Conversion Date. Depending upon the particular facts and circumstances, a
portion of the shares of Common Stock received upon conversion or a portion of
the Redemption Price in the usual case may be treated as interest for federal
income tax purposes. Each person who is to receive Warrants pursuant to this
Prospectus is urged to consult his or her own tax advisor to determine the
particular tax consequences to such person of the receipt, redemption or
conversion of Warrants (including the applicability and effect of foreign,
state, local and other tax laws).
If Warrants are issued in any particular transaction, a prospectus
supplement will describe the specific terms and conditions of such Warrants, and
any other material provisions thereof. In no event will Warrants be issued for
shares of Common Stock (taking into account all prior issuances of shares of
Common Stock hereunder at the relevant time) in excess of the number of shares
of Common Stock remaining available for issuance under the Registration
Statement.
VALIDITY OF SECURITIES
The validity of the issuance of the Securities offered hereby have
been passed upon for the Company by Jones, Day, Reavis & Pogue, counsel for the
Company.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedules incorporated in this Prospectus by reference from
Nextel's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Set forth below is a description of certain provisions of the
Restated Certificate of Incorporation (the "Nextel Charter") of Nextel
Communications, Inc. ("New Nextel," and, together with "Old Nextel," its
predecessor corporation of the same name, "Nextel"), the Amended and Restated
By-laws of Nextel (the "Nextel By-Laws") and the Delaware General Corporation
Law (the "DGCL"). This description is intended as a summary only and is
qualified in its entirety by reference to the Nextel Charter, the Nextel By-laws
and the DGCL.
Elimination of Liability in Certain Circumstances. The Nextel
Charter provides that, to the full extent provided by law, a director will not
be personally liable to Nextel or its stockholders for or with respect to any
acts or omissions in the performance of his or her duties as a director. The
DGCL provides that a corporation may limit or eliminate a director's personal
liability for monetary damages to the corporation or its stockholders, except
for liability (i) for any breach of the director's duty of loyalty to such
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
While Article 7 of the Nextel Charter provides directors with
protection from awards for monetary damages for breaches of the duty of care, it
does not eliminate the directors' duty of care. Accordingly, Article 7 will have
no effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of the duty of care. The provisions of
Article 7 as described above apply to officers of Nextel only if they are
directors of Nextel and are acting in their capacity as directors and does not
apply to officers of Nextel who are not directors.
Indemnification and Insurance. Under the DGCL, directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation as a derivative action) if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Article 6 of the Nextel Charter and Article VII of the Nextel
By-laws provide to directors and officers indemnification to the full extent
provided by law, thereby affording the directors and officers of Nextel the
protections available to directors and officers of Delaware corporations.
Article VII of the Nextel By-laws also provides that expenses incurred by a
person in defending a civil or criminal action, suit or proceeding by reason of
the fact that he or she is or was a director or officer shall be paid in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by Nextel as authorized by relevant Delaware law. Nextel has
obtained directors and officers liability insurance providing coverage to its
directors and officers.
On September 12, 1991, the Board of Directors of Nextel
unanimously adopted resolutions authorizing Nextel to enter into an
Indemnification Agreement (the "Indemnification Agreement") with each director
of Nextel, and Nextel has entered into the Indemnification Agreements.
One of the purposes of the Indemnification Agreements is to
attempt to specify the extent to which persons entitled to indemnification
thereunder (the "Indemnitees") may receive indemnification under circumstances
in which indemnity would not otherwise be provided by the DGCL. Pursuant to the
Indemnification Agreements, an Indemnitee is entitled to indemnification as
provided by Section 145 of the DGCL and to indemnification for any amount which
the Indemnitee is or becomes legally obligated to pay relating to or arising out
of any claim made against such person because of any act, failure to act or
neglect or breach of duty, including any actual or alleged error, misstatement
or misleading statement, which such person commits, suffers, permits or
acquiesces in while acting in the Indemnitee's position with Nextel. The
Indemnification Agreements are in addition to and are not intended to limit any
rights of indemnification which are available under the Nextel Charter or the
Nextel By-laws, any policy of insurance or otherwise. Nextel is not
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required under the Indemnification Agreements to make payments in excess of
those expressly provided for in the DGCL in connection with any claim against
the Indemnitee:
(i) which results in a final, nonappealable order
directing the Indemnitee to pay a fine or similar governmental
imposition which Nextel is prohibited by applicable law from
paying; or
(ii) based upon or attributable to the Indemnitee
gaining in fact a personal profit to which he was not legally
entitled including, without limitation, profits made from the
purchase and sale by the Indemnitee of equity securities of Nextel
which are recoverable by Nextel pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and profits arising from transactions in publicly traded
securities of Nextel which were effected by the Indemnitee in
violation of Section 10(b) of the Exchange Act or Rule 10b-5
promulgated thereunder.
In addition to the rights to indemnification specified therein,
the Indemnification Agreements are intended to increase the certainty of receipt
by the Indemnitee of the benefits to which he or she is entitled by providing
specific procedures relating to indemnification.
The Indemnification Agreements are also intended to provide
increased assurance of indemnification by prohibiting Nextel from adopting any
amendment to the Nextel Charter or the Nextel By-laws which would have the
effect of denying, diminishing or encumbering the Indemnitee's rights pursuant
thereto or to the DGCL or any other law as applied to any act or failure to act
occurring in whole or in part prior to the effective date of such amendment.
ITEM 21. EXHIBITS.
Pursuant to Item 601 of Regulation S-K, 17 C.F.R. Section
229.601(b)(4)(iii)(A), Nextel has excluded from Exhibit 4 instruments defining
the rights of holders of long-term debt with respect to debt that does not
exceed 10% of the total assets of Nextel. Nextel agrees to furnish copies of
such instruments to the Commission upon request.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- ------------------------------------------------------------------------------------------------------
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, 1995 as Exhibits No. 4.1.1 and
4.1.2 to Nextel's Post-Effective Amendment No. 1 on Form S-8 to Registration Statement No. 33-91716
on Form S-4 (the "Nextel S-8 Registration Statement") and incorporated herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as Exhibit No. 4.2 to the Nextel S-8
Registration Statement and incorporated herein by reference).
4.3 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated August 15, 1993 (the
"August Indenture") (filed on December 23, 1993 as Exhibit No. 4.13 to the Registration Statement on
Form S-4 of the Company, No. 33-73388 and incorporated herein by reference).
4.4 -- Form of Note issued pursuant to the August Indenture (included in Exhibit No. 4.3).
4.5 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of February 15, 1994
(the "February Indenture") (filed on March 1, 1994 as Exhibit No.4.1 to the Form 8-K Current Report
of Old Nextel dated February 16, 1994 and incorporated herein by reference).
4.6 -- Form of Note issued pursuant to the February Indenture (included in Exhibit No. 4.5).
4.7 -- Supplemental Indenture, dated as of June 30, 1995 to the August Indenture between Old Nextel and The
Bank of New York (filed on November 14, 1995 as Exhibit 4.1 to the Quarterly Report on Form 10-Q of
Nextel for the quarter ended September 30, 1995 and incorporated herein by reference).
4.8 -- Supplemental Indenture, dated as of June 30, 1995 to the February Indenture between Old Nextel and
The Bank of New York (filed on November 14, 1995 as Exhibit 4.2 to the Quarterly Report on Form
10-Q of Nextel for the quarter ended September 30, 1995 and incorporated herein by reference).
4.9 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known as Nextel), as
Successor by Merger to Old Nextel and The Bank of New York (relating to the August Indenture) (filed
on November 14, 1995 as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Nextel for the quarter
ended September 30, 1995 and incorporated herein by reference).
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4.10 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known as Nextel), as
Successor by Merger to Old Nextel and The Bank of New York (relating to the February Indenture)
(filed on November 14, 1995 as Exhibit 4.4 to the Quarterly Report on Form 10-Q of Nextel for the
quarter ended September 30, 1995 and incorporated herein by reference).
4.11 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the August Indenture) (filed on June 17, 1997 as Exhibit 4.1 to Nextel's Current Report on
Form 8-K dated June 17, 1997 (the "June 17 Form 8-K") and incorporated herein by reference).
4.12 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the February Indenture) (filed on June 17, 1997 as Exhibit 4.2 to the June 17, Form 8-K
and incorporated herein by reference).
4.13 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13, between OneComm
(formerly called CenCall Communications Corp.) and The Bank of New York (the "OneComm
Indenture") (filed on June 7, 1995 as Exhibit No. 99.2 to Old Nextel's Registration Statement No. 33-
93182 on Form S-4 (the "OneComm S-4 Registration Statement") and incorporated herein by
reference).
4.14 -- Form of Note issued pursuant to the OneComm Indenture (included in Exhibit 4.11).
4.15 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Indenture between OneComm
(formerly called CenCall Communications Corp.) and The Bank of New York (filed on November 14, 1995
as Exhibit 10.12 to the Form 10-Q for the quarter ended September 30, 1995 and incorporated herein
by reference).
4.16 -- Second Supplemental Indenture dated as of July 28, 1995 between Nextel (formerly known as ESMR,
Inc.), as successor to OneComm, and The Bank of New York (relating to the OneComm Indenture)
(filed on November 14, 1995 as Exhibit 10.13 to the Form 10-Q for the quarter ended September 30,
1995 and incorporated herein by reference).
4.17 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the OneComm Indenture) (filed on June 17, 1997 as Exhibit 4.5 to the June 17 Form 8-K
and incorporated herein by reference).
4.18 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25, 1994, between Dial
Call and The Bank of New York (the "2004 Indenture") (filed on June 7, 1995 as Exhibit 99.4 to the
OneComm S-4 Registration Statement and incorporated herein by reference).
4.19 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004 Indenture between Dial Call and The
Bank of New York (filed on December 5, 1995 as Exhibit 99.3 to Nextel's Registration Statement No.
33- 80021 on Form S-4 (the "Dial Page S-4 Registration Statement") and incorporated herein by
reference).
4.20 -- Second Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture between Dial Page
(as successor to Dial Call) and The Bank of New York (filed on April 1, 1996 as Exhibit 4.26 to the
Annual Report on Form 10-K of Nextel for the year ended December 31, 1995 (the "1995 Form 10-K")
and incorporated herein by reference).
4.21 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture between Nextel (as
successor to Dial Page) and The Bank of New York (filed on April 1, 1996 as Exhibit 4.27 to the 1995
Form 10-K and incorporated herein by reference).
4.22 -- Fourth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the 2004 Indenture) (filed on June 17, 1997 as Exhibit 4.3 to the June 17 Form 8-K and
incorporated herein by reference).
4.23 -- Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993, between Dial Call and
The Bank of New York (the "2005 Indenture") (filed as Exhibit 99.3 to the OneComm S-4 Registration
Statement and incorporated herein by reference).
4.24 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Indenture between Dial Call and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.29 to the 1995 Form 10-K and incorporated
herein by reference).
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4.25 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005 Indenture between Dial Call and The
Bank of New York (filed on December 5, 1995 as Exhibit 99.4 to the Dial Page S-4 Registration
Statement and incorporated herein by reference).
4.26 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture between Dial Page
(as successor to Dial Call) and The Bank of New York (filed on April 1, 1996 as Exhibit 4.31 to the
1995 Form 10-K and incorporated herein by reference).
4.27 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture between Nextel
(as successor to Dial Page) and The Bank of New York (filed on April 1, 1996 as Exhibit 4.32 to the
1995 Form 10-K and incorporated herein by reference).
4.28 -- Fifth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the 2005 Indenture) (filed on June 17, 1997 as Exhibit 4.4 to the June 17 Form 8-K and
incorporated herein by reference).
4.29 -- Indenture for Senior Discount Notes due 2007, dated as of March 6, 1997, between McCaw
International and The Bank of New York, as Trustee (the "McCaw Indenture") (filed on March 31,
1997 as Exhibit 4.24 to Nextel's Annual Report on Form 10-K for the year ended December 31, 1996
(the "1996 Form 10-K") and incorporated herein by reference).
4.30 -- Form of Note issued pursuant to the McCaw Indenture (included in Exhibit 4.24).
4.31 -- Warrant Agreement, dated as of March 6, 1997, between McCaw International and The Bank of New
York (filed on March 31, 1997 as Exhibit 4.26 to the 1996 Form 10-K and incorporated herein by
reference).
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, Nextel Finance Company, the
Restricted Companies party thereto, the Lenders party thereto, Toronto-Dominion (Texas) Inc., as
Administrative Agent, and The Chase Manhattan Bank, as Collateral Agent (the "Bank Credit
Agreement") (filed on October 1, 1996 as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated
September 27, 1996 (the "September 27 Form 8-K") and incorporated herein by reference).
4.33 -- Amendment No. 1 dated as of March 24, 1997 to the Bank Credit Agreement (filed on July 9, 1997
as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated July 9, 1997 (the "July 9 Form 8-K")
and incorporated herein by reference).
4.34 -- Amended, Restated and Consolidated Credit Agreement dated as of September 27, 1996 among Nextel,
NFC, the Restricted Companies party thereto and the Vendors party thereto (the "Vendor Credit
Agreement") (filed on October 1, 1996 as Exhibit 99.2 to the September 27 Form 8-K and incorporated
herein by reference).
4.35 -- Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit Agreement (filed on July 9, 1997
as Exhibit 99.2 to the July 9 Form 8-K and incorporated herein by reference).
4.36 -- Option Exercise and Lending Commitment Agreement by and between Nextel and Digital Radio,
L.L.C., dated as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.1 to the July 9 Form 8-K and
incorporated herein by reference).
4.37 -- Option Purchase Agreement by and among Nextel and Unrestricted Subsidiary Funding Company and
Option Acquisition, L.L.C., dated as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the
July 9 Form 8-K and incorporated herein by reference).
4.38 -- Option Agreement (First New Option) by and between Option Acquisition, L.L.C. and Nextel, dated
as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated
herein by reference).
4.39 -- Option Agreement (Second New Option) by and between Option Acquisition, L.L.C. and Nextel, dated
as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.5 to the July 9 Form 8-K and incorporated
herein by reference).
4.40 -- Certificate of Designation for 13% Series D Exchangeable Preferred Stock (filed on July 22, 1997 as
Exhibit 4.1 to Nextel's Current Report on Form 8-K dated July 21, 1997 and incorporated herein by
reference).
4.41 -- Amendment No. 2 dated as of June 3, 1997 to the Bank Credit Agreement (filed on August 5, 1997 as
Exhibit 4.41 to Nextel's Registration Statement No. 333-28461 on Form S-3 (the "August S-3
Registration Statement") and incorporated herein by reference).
4.42 -- Amendment No. 2 dated as of June 3, 1997 to the Vendor Credit Agreement (filed on August 5, 1997 as
Exhibit 4.42 to the August S-3 Registration Statement and incorporated herein by reference).
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4.43 -- Amendment No. 3 dated as of August 20, 1997, to the Bank Credit Agreement (filed on September 5,
1997 as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated September 5, 1997 (the "September
5 Form 8-K) and incorporated herein by reference).
4.44 -- Amendment No. 3 to the Vendor Credit Agreement, dated as of August 29, 1997, amending the Vendor
Credit Agreement (filed on September 5, 1997 as Exhibit 99.2 to the September 5 Form 8-K and
incorporated herein by reference).
4.45 -- Second Secured Vendor Financing Agreement dated as of August 29, 1997, among Nextel, Nextel
Finance Company and the other Restricted Companies thereto and the Vendor Lenders thereto (the
"Second Vendor Financing Agreement") (filed as Exhibit 99.3 to the September 5 Form 8-K and
incorporated herein by reference).
4.46 -- Amendment No. 4 dated as of September 10, 1997 to the Bank Credit Agreement (filed on September
22, 1997 as Exhibit 4.2 to Nextel's Current Report on Form 8-K dated September 22, 1997 (the
"September 22 Form 8-K") and incorporated herein by reference).
4.47 -- Amendment No. 4 dated as of September 10, 1997 to the Vendor Credit Agreement (filed on
September 22, 1997 as Exhibit 4.3 to the September 22 Form 8-K and incorporated herein by
reference).
4.48 -- Amendment No. 1 to the Second Vendor Financing Agreement dated as of September 10, 1997 (filed
on September 22, 1997 as Exhibit 4.4 to the September 22 Form 8-K and incorporated herein by
reference).
4.49 -- Indenture between Nextel and Harris Trust and Savings Bank, as Trustee, dated September 17, 1997
(filed on November 26, 1997 as Exhibit 4.49 to Nextel's Registration Statement No. 333-41097 on
Form S-4 (the "September Notes Registration Statement") and incorporated herein by reference).
4.50 -- Form of Nextel's 13% Series D Exchangeable Preferred Stock Certificate (filed on November 4, 1997
as Exhibit 4.50 to Nextel's Registration Statement No. 333-39411 on Form S-4 (the "Preferred Stock
Registration Statement") and incorporated herein by reference).
4.51 -- Registration Rights Agreement by and among Nextel, Morgan Stanley & Co. Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation dated July 21, 1997 (filed on November 4, 1997
as Exhibit 4.51 to the Preferred Stock Registration Statement and incorporated herein by reference).
4.52 -- Form of Indenture related to the Exchange Debentures (the "Exchange Debenture Indenture") (filed on
November 4, 1997 as Exhibit 4.52 to the Preferred Stock Registration Statement and incorporated
herein by reference).
4.53 -- Form of Note to be issued pursuant to the Exchange Debenture Indenture (included in Exhibit 4.52).
4.54 -- Indenture between Nextel and Harris Trust and Savings Bank, as Trustee, dated as of October 22, 1997
(filed on December 9, 1997 as Exhibit 4.54 to Nextel's Registration Statement No. 333-41747 on Form
S-4 (the "October Notes Registration Statement") and incorporated herein by reference).
4.55 -- Amendment No. 5 dated as of October 9, 1997 to the Bank Credit Agreement (filed on October 23,
1997 as Exhibit 4.2 to Nextel's Current Report on Form 8-K dated October 23, 1997 (the "October 23
Form 8-K") and incorporated herein by reference).
4.56 -- Amendment No. 5 dated as of October 9, 1997 to the Vendor Credit Agreement (filed on October 23,
1997 as Exhibit 4.3 to the October 23 Form 8-K and incorporated herein by reference).
4.57 -- Amendment No. 2 dated as of October 9, 1997 to the Second Vendor Financing Agreement (filed on
October 23, 1997 as Exhibit 4.4 to the October 23 Form 8-K and incorporated herein by reference).
4.58 -- Registration Rights Agreement dated September 17, 1997 by and among Nextel, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, TD Securities (USA) Inc., Lehman Brothers Inc., and NationsBank
Capital Markets, Inc. (filed on November 26, 1997 as Exhibit 4.58 to the September Notes Registration
Statement and incorporated herein by reference).
4.59 -- Registration Rights Agreement dated October 22, 1997 by and among Nextel, Morgan Stanley & Co.
Incorporated, Chase Securities Inc., J.P. Morgan Securities Inc., NationsBanc Montgomery Securities,
Inc., TD Securities (USA) Inc., and Credit Suisse First Boston Corporation (filed on December 9, 1997
as Exhibit 4.59 to the October Notes Registration Statement and incorporated herein by reference).
4.60 -- Form of Redeemable Warrant (filed on April 26, 1996 as Exhibit 4.3 to Nextel's Registration Statement
No. 333-1290 on Form S-4 and incorporated herein by reference).
*5 -- Opinion of Jones, Day, Reavis & Pogue re validity.
II-5
37
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
+23.2 -- Consent of Deloitte & Touche LLP.
*24.1 -- Powers of Attorney, excluding Messrs. Shindler and Arendt.
+24.2 -- Powers of Attorney for Messrs. Shindler and Arendt.
- ----------
* Previously filed.
+ Filed herewith.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus: (i) that is filed pursuant to
paragraph (5) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule
II-6
38
415, will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(9) To supply by means of a post-effective amendment all
information concerning a transaction, and the Company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
II-7
39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of McLean, in
the Commonwealth of Virginia, on the 5th day of January, 1998.
NEXTEL COMMUNICATIONS, INC.
By: /S/ THOMAS J. SIDMAN
----------------------------------
THOMAS J. SIDMAN
VICE PRESIDENT AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated:
NAME TITLE DATE
------------------------------ -------------------------------------- -------------------
* Chairman of the Board,
------------------------------ Chief Executive Officer and Director
DANIEL F. AKERSON (Principal Executive Officer)
* Vice President and Chief Financial
------------------------------ Officer (Principal Financial Officer)
STEVEN M. SHINDLER
* Vice President and Controller
------------------------------ (Principal Accounting Officer)
WILLIAM ARENDT
* Vice Chairman of the Board and
------------------------------ Director
MORGAN E. O'BRIEN
President, Chief Operating Officer
------------------------------ and Director
TIMOTHY M. DONAHUE
* Director
------------------------------
KEITH J. BANE
* Director
------------------------------
CRAIG O. MCCAW
* Director
------------------------------
KEISUKE NAKASAKI
* Director
------------------------------
MASAAKI TORIMOTO
* Director
------------------------------
DENNIS M. WEIBLING
Director
------------------------------
WILLIAM E. CONWAY, JR.
Director
------------------------------
FRANK M. DRENDEL
/S/ THOMAS J. SIDMAN Attorney-in-fact January 5, 1998
------------------------------
THOMAS J. SIDMAN
II-8
40
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
------ ------------------------------------------------------------------- --------------
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, Not applicable
1995 as Exhibits No. 4.1.1 and 4.1.2 to Nextel's
Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement No. 33-91716 on Form S-4 (the
"Nextel S-8 Registration Statement") and incorporated
herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as Not applicable
Exhibit 4.2 to the Nextel S-8 Registration Statement and incorporated
herein by reference).
4.3 -- Indenture between Old Nextel and The Bank of New York, as Trustee, Not applicable
dated August 15, 1993 (the "August Indenture") (filed on December 23,
1993 as Exhibit No. 4.13 to the Registration Statement on Form S-4 of
the Company, No. 33-73388 and incorporated herein by reference).
4.4 -- Form of Note issued pursuant to the August Indenture (included in Not applicable
Exhibit No. 4.3).
4.5 -- Indenture between Old Nextel and The Bank of New York, as Trustee, Not applicable
dated Not applicable as of February 15, 1994 (the "February
Indenture") (filed on March 1, 1994 as Exhibit No. 4.1 to the Form
8-K of Old Nextel dated February 16, 1994 and incorporated herein by
reference).
4.6 -- Form of Note issued pursuant to the February Indenture (included in Not applicable
Exhibit No. 4.5).
4.7 -- Supplemental Indenture, dated as of June 30, 1995 to the August Not applicable
Indenture Not applicable between Old Nextel and The Bank of New York
(filed on November 14, 1995 as Exhibit 4.1 to the Quarterly Report on
Form 10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.8 -- Supplemental Indenture, dated as of June 30, 1995 to the February Not Not applicable
applicable Indenture between Old Nextel and The Bank of New York
(filed on November 14, 1995 as Exhibit 4.2 to the Quarterly Report on
Form 10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.9 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR Not applicable
Not applicable (now known as Nextel), as Successor by Merger to Old
Nextel and The Bank of New York (relating to the August Indenture)
(filed on November 14, 1995 as Exhibit 4.3 to the Quarterly Report on
Form 10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.10 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR Not applicable
(now known as Nextel), as Successor by Merger to Old Nextel and The
Bank of New York (relating to the February Indenture) (filed on
November 14, 1995 as Exhibit 4.4 to the Quarterly Report on Form 10-Q
of Nextel for the quarter ended September 30, 1995 and incorporated
herein by reference).
4.11 -- Third Supplemental Indenture, dated as of June 13, 1997 between Not applicable
Nextel and The Bank of New York (relating to the August Indenture)
(filed on June 17, 1997 as Exhibit 4.1 to Nextel's Current Report on
Form 8-K dated June 17, 1997 (the "June 17 Form 8-K") and
incorporated herein by reference).
4.12 -- Third Supplemental Indenture, dated as of June 13, 1997 between Not applicable
Nextel and The Bank of New York (relating to the February Indenture)
(filed on June 17, 1997 as Exhibit 4.2 to the June 17, Form 8-K and
incorporated herein by reference).
4.13 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of Not applicable
January 13, 1994, between OneComm (formerly called CenCall
i
41
Communications Corp.) and The Bank of New York (the "OneComm
Indenture") (filed on June 7, 1995 as Exhibit No. 99.2 to Old
Nextel's Registration Statement No. 33-93182 on Form S-4 (the
"OneComm S-4 Registration Statement") and incorporated herein by
reference).
4.14 -- Form of Note issued pursuant to the OneComm Indenture (included in Not applicable
Exhibit 4.11).
4.15 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Not applicable
Indenture between OneComm (formerly called CenCall Communications
Corp.) and The Bank of New York (filed on November 14, 1995 as
Exhibit 10.12 to the Form 10-Q for the quarter ended September 30,
1995 and incorporated herein by reference).
4.16 -- Second Supplemental Indenture dated as of July 28, 1995 between Not applicable
Nextel (formerly known as ESMR, Inc.), as successor to OneComm, and
The Bank of New York (relating to the OneComm Indenture) (filed on
November 14, 1995 as Exhibit 10.13 to the Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by reference).
4.17 -- Third Supplemental Indenture, dated as of June 13, 1997 between Not applicable
Nextel Not applicable and The Bank of New York (relating to the
February Indenture) (filed on June 17, 1997 as Exhibit 4.2 to the
June 17, Form 8-K and incorporated herein by reference).
4.18 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of Not applicable
April 25, 1994, between Dial Call and The Bank of New York (the "2004
Indenture") (filed on June 7, 1995 as Exhibit 99.4 to the OneComm S-4
Registration Statement and incorporated herein by reference).
4.19 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004 Not applicable
Indenture between Dial Call and The Bank of New York (filed on
December 5, 1995 as Exhibit 99.3 to Nextel's Registration Statement
No. 33-80021 on Form S-4 (the "Dial Page S-4 Registration Statement")
and incorporated herein by reference).
4.20 -- Second Supplemental Indenture, dated as of January 30, 1996, to the Not applicable
2004 Indenture between Dial Page (as successor to Dial Call) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.26 to the
Annual Report on Form 10-K of Nextel for the year ended December 31,
1995 (the "1995 Form 10-K") and incorporated herein by reference).
4.21 -- Third Supplemental Indenture, dated as of January 30, 1996, to the Not applicable
2004 Indenture between Nextel (as successor to Dial Page) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.27 to the 1995
Form 10-K and incorporated herein by reference).
4.22 -- Fourth Supplemental Indenture, dated as of June 13, 1997 between Not applicable
Nextel and The Bank of New York (relating to the 2004 Indenture)
(filed on June 17, 1997 as Exhibit 4.3 to the June 17 Form 8-K and
incorporated herein by reference).
4.23 -- Indenture for Senior Discount Notes due 2005, dated as of December Not applicable
22, 1993, between Dial Call and The Bank of New York (the "2005
Indenture") (filed as Exhibit 99.3 to the OneComm S-4 Registration
Statement and incorporated herein by reference).
4.24 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Not applicable
Indenture between Dial Call and The Bank of New York (filed on April
1, 1996 as Exhibit 4.29 to the 1995 Form 10-K and incorporated herein
by reference).
4.25 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005 Not applicable
Indenture between Dial Call and The Bank of New York (filed on
December 5, 1995 as Exhibit 99.4 to the Dial Page S-4 Registration
Statement and incorporated herein by reference).
4.26 -- Third Supplemental Indenture, dated as of January 30, 1996, to the Not applicable
2005 Indenture between Dial Page (as successor to Dial Call) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.31 to the 1995
ii
42
Form 10-K and incorporated herein by reference).
4.27 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the Not applicable
2005 Indenture between Nextel (as successor to Dial Page) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.32 to the 1995
Form 10-K and incorporated herein by reference).
4.28 -- Fifth Supplemental Indenture, dated as of June 13, 1997 between Not applicable
Nextel and The Bank of New York (relating to the 2005 Indenture)
(filed on June 17, 1997 as Exhibit 4.4 to the June 17 Form 8-K and
incorporated herein by reference).
4.29 -- Indenture for Senior Discount Notes due 2007, dated as of March 6, Not applicable
1997, between McCaw International and The Bank of New York, as
Trustee (the "McCaw Indenture") (filed on March 31, 1997 as Exhibit
4.24 to Nextel's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K") and incorporated herein by
reference).
4.30 -- Form of Note issued pursuant to the McCaw Indenture (included in
Exhibit 4.24).
4.31 -- Warrant Agreement, dated as of March 6, 1997, between McCaw Not applicable
International and The Bank of New York (filed on March 31, 1997 as
Exhibit 4.26 to the 1996 Form 10-K and incorporated herein by
reference).
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, NFC, Not applicable
the Restricted Companies party thereto, the Lenders party thereto,
Toronto-Dominion (Texas) Inc., as Administrative Agent, and The Chase
Manhattan Bank, as Collateral Agent (the "Bank Credit
Agreement") (filed on October 1, 1996 as Exhibit 99.1
to Nextel's Current Report on Form 8-K dated September
27, 1996 (the "September 27 Form 8-K") and
incorporated herein by reference).
4.33 -- Amendment No. 1 dated as of March 24, 1997 to the Bank Credit Not applicable
Agreement (filed on July 9, 1997 as Exhibit 99.1 to Nextel's Current
Report on Form 8-K dated July 9, 1997 (the "July 9 Form 8-K") and
incorporated herein by reference).
4.34 -- Amended, Restated and Consolidated Credit Agreement dated as of Not applicable
September 27, 1996 among Nextel, Nextel Finance Company, the
Restricted Companies party thereto and the Vendors party thereto (the
"Vendor Credit Agreement") (filed on October 1, 1996 as Exhibit 99.2
to the September 27 Form 8-K and incorporated herein by reference).
4.35 -- Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit Not applicable
Agreement (filed on July 9, 1997 as Exhibit 99.2 to the July 9 Form
8-K and incorporated herein by reference).
4.36 -- Option Exercise and Lending Commitment Agreement by and between Not applicable
Nextel and Digital Radio, L.L.C., dated as of June 16, 1997 (filed on
July 9, 1997 as Exhibit 10.1 to the July 9 Form 8-K and incorporated
herein by reference).
4.37 -- Option Purchase Agreement by and among Nextel and Unrestricted Not applicable
Subsidiary Funding Company and Option Acquisition, L.L.C., dated as
of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the July 9
Form 8-K and incorporated herein by reference).
4.38 -- Option Agreement (First New Option) by and between Option Not applicable
Acquisition, L.L.C. and Nextel, dated as of June 18, 1997 (filed on
July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated
herein by reference).
4.39 -- Option Agreement (Second New Option) by and between Option Not applicable
Acquisition, L.L.C. and Nextel, dated as of June 18, 1997 (filed on
July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated
herein by reference).
4.40 -- Certificate of Designation for 13% Series D Exchangeable Preferred Not applicable
Stock (filed on July 22, 1997 as Exhibit 4.1 to Nextel's Current
iii
43
Report on Form 8-K dated July 21, 1997 and incorporated herein by
reference).
4.41 -- Amendment No. 2 dated as of June 3, 1997 to the Bank Credit Agreement Not applicable
(filed on August 5, 1997 as Exhibit 4.41 to Nextel's Registration
Statement No. 333-28461 on Form S-3 (the "August S-3 Registration
Statement") and incorporated herein by reference).
4.42 -- Amendment No. 2 dated as of June 3, 1997 to the Vendor Credit Not applicable
Agreement (filed on August 5, 1997 as Exhibit 4.42 to the August S-3
Registration Statement and incorporated herein by reference).
4.43 -- Amendment No. 3 dated as of August 20, 1997, to the Bank Credit Not applicable
Agreement (filed on September 5, 1997 as Exhibit 99.1 to Nextel's
Current Report on Form 8-K dated September 5, 1997 (the "September 5
Form 8-K") and incorporated herein by reference).
4.44 -- Amendment No. 3 dated as of August 29, 1997, to the Vendor Credit Not applicable
Agreement (filed on September 5, 1997 as Exhibit 99.2 to the
September 5 Form 8-K and incorporated herein by reference).
4.45 -- Second Secured Vendor Financing Agreement dated as of August 29, 1997 Not applicable
among Nextel, Nextel Finance Company and the other Restricted
Companies thereto and the Vendor Lenders thereto (the "Second Secured
Vendor Financing Agreement") (filed as Exhibit 99.3 to the September
5 Form 8-K and incorporated herein by reference).
4.46 -- Amendment No. 4 dated as of September 10, 1997 to the Bank Credit Not applicable
Agreement (filed on September 22, 1997, as Exhibit 4.2 to Nextel's
Current Report on Form 8-K dated September 22, 1997 (the "September
22 Form 8-K") and incorporated herein by reference).
4.47 -- Amendment No. 4 dated as of September 10, 1997 to the Vendor Credit Not applicable
Agreement (filed on September 22, 1997, as Exhibit 4.3 to the
September 22 Form 8-K and incorporated herein by reference).
4.48 -- Amendment No. 1 dated as of September 10, 1997 to the Second Vendor Not applicable
Financing Agreement (filed on September 22, 1997 as Exhibit 4.4 to
the September 22 Form 8-K and incorporated herein by reference).
4.49 -- Indenture between Nextel and Harris Trust and Savings Bank, as Not applicable
Trustee, dated September 17, 1997 (filed on November 26, 1997 as
Exhibit 4.49 to Nextel's Registration Statement No. 333-41097 on Form
S-4 (the "September Notes Registration Statement") and incorporated
herein by reference).
4.50 -- Form of Nextel's 13% Series D Exchangeable Preferred Stock Not applicable
Certificate (filed on November 4, 1997 as Exhibit 4.50 to Nextel's
Registration Statement No. 333-39411 on Form S-4 (the "Preferred
Stock Registration Statement) and incorporated herein by reference).
4.51 -- Registration Rights Agreement by and among Nextel, Morgan Stanley & Not applicable
Co. Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation dated July 21, 1997 (filed on November 4, 1997 as Exhibit
4.51 to the Preferred Stock Registration Statement and incorporated
herein by reference).
4.52 -- Form of Indenture related to the Exchange Debentures (the "Exchange Not applicable
Debenture Indenture") (filed on November 4, 1997 as Exhibit 4.52 to
the Preferred Stock Registration Statement and incorporated herein by
reference).
4.53 -- Form of Note to be issued pursuant to the Exchange Debenture Not applicable
Indenture (included in Exhibit 4.52).
4.54 -- Indenture between Nextel and Harris Trust and Savings Bank, as Not applicable
Trustee, dated as of October 22, 1997 (filed on December 9, 1997
as Exhibit 4.54 to Nextel's Registration Statement No. 333-41747 on
Form S-4 (the "October Notes Registration Statement")
and incorporated herein by reference).
4.55 -- Amendment No. 5 dated as of October 9, 1997 to the Bank Credit Not applicable
Agreement (filed on October 23, 1997 as Exhibit 4.2 to Nextel's
iv
44
Current Report on Form 8-K dated October 23, 1997 (the "October 23 Form
8-K") and incorporated herein by reference).
4.56 -- Amendment No. 5 dated as of October 9, 1997 to the Vendor Credit Not applicable
Agreement (filed on October 23, 1997 as Exhibit 4.3 to the October 23
Form 8-K and incorporated herein by reference).
4.57 -- Amendment No. 2 dated as of October 9, 1997 to the Second Vendor Not applicable
Financing Agreement (filed on October 23, 1997 as Exhibit 4.4 to the
October 23 Form 8-K and incorporated herein by reference).
4.58 -- Registration Rights Agreement dated September 17, 1997 by and among Not applicable
Nextel, Merrill Lynch, Pierce, Fenner & Smith Incorporated, TD
Securities (USA) Inc., Lehman Brothers Inc., and NationsBank Capital
Markets, Inc. (filed on November 26, 1997 as Exhibit 4.58 to the
September Notes Registration Statement and incorporated herein by
reference).
4.59 -- Registration Rights Agreement dated October 22, 1997 by and among Not applicable
Nextel, Morgan Stanley & Co. Incorporated, Chase Securities Inc.,
J.P. Morgan Securities Inc., NationsBanc Montgomery Securities, Inc.,
TD Securities (USA) Inc., and Credit Suisse First Boston Corporation (filed
on December 9, 1997 as Exhibit 4.59 to the October Notes Registration
Statement and incorporated herein by reference).
4.60 -- Form of Redeemable Warrant (filed on April 26, 1996 as Exhibit 4.3 to Not applicable
Nextel's Registration Statement No. 333-1290 on Form S-4 and
incorporated herein by reference).
*5 -- Opinion of Jones, Day, Reavis & Pogue re validity. Not applicable
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
+23.2 -- Consent of Deloitte & Touche LLP.
*24.1 -- Powers of Attorney, excluding Messrs. Shindler and Arendt. Not applicable
+24.2 -- Powers of Attorney for Messrs. Shindler and Arendt.
- ----------
* Previously filed.
+ Filed herewith.
v