Nextel unveils Boost Mobile for youth

By Yukari Iwatani

CHICAGO: Nextel Communications Inc. said on Thursday it would partner with Australia's Boost to test-market a new wireless service for youth, joining its rivals in a bid for the growing market. The fifth-largest U.S. wireless telephone company said the new "pay-as-you-go" service, called Boost Mobile, would launch in mid- to late September in California and Nevada, with a subsequent national rollout depending on the response in the test markets. Closely held Boost already provides similar service in Australia and New Zealand.

Nextel, which owns 60 percent of Irvine, California-based Boost Mobile LLC, said the new service would not affect its 2002 financial guidance. The launch of Boost Mobile is a new strategy for Reston, Virginia-based Nextel, which until now has focused on corporate customers, who tend to spend more time on their cell phones than the average consumer.

Nextel cited reports estimating that 43 million American youths will be wireless subscribers by 2004 and 74 percent of U.S. teens and college students will have cell phones and other wireless devices by 2006. Only 25 percent of 13-to-24-year-olds currently own cell phones in the United States, compared with 60 percent to 85 percent in Europe, according to Virgin Mobile, one of its rivals.

"We have...long stated that we are interested in opportunities to serve valuable or under-served segments in the consumer market where we believe that our network and service differentiators will be perceived as having high value," Nextel Chief Marketing Officer Tom Kelly said in a conference call.

Nextel has posted strong financial results despite an industrywide slowdown in customer growth due to its devoted following for Direct Connect, a unique service similar to a walkie-talkie used by technicians, construction crews and other professionals. The company said it would continue to target business customers for its Nextel-branded wireless service.

Kelly told analysts Boost Mobile would also offer a walkie-talkie feature in addition to two-way messaging, wireless Web and fast-action games. Jane Zweig, chief executive of wireless consulting firm the Shosteck Group, said the walkie-talkie feature could be a significant way for Boost Mobile to distinguish itself from its competitors among teenagers who like to hang out in groups. Nextel joins other wireless operators like Verizon Wireless and Cingular Wireless, which have been vying for the youth market.

Most recently, Virgin Mobile USA, a joint venture between Richard Branson's Virgin Group and Sprint Corp., launched a pay-as-you-go wireless service last month targeted at young people under 30. Pay-as-you-go services, also known as prepaid, appeal to teenagers who lack the credit history to sign long-term contracts.

"Boost Mobile is going head to head with Virgin," said Michael Doherty, a wireless analyst with Ovum. "To be really effective, they're going to have to go after an entertainment type of brand partner," he said, alluding to Boost Mobile's lack of brand recognition. Boost Mobile plans to launch its service with six Boost Mobile-branded cell phones manufactured by Motorola Inc., which is an exclusive cell phone provider to Nextel.

It plans to sell the service through national retailers and convenience stores as well as youth fashion retailers. Service prices will be announced when it launches its new service. Boost founder Peter Adderton said games will be a key feature in the new U.S. service. It also plans to sponsor sports events, teams, television programs, festivals and concerts as part of its marketing strategy.

Shares of Nextel closed up 27 cents at $6.04 on Nasdaq.

© Reuters