##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K



|                                            |  |                                                                                          
|------------------------------------------- |  | -----------------------------------------------------------------------------------------
|                                            |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934    
|                                           
|                                           
|                                           
|                                           
|For the fiscal year ended December 31, 2000
|                                            |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934
|                                            |  | For the transition period from    to                                                     
|Commission file number 0-19656             

NEXTEL COMMUNICATIONS, INC.



|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Delaware                                                        |  | 36-3939651                           
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)
|                                                               
|                                                               
|                                                               
|                                                               
|2001 Edmund Halley Drive, Reston, VA                            |  | 20191                                
|(Address of principal executive offices)                        |  | (Zip Code)                           

Registrants telephone number, including area code:
(703) 433-4000

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.001 par value

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days:  Yes  

     No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated herein by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.

Based on the closing sales price on March 16, 2001, the
aggregate market value of the voting and non-voting common stock
held by nonaffiliates of the registrant was $8,211,346,429.

On March 16, 2001, the number of shares outstanding of the
registrants Class A Common Stock and Class B
Non-Voting Common Stock, $0.001 par value, was 728,682,100
and 35,660,000, respectively.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement relating to the Annual Meeting
of Stockholders scheduled to be held on May 31, 2001 are
incorporated in Part III, Items 10, 11, 12 and 13.









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TABLE OF CONTENTS



|                                                  |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                           
|                                                  | Item 1. Business                                                                             
|                                                  | Item 2. Properties                                                                           
|                                                  | Item 3. Legal Proceedings                                                                    
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                          
|                                                  | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters            
|                                                  | Item 6. Selected Financial Data                                                              
|                                                  | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                  | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                          
|                                                  | Item 8. Financial Statements and Supplementary Data                                          
|                                                  | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                         
|                                                  | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                  | Item 11. Executive Compensation                                                              
|                                                  | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                  | Item 13. Certain Relationships and Related Transactions                                      
|PART IV                                          
|                                                  | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.                   
|SIGNATURES                                       
|Amend. #2 dated March 29,2001 to Credit Agreement
|Amend. to iDEN Subscriber Supply Agreement       
|Amend. iDEN Infrastructure Supply Agreement      
|Nextel Amended & Restated Incentive Equity Plan  
|Nextel Severance Benefits Plan                   
|Change of Control Retention Bonus & Severance Pay
|Subsidiaries of Nextel Conmmunications, Inc.     
|Consent of Deloitte & Touche LLP                 



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TABLE OF CONTENTS

Description

PART I

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|Item     |  |                                                                                        |  | Page
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|1.       |  | Business                                                                               |  |      | 1  | 
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|2.       |  | Properties                                                                             |  |      | 32 | 
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|3.       |  | Legal Proceedings                                                                      |  |      | 33 | 
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|4.       |  | Submission of Matters to a Vote of Security Holders                                    |  |      | 33 | 
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|PART II 
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|5.       |  | Market for Registrants Common Equity and Related
	Stockholder Matters                 |  |      | 35 | 
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|6.       |  | Selected Financial Data                                                                |  |      | 36 | 
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|7.       |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |  |      | 37 | 
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|7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                             |  |      | 52 | 
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|8.       |  | Financial Statements and Supplementary Data                                            |  |      | 54 | 
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|9.       |  | Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure  |  |      | 54 | 
|        
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|PART III
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|10.      |  | Directors and Executive Officers of the Registrant                                     |  |      | 55 | 
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|11.      |  | Executive Compensation                                                                 |  |      | 55 | 
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|12.      |  | Security Ownership of Certain Beneficial Owners and Management                         |  |      | 55 | 
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|13.      |  | Certain Relationships and Related Transactions                                         |  |      | 55 | 
|        
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|PART IV 
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|14.      |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                       |  |      | 56 | 

See page 33 for Executive Officers of the
Registrant.



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.






PART I





Item 1.  Business

A.  Overview

We provide a wide array of digital wireless communications
services throughout the United States. We offer a
differentiated, integrated package of digital wireless
communications services under the Nextel brand name, primarily
to business users. Our digital mobile network constitutes one of
the largest integrated wireless communications systems utilizing
a single transmission technology in the United States. This
digital technology, developed by Motorola, Inc., is referred to
as integrated Digital Enhanced Network, or iDEN®,
technology.

A customer using our digital mobile network is able to access:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service;                                                                                                          
|
| |  | digital two-way radio dispatch service, which is marketed as
	Nextel Direct Connect® service;                                            
|
| |  | the Internet, mobile messaging services, e-mail and advanced
	business applications, which are marketed as Nextel
	Wireless Web services;
|
| |  | advanced calling features, such as three-way calling, voicemail,
	call forwarding and additional line service;                             
|
| |  | international roaming capabilities, which are marketed as
	Nextel WorldwideSM; and                                                       
|
| |  | text and numeric paging.                                                                                                                   

As of December 31, 2000:



| |   |                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have about 6,678,200 digital handsets in service in the
	United States;  and                                                                                                                                                                                
|
| |  | our digital mobile network or the compatible digital mobile
	network of Nextel Partners, Inc., our affiliate providing
	service in small and medium sized markets, was operational in
	180 of the top 200 metropolitan statistical areas in the United
	States.

In addition to our domestic operations, we have ownership
interests in international wireless companies through our
substantially wholly owned subsidiary, Nextel International,
Inc. Nextel International, through its subsidiaries, provides
wireless communications services in and around various major
metropolitan market areas in Latin America and the Philippines,
referred to as their managed markets. As of December 31,
2000, Nextel Internationals proportionate share of
international digital handsets in service in its managed
markets, based on its equity ownership in its subsidiaries, was
about 762,800, which includes total international digital
handsets on networks in operation in Argentina, Brazil, Mexico,
Peru and the Philippines. Additionally, Nextel International has
investments in wireless communications providers in Canada and
Japan and owns analog specialized mobile radio companies in
Chile.

Our consolidated financial statements include financial
information reflecting the financial position and results of
operations relating to Nextel International and its consolidated
subsidiaries as of the relevant dates and periods indicated in
those statements. For selected financial information concerning
our domestic operations, the operations of Nextel International
and our operations on a consolidated basis, see note 14 to
the consolidated financial statements. Additional, more detailed
and focused information relating to Nextel International may be
found in the periodic and other reports filed by Nextel
International with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 and related rules. Except as
noted above and as otherwise indicated, the description of our
business in this document refers to our United States operations.

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Our principal executive and administrative facility is located
at 2001 Edmund Halley Drive, Reston, Virginia 20191, and our
telephone number is (703) 433-4000.

B.  2000 New Product and Service Offerings and
Network Enhancement

In 2000, we set as our primary goals to:



| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | augment our digital mobile network by effectively implementing
	our Nextel Wireless Web services, providing customers with
	Internet access and business to business data applications;                                                                                                                                                                        
|
| |  | continue to offer high-capacity, high-quality, advanced
	communications services on our digital mobile network to our
	customers in our metropolitan markets throughout the United
	States and provide more comprehensive coverage within these
	markets while expanding our coverage in ancillary markets and
	heavily traveled corridors between our markets;
|
| |  | enhance our digital mobile network to assure the quality and
	performance of new service offerings and to strengthen our
	competitive position;  and                                                                                                                                                                                                           
|
| |  | further progress toward becoming a major participant in the
	global wireless communications business.                                                                                                                                                                                                                                                          

Foremost among our new products and services are our Nextel
Wireless Web services, which we commercially launched in the
second quarter of 2000. These services are currently available
in all of our domestic markets for our Internet capable handsets
developed and manufactured by Motorola, the
i1000plusTM, the
i700plusTM, introduced in
January 2000, the i500plusTM, and
the i550plusTM, introduced in
August 2000. These digital handsets enable wireless
Internet services by allowing web-based applications and content
to be supplied directly to our subscribers. Through our website,
we also provide customers with access to information about our
products and services, permit account inquiries and encourage
handset and accessory sales directly over the Internet. We have
worked with third party vendors through our Nextel
Developers Program to encourage them to develop valuable
applications for our vertical markets, such as construction,
financial, hospitality and transportation, offering our
customers additional services. We expect our website to continue
to provide heightened product development, promotion and
distribution and enhanced real-time customer service while
simultaneously reducing our customer acquisition and customer
care costs.

We have also provided our subscribers with an improved and
expanded suite of applications to effectively manage their busy
lives. Subscribers may now elect to access their corporate
information directly from our Internet capable handsets. Our
Address Book feature allows customers to create, sort and edit
their contacts online, as well as place a call or send a message
directly from their contact list. Subscribers may also access
and utilize their existing POP3 e-mail accounts with Internet
service providers from their handset. POP3, or post office
protocol 3, is a widely used standard for receiving e-mail. Our
customers may also access their Microsoft ExchangeTM
or Lotus DominoTM e-mail, calendar and contacts using
our Internet capable handsets. Finally, subscribers can access
their corporate information using our Nextel dial-up service.
This service allows our Internet capable handsets to act as a
wireless modem, enabling customers to connect to a laptop or
handheld device to reach their corporate network or an Internet
service provider.

In June 2000, we commercially launched our Nextel Two-Way
Messaging service that enables Internet capable handsets to
send, receive and respond to text messages. The introduction of
this service helped us deliver more than 41 million
Internet text messages in the second half of 2000. Additionally,
in June 2000, Nextel Partners introduced Nextel Wireless
Web services in selected markets.

In April 2000, we launched our Nextel Worldwide service
offering with the introduction of the
i2000TM digital handset. In
February 2001, we introduced the
i2000plusTM digital handset, our first
global handset with Internet capabilities. The i2000 and
i2000plus, manufactured by Motorola, are dual-mode handsets that
operate on both the iDEN technology we use and the Global System
for Mobile Communications, or GSM, digital wireless technology
that is the current digital cellular communications

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During 2000, we have enhanced our digital mobile network by
providing more comprehensive coverage to our subscribers. Our
digital mobile network is now accessible over a greater area,
and we enhanced our coverage in existing markets to support an
increased customer base. We believe our improved network
performance, expanded network coverage and increased network
capacity contributed to our achievement of doubling our domestic
operating cash flow during 2000 to $1.4 billion. Additional
benchmarks we achieved for the year ended December 31,
2000, include:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a 2,162,500 increase in digital handsets in service from
	4,515,700 to 6,678,200;                                                                                                                              
|
| |  | a 75% increase in total system minutes of use from about
	18.0 billion during 1999 to about 31.5 billion during
	2000;                                                                                         
|
| |  | a 44% increase in transmitter and receiver sites in service on
	our digital mobile network, adding 3,900 sites during 2000 for a
	total of about 12,700 digital transmitter and receiver sites in
	service; and
|
| |  | a 63% increase in the number of switches in service, adding 29
	switches to our digital mobile network during 2000, for a total
	of 75 switches in service.                                                    

Also to improve the quality and capacity of our digital mobile
network, during 2000 we purchased, or agreed to purchase,
additional spectrum in the 800 and 900 MHz bands and we continue
to pursue the acquisition of additional channels from third
parties. Giving effect to pending acquisitions, we now have
about 20 MHz of spectrum in the 800 and 900 MHz bands in 52 of
the top 100 U.S. markets.

Nextel International has also made substantial progress during
2000. As a result of acquisitions completed during 2000, Nextel
International now owns 100% of its subsidiaries in Brazil, Chile
and Peru. In part due to these acquisitions, Nextel
International grew proportionate digital subscribers in its
managed markets 185% during 2000 to about 762,800 at the end of
2000. During 2000, Nextel International continued to expand
coverage and capacity to its network operations, adding about
560 digital transmitter and receiver sites throughout its
service territories. Nextel International continues to make
progress in building an iDEN packet data service capability and
expects to launch digital two-way mobile data services in
selected markets by mid-2001.

C.  2001 Goals and Business Strategy

For 2001, our principal business objectives are to:



| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to deliver leading edge product solutions to our
	customers, focusing on our Nextel Wireless Web features and
	business applications;                                                 
|
| |  | consistently provide our customers with superior service, by
	delivering the best customer care experience and having the
	highest quality digital mobile network;                             
|
| |  | expand our distribution channels, such as direct retail,
	telemarketing and web sales, allowing us to reach out to
	existing and new customer groups in effective and cost-efficient
	ways; and
|
| |  | focus aggressively on increasing efficiencies and reducing costs
	wherever possible.                                                                                                           

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We believe that the following elements of our business strategy
and characteristics of our business distinguish our wireless
service offerings from those of our competitors in the wireless
communications marketplace:

1.  We provide a differentiated, integrated package
of wireless services, including our unique Nextel Direct Connect
feature. We offer a bundled product offering accessible
through a single handset, currently consisting of:



| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service;                                                                                                                                       
|
| |  | digital two-way radio dispatch service;                                                                                                                                 
|
| |  | access to the Internet, mobile messaging services, e-mail and
	advanced business applications, all available on either our
	packetized or circuit switched data network;
|
| |  | advanced calling features, such as three-way calling, voicemail,
	call forwarding and additional line service;                                                          
|
| |  | international roaming capabilities; and                                                                                                                                 
|
| |  | text and numeric paging.                                                                                                                                                

We believe that, for customers who already subscribe to or who
would benefit by access to multiple wireless services, the
convenience of combining multiple wireless communications
options in a single handset and of consolidating all wireless
service charges into a single package price and billing
statement are important features that distinguish us from many
of our competitors.

Our market research indicates that a sizeable portion of
business users communications involves contacting others
within the same organization. We believe that our Nextel Direct
Connect service is especially well suited to address these
intracompany wireless communications needs. The Nextel Direct
Connect service, which gives customers the ability instantly to
set up a conference on either a private (i.e.,
one-to-one) or group (i.e., one-to-many) basis, is a
service that is not included in any integrated service package
currently available from competing cellular and personal
communications services, or PCS, operators. To further expand
the flexibility and convenience offered by our Nextel Direct
Connect service to users outside a single organization but
within a single industry or interest group in a particular
dispatch service area, we pioneered the Nextel Business
NetworkSM concept. Nextel Business Networks extend
Nextel Direct Connect service beyond a companys employees
to suppliers or other parties involved in the same industry.
Over 2.6 million domestic digital handsets in service as of
December 31, 2000, representing over one-third of our total
domestic digital handsets then in service, were participating in
the Nextel Business Networks program throughout the United
States. Beginning later in 2001, we expect to further
differentiate our products by enhancing Nextel Direct Connect to
allow any customer to Direct Connect any other customer in their
home calling area. This will allow customers the ability to set
up their own talk groups, offering greater customer satisfaction
at a lower cost to us.

In addition to Nextel Direct Connect, we expect our Nextel
Wireless Web services to continue to differentiate our service
offering from our competitors. We have provided our
subscribers with an improved and expanded suite of applications,
enabling them to remotely access critical business information
directly from their Internet capable handsets. We believe our
Address Book feature described above, our dial-up service and
our numerous e-mail and messaging solutions offer our
subscribers productive and efficient tools to communicate with
their business associates. We expect to offer expanded and
improved applications during 2001 resulting from the Nextel
Developers Program.

We expect to further differentiate our unique package of
services in 2001 by adding a new platform of handsets with
embedded Java technology. These new handsets, being
developed and manufactured by Motorola, are expected to combine
the qualities of our Internet capable handsets with additional
features and functionality, such as the ability to download
Java-based applications, wireless synchronization capabilities
and certain voice recognition and recorder features. We have
deployed and test marketed pre-

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2.  We focus on the business customer. Our
corporate marketing strategy has traditionally focused on
targeting business users that we believe will be likely to
appreciate the potential for our wireless communication service
capabilities to increase efficiencies and reduce costs in those
users business activities. We originally concentrated our
sales efforts on a number of distinct occupational groupings of
mobile workers, but in the past few years we have broadened our
primary targeted customer population to include a much wider
group of business users. In 2001, we expect to continue to
gradually expand our customer base. We will continue to
aggressively market our services to our core business segments
including white-collar professionals and will continue to expand
our marketing to the high-end consumer. We expect to focus in
particular on marketing the benefits of Nextel Wireless Web
services to our business users in both their corporate and
personal lives.

We also are committed to provide our customers with superior
service, in part by striving to deliver the best customer care
experience. Our fifth customer care center in Temple, Texas is
now operational, and we expect to open a sixth center near
Bremerton, Washington in late 2001. With the addition of these
new customer care facilities, we expect to be well positioned to
handle the core needs of our growing customer base, as we expand
our product and service offerings.

3.  We offer innovative pricing features. We
offer pricing that we believe differentiates our services from
those of many of our competitors. Our pricing packages offer our
customers simplicity and predictability in their wireless
telecommunications billing by combining unlimited Nextel Direct
Connect minutes with the following price features:



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a flat rate plan marketed as the Nextel National Business
	PlanSM, which offers a predetermined mix of cellular
	and long distance minutes for one flat rate;                                                            
|
| |  | one airtime rate, regardless of the time of day or day of the
	week a call is made;                                                                                                                                      
|
| |  | no roaming charges assessed for mobile telephone services
	provided to our customers traveling anywhere on our digital
	mobile network or the compatible digital mobile network of
	Nextel Partners in the United States;
|
| |  | billing based on the actual number of seconds of airtime used
	after the first minute, in contrast to the common cellular
	industry practice of rounding all calls up to the next minute;                                
|
| |  | a flat rate plan which offers unlimited domestic calls; and                                                                                                                                                              
|
| |  | special pricing plans that allow some customers to aggregate the
	total number of account minutes for all handsets and reallocate
	the aggregate minutes among those handsets.                                           

4.  Our marketing program and distribution
channels. Our marketing program and related advertising
campaigns are designed to:



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | expand our use of lower cost distribution channels, such as
	sales of our handsets through our website;                          
|
| |  | stimulate additional interest in and demand for our services by
	stressing their versatility, value, simplicity and
	quality; and
|
| |  | enhance brand name awareness.                                                                                                    

We use both direct and indirect sales forces as part of our
strategy to increase the number of handsets placed in service on
our digital mobile network. We expect to expand and enhance both
direct and indirect distribution channels as we further
penetrate existing markets, expand our geographic reach in those
markets and, through Nextel Partners, expand our coverage in
ancillary markets. We also expect to develop new distribution
channels, such as direct retail and telemarketing, allowing us
to reach out to existing and new customer groups in effective
and cost-efficient ways. To expand our international reach,

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5.  We have strategic relationships with
Craig O. McCaw, Motorola and Microsoft. Through
December 31, 2000, Mr. Craig O. McCaw and members
of the McCaw family have invested more than $965 million in
our stock through purchases of our equity securities from Nextel
and Motorola. As of December 31, 2000, Mr. McCaw and
his affiliates beneficially owned about 13% of our common
equity, assuming the conversion of the preferred stock and the
exercise of all presently exercisable options held by Digital
Radio, L.L.C. or other controlled affiliates of Mr. McCaw.
We also benefit from Mr. McCaws more than
25 years experience in the wireless communications
business. Mr. McCaw currently serves as a member of our
board of directors and also as Chairman of the operations
committee of our board of directors, which is responsible for
formulating key aspects of our business strategy. See
I. Agreements with Significant
Stockholders  1. McCaw Interests.

We have a number of important strategic and commercial
relationships with Motorola. Motorola provides the iDEN
infrastructure and handset equipment used throughout our
domestic markets and in most of the international markets served
by Nextel Internationals subsidiaries and affiliates. We
also work closely with Motorola to improve existing products and
develop new technologies such as the iDEN technology that we use
in our digital mobile network. As of December 31, 2000,
Motorola was the beneficial owner of about 14% of our common
equity, assuming the conversion of shares of our class B
nonvoting common stock, all of which is owned by Motorola. See
I. Agreements with Significant Stockholders  2.
Motorola.

In May 1999, Microsoft Corporation purchased about
33.3 million shares of our class A common stock for a cash
investment of $600 million, representing a per share price
of $18.00. In connection with this transaction, we entered into
agreements under which Microsoft provides specified Internet
portal services and related assistance in connection with our
Nextel Wireless Web services. As of December 31, 2000,
Microsoft was the beneficial owner of slightly less than 5% of
our outstanding common stock.

D.  Year 2000 Developments

1.  5.25% convertible senior notes. In
February 2000, we completed the sale of $1.15 billion
aggregate principal amount of our 5.25% convertible senior notes
due 2010, generating $1.13 billion in net cash proceeds.
Cash interest is payable semiannually on these notes beginning
July 15, 2000 at a rate of 5.25% per year. These notes
are convertible at the option of the holders into our class A
common stock at any time prior to redemption, repurchase or
maturity at a conversion price of $74.40 per share, subject
to adjustment. These notes are senior unsecured indebtedness of
ours and rank equal in right of payment with all our other
unsubordinated, unsecured indebtedness.

2.  Initial public offerings of SpectraSite and of
Nextel Partners. In 2000, SpectraSite Holdings, Inc. and
Nextel Partners each consummated an initial public offering of
its common stock. After giving effect to these transactions,
including the conversion of some shares of nonvoting preferred
stock we held into additional shares of voting common stock of
Nextel Partners, we, through our subsidiaries, beneficially
owned about 10% of SpectraSite and about 32% of Nextel Partners,
as of December 31, 2000.

3.  Incremental bank financing. In
March 2000, we, some of our subsidiaries and some of our
lenders established the $1.0 billion incremental senior
secured term loan under our existing amended and restated
secured bank credit facility. As a result, the total amount of
borrowings available under our bank credit facility increased
from $5.0 billion to $6.0 billion. We borrowed the
entire amount of this incremental $1.0 billion term loan in
March 2000. The maturity date of this loan is March 31,
2009, although the maturity date can accelerate if our credit
ratings are below specified levels and the aggregate amount of
specified debt obligations that mature before June 30,
2009, and the redemption price of redeemable stock that is
mandatorily redeemable before June 30, 2009, exceed
specified amounts. Loans under this facility bear interest
payable quarterly, at variable rates calculated based on either
the U.S. prime rate or the London Interbank Offered Rate,
or LIBOR. At December 31, 2000, we had borrowed an
aggregate of

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4.  Debt extinguishment. During the first
quarter of 2000, we utilized a portion of the proceeds from our
9.375% senior notes due 2009, issued in November 1999, to
redeem prior to final maturity all of our outstanding 10.125%
senior notes due 2004 and all of our outstanding 9.75% senior
notes due 2004. As a result of the early retirement of these
senior notes, we recognized an extraordinary loss of
$104 million in the first quarter of 2000, representing the
excess of the purchase price over the carrying values of the
redeemed notes and the write-off of unamortized debt financing
costs.

5.  Conversion of securities. In
March 2000, we issued 10.4 million shares of our class
A common stock upon the conversion of $246 million of our
4.75% convertible senior notes, representing a conversion price
of $23.654 per share. In order to induce conversion of
these notes prior to redemption, we paid the converting note
holders $26 million in cash. During the first half of 2000,
we also issued 6.7 million shares of our class A common
stock upon the conversion of $98 million in total accreted
value of our zero coupon convertible preferred stock mandatorily
redeemable in 2013, representing the original stated conversion
rate adjusted for the effect of our stock split.

6.  Stock split. On May 25, 2000, our
stockholders approved an increase in the number of authorized
shares of our class A common stock from 515,000,000 to
2,060,000,000 and our class B common stock from 35,000,000 to
100,000,000, enabling us to complete a two-for-one common stock
split effective June 6, 2000, distributed to stockholders
of record as of May 26, 2000. Information presented
throughout this annual report on Form 10-K has been
adjusted to reflect the two-for-one common stock split.

7.  Sale-leaseback transaction. In
August 2000, we completed a sale-leaseback transaction
involving some of our owned switch equipment that is being
accounted for as a capital lease. We received total net proceeds
of $280 million, resulting in a deferred gain of
$19 million.

8.  Spectrum purchases. In
September 2000, the Federal Communications Commission
concluded auctions of specified 700 MHz and 800 MHz frequencies.
We paid $232 million for licenses in the 800 MHz auction
and $338 million for licenses in the 700 MHz auction. We
also successfully bid $27 million for licenses in a second
800 MHz auction in December 2000 and an additional
$8 million for some 700 MHz licenses that were re-auctioned
in February 2001.

9.  Nextel Partners transaction. In
September 2000, pursuant to binding agreements, Nextel
Partners exercised its option to acquire from us specified
additional territories and assets, including related Federal
Communications Commission licenses. In exchange, we received
$31 million in equity for the licenses and $3 million
in cash for the other assets.

10.  Officer and director developments. As of
March 2000, Steven M. Shindler, formerly our Chief
Financial Officer, was appointed to the additional position of
Chief Executive Officer of Nextel International. In
December 2000, Mr. Shindler stepped down from his
senior officer positions at Nextel to devote his attention
exclusively to Nextel International. John S. Brittain, Jr.
became our Chief Financial Officer in December 2000,
replacing Mr. Shindler, and Mr. Brittain also
continues to serve in his roles as Vice President and Treasurer
of Nextel. In May 2000, William A. Hoglund resigned
from our board of directors, reducing the number of sitting
directors to nine.

E.  Year 2000 International Developments

1.  Issuances of preferred stock. In a series
of transactions during 2000, Nextel International received
$693 million in proceeds from the issuance of shares of its
series A exchangeable redeemable preferred stock to one of our
wholly owned subsidiaries.

2.  Management change. In March 2000,
Steven M. Shindler was appointed Chief Executive Officer of
Nextel International. Mr. Shindler has been a director on
Nextel Internationals board of directors since
May 1997. Until December 2000, Mr. Shindler also
served as an Executive Vice President and the Chief Financial
Officer of Nextel.

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3.  Motorola incremental facility. In
December 1999, Nextel International entered into a secured
loan agreement with Motorola Credit Corporation under which
Motorola Credit provided $57 million in incremental term
loans to Nextel International to acquire digital mobile network
equipment and related services from Motorola. The loan, fully
drawn in January 2000, will mature June 30, 2003 and
bears interest at variable rates based upon either the
U.S. prime rate or LIBOR. Borrowings under this facility
are secured by a pledge of all the shares of stock of TELUS
Corporation held by Nextel International.

4.  Latin American acquisitions. As a result
of the acquisitions described below, Nextel International owns
100% of its operating companies in Latin America as of
December 31, 2000.

Peru. In May 2000, Nextel International purchased
all of the equity interests of Motorola International
Development Corporation and the other minority stockholder in
its Peruvian operating company, increasing Nextel
Internationals ownership from about 64% to 100%.

Chile. In May 2000, Nextel International also
purchased three Chilean analog specialized mobile radio
companies from Motorola International.

Brazil. In May 2000, Nextel International purchased
all of Motorola Internationals equity interests in McCaw
International (Brazil), Ltd., the parent company of Nextel
Internationals Brazilian operating company. This purchase
increased Nextel Internationals ownership of its Brazilian
operations from about 88% to about 92%. Nextel International
paid Motorola International an aggregate purchase price of about
$78 million in cash for the acquisitions in Peru, Chile and
Brazil.

In July 2000, Nextel International entered into a purchase,
release and settlement agreement with the minority stockholders
in McCaw International (Brazil). Under that agreement, in
August 2000, Nextel International made a cash payment to
the minority stockholders totaling $146 million, received
all of the equity interests held by the minority stockholders in
McCaw International (Brazil) and exchanged mutual releases with
the minority stockholders. In addition, all pending court
disputes between Nextel International and one of the minority
stockholders were permanently dismissed. As a result, Nextel
International increased its ownership interest in both its
primary Brazilian operating company and its parent, McCaw
International (Brazil), to 100%. Additionally, all rights of the
minority stockholders in McCaw International (Brazil), including
their rights to put their equity interests to Nextel
International beginning in October 2001, were terminated.

5.  Nextel International 12.75% senior serial
redeemable notes due 2010. In August 2000, Nextel
International completed the sale of $650 million in
aggregate principal amount of its 12.75% senior serial
redeemable notes due 2010, generating $624 million in net
cash proceeds. Cash interest is payable semiannually on these
notes beginning February 1, 2001 at a rate of
12.75% per year. The notes are senior unsecured
indebtedness of Nextel International and rank equal in right of
payment with all of Nextel Internationals other
unsubordinated, unsecured indebtedness.

6.  Peoples Republic of China. As a
result of changes to the regulatory environment in China, a
joint venture in which Nextel International owned a 30% interest
terminated its agreement with China United Telecommunications
Corporation in early 2000. In consideration for entering into
this termination agreement, the joint venture received
$61 million in cash, and the joint venture participants
received warrants to purchase shares of China United
Telecommunications stock. In September 2000, the joint
venture was formally dissolved.

7.  Japan. As a result of an inability
to effect timely regulatory changes, and a determination that a
network build-out under existing specialized mobile radio
technology would be costly and inefficient, Nextel International
reached the conclusion that the value of its existing investment
in its Japanese affiliate is not recoverable. In light of this
conclusion, Nextel International recorded a one-time non-cash
charge of $21 million in the fourth quarter of 2000 that
represents a write-off of the entire carrying amount of this
investment.

8.  Philippines. In July 2000, Nextel
International increased its direct and indirect ownership
interests in its Philippine operating company to about 51% by
purchasing some of the minority owners

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9.  Acquisition of Clearnet Communications by TELUS
Corporation. In October 2000, TELUS Corporation
acquired Clearnet Communications, Inc., a publicly traded
Canadian company in which Nextel International owned a 14%
equity interest, for cash and stock. TELUS is a publicly traded
telecommunications company that, before its acquisition of
Clearnet, provided wireline, wireless data and Internet
communications services primarily in Western Canada. Under
agreements among Nextel International, TELUS and Clearnet,
Nextel International exchanged all of its Clearnet stock for
nonvoting shares of TELUS. Nextel International also entered
into a lock-up agreement with TELUS under which it has agreed
not to dispose of any of its TELUS shares prior to
October 2001, subject to specified exceptions. In exchange
for 8.4 million shares of Clearnet stock, Nextel
International received 13.7 million shares of TELUS stock,
representing slightly less than 5% of the ownership interest in
TELUS. We recorded a pre-tax gain of $275 million in the
fourth quarter of 2000 related to this transaction.

For additional information concerning transactions and
developments relating to Nextel International during 2000,
including those summarized above, see Nextel
Internationals annual report on Form 10-K for the
year ended December 31, 2000 filed with the Securities and
Exchange Commission.

F.  Post Year 2000 Developments

1.  Arch Wireless spectrum purchase. In
January 2001, we agreed to purchase specified 900 MHz
specialized mobile radio licenses from Arch Wireless, Inc. for
an aggregate purchase price of $175 million and an
investment of $75 million in a new Arch Wireless equity
issue of redeemable cumulative preferred stock. In
February 2001, we advanced Arch Wireless the
$175 million purchase price and the $75 million
investment in the form of two loans which accrue interest until
the necessary regulatory approvals to permit transfer of the 900
MHz licenses to us are obtained. Upon transfer of the licenses
to us, Arch Wireless obligation to repay the
$175 million loan obligation will be satisfied, and the
$75 million of loans will be converted into shares of the
new series of preferred stock of Arch Wireless. Arch Wireless
will pay accrued interest on these two loans by issuing to us at
closing shares of common stock of Arch Wireless. The closing of
this purchase is also subject to other customary conditions.

2.  9.5% senior serial redeemable notes due
2011. In January 2001, we completed the sale in a
private placement of $1.25 billion in aggregate principal
amount of our 9.5% senior serial redeemable notes due 2011,
generating about $1.245 billion in net cash proceeds. Cash
interest is payable semiannually on these notes beginning
August 1, 2001 at a rate of 9.5% per year. The notes
are senior unsecured indebtedness of ours and rank equal in
right of payment with all our other unsubordinated, unsecured
indebtedness. Because these notes were issued in a private
placement, they may not be offered or sold in the United States
absent an effective registration statement or an applicable
exemption from the registration requirements of the Securities
Act. In the event that these notes are not registered with the
Securities and Exchange Commission prior to August 1, 2001,
additional incremental interest on the principal amount of these
notes will accrue until they are registered or other
requirements are met.

3.  Lets Talk Cellular &
Wireless. In January 2001, we entered into an asset
purchase agreement with Lets Talk Cellular &
Wireless, Inc., a specialty cellular and wireless retailer.
Under the agreement, we will purchase a substantial portion of
Lets Talk Cellulars nationwide distribution network
to provide additional points of contact for existing and new
Nextel customers. Under the terms of the asset purchase
agreement, we will pay a cash purchase price of $32 million
for the operations, assets and rights associated with about 200
Lets Talk Cellular stores. We have placed $32 million
into an escrow which is refundable under specified
circumstances. The purchase price is subject to adjustments.
Lets Talk Cellular is currently involved in
Chapter 11 bankruptcy proceedings, and this agreement is
contingent upon the approval of the United States Bankruptcy
Court. The closing of this transaction, which is tentatively
scheduled to occur in the second quarter of 2001, is also
subject to other customary conditions.

4.  Officer and Director developments. In
February 2001, William E. Conway, Jr. was
appointed Chairman of our board of directors, replacing
Daniel F. Akerson, who remains on our board. Mr. Conway

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5.  Nextel International initial public
offering. In August 2000, Nextel International
filed a registration statement with the Securities and Exchange
Commission for a proposed initial public offering of its common
stock. In March 2001, Nextel International announced that due to
market conditions, it decided to discontinue its initial public
offering at that time.

6.  Credit facility amendment. In
March 2001, we amended our $6.0 billion domestic bank
credit facility to modify certain financial covenants to better
reflect our anticipated financial performance and to permit
ongoing compliance with the financial covenants during 2001. As
of December 31, 2000, $4.5 billion was outstanding
under this facility leaving $1.5 billion of additional
borrowing availability, and we were in full compliance with all
financial covenants under this facility as in effect on that
date.

G.  Wireless Industry Overview

1.  Development of the wireless communications
industry. Todays wireless communications industry
began in 1970 when the FCC reallocated 115 MHz of radio spectrum
in the 800 and 900 MHz bands from the federal government and UHF
television to land mobile service use to provide high-quality,
high-capacity communications services to vehicle-mounted and
hand-held portable telephones and other two-way radio units. The
FCC allocated 50 MHz for cellular service, which were allocated
in equal blocks to two cellular operators in each metropolitan
statistical area or rural statistical area, and 46 MHz for
private radio services, including specialized mobile radio,
otherwise known as SMR. The remaining 19 MHz were divided among
six different services. Because of regulatory delays, the first
commercial cellular systems were not operational until 1983.
Since then, however, growth in the industry has been rapid, with
about 97 million wireless phone units (consisting of analog
cellular, digital cellular and PCS units) in service at
June 30, 2000, as reported by the Cellular
Telecommunications and Internet Association.

2.  SMR and cellular/PCS telephony. The
cellular telephone industry was created by the FCC as a
regulated duopoly. The FCC awarded only two licenses to provide
cellular service in the service area of any given metropolitan
statistical area or rural statistical area. Subsequently, the
FCC allocated 120 MHz of spectrum in the 1.8-2.2 GHz band for
the provision of licensed PCS, which include mobile wireless
communications services similar to those provided over our
digital mobile network. The FCC has awarded three 30 MHz and
three 10 MHz PCS licenses for this PCS spectrum through a
competitive bidding process. Since August 1996, SMR
operators have been subject to the same common carrier
obligations as cellular and PCS operators, although a more
limited amount of spectrum is assigned to a single SMR licensee
as compared to cellular and PCS licensees. See J.
Regulation for additional information. Within the
limitations of available spectrum and technology, SMR operators
are authorized to provide mobile communications services to
business and individual users, including the bundled products we
already offer.

H.  Our Digital Mobile Network and Services

1.  Digital mobile network services. We are
designing and constructing our digital mobile network to support
the full complement of digital wireless services described
above. See A. Overview. Additionally, we anticipate
offering our subscribers even more tools and applications to
access time-sensitive information and content, providing them
with effective and innovative ways to communicate with their
business associates.

Our digital mobile network provides customers desiring mobile
telephone service with access to features competitive with those
offered by other current wireless communications services, such
as the hand-off of calls from one site to another
and in-building signal penetration for improved
portable performance in selected high usage areas. In addition
to the mobile telephone and two-way radio dispatch functions,
our digital mobile network has been designed to include a
messaging or paging capability, which also has been built into
each handset, to enable a customer to receive alphanumeric
short-text messages.

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Working together with Motorola and others, we have adapted our
iDEN-based packet data network to enable wireless Internet
connectivity and new digital two-way mobile data services,
marketed as Nextel Wireless Web services. We completed our
nationwide roll-out of packet data services in
September 2000. Subscribers may now elect to access a broad
array of content directly from their Internet capable handset
such as news, weather, travel, sports and leisure information
and shopping. Also available are Nextel Industry Solutions,
which are industry specific applications such as fleet
management applications, timesheet programs and customer service
assistance applications, all designed to keep customers
businesses functioning smoothly through their ever-mobile
workforce.

Nextel International, through its subsidiaries, is constructing
and operating digital networks employing iDEN technology on 800
MHz spectrum holdings in major metropolitan market areas located
in Latin American and the Philippines. Nextel International also
has investments in wireless communications providers in Canada
and Japan and owns analog specialized mobile radio companies in
Chile. We have entered into interoperability agreements with
TELUS Corporation and Nextel Internationals Mexican
affiliate, to provide for coordination of customer
identification and validation necessary to facilitate
cross-border roaming service in North America.

We have roaming agreements currently in effect with Nextel
Partners covering all of the U. S. market areas in which
Nextel Partners currently, or will in the future, provide
iDEN-based digital mobile services. We also have a roaming
agreement in effect with TELUS in Canadian market areas where
TELUS offers iDEN-based digital mobile services. Our i2000
handset is a dual mode handset that operates on both the iDEN
800 MHz technology used by Nextel and the GSM 900 MHz standard
and allows digital roaming in over 75 countries. Our i2000plus
handset, which offers all the features of our i2000, also has
the ability to access Nextel Wireless Web services.

2.  Digital mobile network technology. Our
digital mobile network combines the advanced iDEN technology
developed and designed by Motorola, with a low-power, multi-site
transmitter/receiver configuration that permits frequency reuse.
The iDEN technology shares many common components with the GSM
technology that has been established as the digital cellular
communications standard in Europe and with a variation of that
GSM technology being deployed by certain PCS operators in the
United States. The design of our existing and proposed digital
mobile network currently is premised on dividing a service area
into multiple sites having a typical coverage area of from less
than one mile to up to thirty miles in radius, depending on the
terrain and the power setting. Each site contains a low-power
transmitter/receiver and control equipment referred to as the
base station. The base station in each site is connected by
microwave, fiber optic or telephone line to a computer
controlled switching center. The switching center controls the
automatic hand-off of cellular calls from site to site as a
subscriber travels, coordinates calls to and from a handset and
connects wireless calls to the public switched telephone network.

In the case of two-way radio dispatch, a piece of equipment
called a dispatch application processor provides a call setup,
identifies the target radio and connects the subscriber
initiating the call to the other subscribers. Although to date
Nortel Networks Corporation has supplied the mobile telephone
switches for our digital mobile network, we recently agreed to
purchase a number of switches from Lucent Technologies, Inc.

Currently, there are three principal digital technology formats
used by providers of cellular telephone service or personal
communications services in the United States:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | time division multiple access, or TDMA, digital transmission
	technology;     
|
| |  | code division multiple access, or CDMA, digital transmission
	technology;  and
|
| |  | GSM-PCS, a variation of the TDMA-based GSM digital technology
	format.        

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Although TDMA, CDMA and GSM-PCS are digital transmission
technologies that share certain basic characteristics and areas
of contrast to analog transmission technology, they are not
compatible or interchangeable with each other. Although
Motorolas proprietary iDEN technology is based on the TDMA
technology format, it differs in a number of significant
respects from the versions of this technology used by cellular
and personal communications services providers in the United
States.

The implementation of a digital mobile network using iDEN
technology significantly increases the capacity of our existing
SMR channels and permits us to utilize our current holdings of
SMR spectrum more efficiently. This increase in capacity is
accomplished in two ways.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | First, each channel on our digital mobile network is capable of
	carrying up to six voice and/or control paths, by employing
	six-time slot TDMA digital technology. Alternatively, each
	channel is capable of carrying up to three voice and/or control
	paths, by employing three-time slot TDMA digital technology.
	Each voice transmission is converted into a stream of data bits
	that are compressed before being transmitted. This compression
	allows each of these voice or control paths to be transmitted on
	the same channel without causing interference. Upon receipt of
	the coded voice data bits, the digital handset decodes the voice
	signal. Using iDEN technology, we achieve about six times
	improvement over analog specialized mobile radio in channel
	utilization capacity for channels used for two-way radio
	dispatch service. We also achieve about three times improvement
	over analog specialized mobile radio in channel utilization
	capacity for channels used for mobile telephone service.
|
| |  | Second, our digital mobile network reuses each channel many
	times throughout the market area in a manner similar to that
	used in the cellular industry, further improving channel
	utilization capacity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Unlike some other digital transmission technologies, iDEN can be
deployed on non-contiguous frequency holdings. This benefits us
because many of our 800 MHz channel holdings are composed of
non-contiguous channels. Further, iDEN technology allows us to
offer our multi-functional package of digital mobile services.
While iDEN offers a number of advantages in relation to other
technology platforms, unlike other wireless technologies, it is
a proprietary technology that relies solely on the efforts of
Motorola and any future licensees of this technology for further
research and continuing technology and product development and
innovation. Motorola is also the sole source supplier of iDEN
infrastructure and digital handsets. Our agreements with
Motorola impose limitations and conditions on our ability to use
other technologies. These agreements may delay or prevent us
from employing new or different technologies that perform better
or are available at a lower cost. Furthermore, iDEN technology
is at a comparatively early stage of development in relation to
other wireless technologies and currently has fewer subscribers
on a worldwide basis.

We are considering implementing over the next several years
advanced digital technology which will allow high capacity
wireless voice and high speed data transmission, and potentially
other advanced digital services. The technology that we would
deploy to provide these types of broadband wireless telephony
services is sometimes referred to as 3G or
third generation. We are presently evaluating
standards and assessing the potential demand for these third
generation wireless services. We are focusing these activities
on maximizing our ability to deliver 3G capabilities while
continuing to fully utilize our existing digital mobile network.
See L. Risk Factors  6. J. We are
considering implementing some third generation
services in the future, however, if we are unable to do so, or
to do so in an economical and competitively effective fashion,
our operations and growth could be adversely affected.

3.  Technology commitments. Pursuant to our
equipment purchase agreements with Motorola first entered into
in 1991, as subsequently amended, Motorola provides the iDEN
infrastructure and handset equipment throughout our markets.
These agreements set forth the prices we must pay to purchase
and license this equipment as well as a structure to develop new
features and make long-term improvements to our network.
Motorola is recognized as the overall integrator of our digital
mobile network elements and has committed to make some
components of our network available to us. We and Motorola have
also

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We continuously review alternate technologies as they are
developed. To date, however, it has not been regarded as
necessary or as a commercially feasible strategy to adapt
currently available alternative technologies to operate on our
present spectrum position. However, in connection with our
potential future deployment of 3G capabilities, we currently are
conducting tests to assess the operational and commercial
feasibility of constructing and launching an overlay network,
using the 3G CDMA 2000 technology, on up to an average of 10 MHz
of contiguous spectrum in nearly every major market in the
United States. After we have successfully completed the
mandatory relocation of incumbent operators out of this
spectrum, we would have access to contiguous channel blocks,
similar to our cellular and PCS competitors. Additionally, we
continue to pursue regulatory initiatives that would provide SMR
operators, including us, with rights to create and use other
contiguous blocks of spectrum. See J. Regulation.
The availability of a significant block of contiguous spectrum
would permit the introduction of a broader range of technology
options not available on non-contiguous spectrum blocks.

Our consideration of alternative technologies, independent of
technological feasibility, would likely be materially affected
by our contractual obligations to Motorola. For example, if we
were to determine that the iDEN technology we use is no longer
suited to our needs, we have agreed to notify Motorola six
months prior to any public announcement or formal contract to
purchase equipment utilizing alternate technology. If Motorola
manufactures, or elects to manufacture, the equipment utilizing
the alternate technology that we elect to deploy, we must give
Motorola the opportunity to supply 50% of our infrastructure
requirements for the alternate technology for three years. See
L. Risk Factors  7. Since we rely on one
supplier to implement our digital mobile network, any failure of
that supplier to perform could hurt our operations and
 8. Agreements with Motorola reduce our operational
flexibility and may adversely affect our growth or operating
results.

We have also recently committed to purchase additional spectrum
in the 700, 800 and 900 MHz bands and we continue to pursue
acquisitions of additional channels from third parties. Giving
effect to pending acquisitions, Nextel now has about 20 MHz of
spectrum in the 800 and 900 MHz bands in 52 of the top 100
U.S. markets and about 4 MHz of spectrum in the 700 MHz
band in most major metropolitan markets in the U.S.

4.  System construction. The first step
required to achieve the build-out of our digital mobile network
in a market is the completion of the radio design plan, which
typically takes about four months. This stage involves the
selection of specific areas in the market for the placement of
base station sites and the identification of specific
frequencies that will be employed at each site in the initial
configuration. Sites are selected on the basis of:



| |   |                                               
| | - | ----------------------------------------------
| |  | their proximity to targeted customers;        
|
| |  | the ability to acquire and build the site; and
|
| |  | frequency propagation characteristics.        

Site procurement efforts include obtaining leases and permits,
and in many cases, zoning approvals. This site acquisition
process for a systems initial construction in a market,
depending on the number of sites, typically takes from two to
eighteen months. Preparation of each site for equipment
installation, including construction of equipment shelters,
towers and power systems, grounding, ventilation and air
conditioning, typically takes six weeks, while equipment
installation, testing and pre-operational systems optimization
generally take an additional six weeks prior to commencing
system operation. Following commencement of system operations in
a selected market, we expect to continually add new sites to
this system as necessary to improve coverage and capacity.

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In an effort to improve our digital mobile network and expedite
network deployment in existing markets, in new markets and in
heavily traveled corridors between markets, beginning in 1999 we
transferred many of our communications towers and related assets
to SpectraSite Holdings, Inc., which we then leased back.
SpectraSite also has constructed additional towers to support
expansion of our digital mobile network. In addition, we have
signed a master lease agreement for the co-location of sites on
Crown Castle International Corporations domestic
communications towers.

5.  Marketing. Our marketing strategy focuses
principally on targeting business users that we believe will be
likely to perceive and appreciate the potential for our wireless
services to increase efficiencies and reduce costs in their
business activities. We continue to believe that our ability to
deliver a full line of integrated mobile communications services
using a single multi-function handset on our digital mobile
network significantly differentiates us from other providers of
wireless communications services. The progress of our marketing
efforts is and will continue to depend upon numerous factors,
including:



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | system performance;                                                                                                   
|
| |  | handset and accessory performance; and                                                                                
|
| |  | the ability to deliver services that satisfy customer needs and
	expectations, including Nextel Wireless Web services.

Recently, we have focused our marketing on offering subscribers
enhanced wireless solutions to manage their busy lives,
increasing the number of distribution channels we employ to
reach our customer base and broadening our targeted customer
groups to include attractive subscriber segments, such as
white-collar professionals and other high-end consumers.

We review our business and marketing plans in light of:



| |   |                                                    
| | - | ---------------------------------------------------
| |  | perceived opportunities;                           
|
| |  | actual experiences in the marketplace;             
|
| |  | availability of financial and other resources; and 
|
| |  | overall economic and/or competitive considerations.

As a result of these reviews, we may from time to time determine
to change, refine or redirect our plans. See L. Risk
Factors  18. Our forward-looking statements are
subject to a variety of factors that could cause actual results
to differ materially from current beliefs.

6.  Competition. We compete with the two
established cellular licensees and with many other PCS licensees
in each of the markets where our digital mobile network
operates. Additional licensees may enter these markets by
operating systems utilizing frequencies obtained in contemplated
FCC auction proceedings, including those involving 700 MHz
frequency allocations which are currently scheduled to occur
later in 2001. 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, some of which have
financial resources, subscriber bases and name recognition
greater than we do. PCS operators currently compete and likely
will continue to compete with us in providing some or all of the
services available through our digital mobile network.
Additionally, we expect that existing PCS and cellular service
providers will continue to upgrade their systems to provide
digital wireless communications services competitive with those
available on our digital mobile network. Moreover, cellular
companies have been granted authority to participate in dispatch
services and wireline companies have been granted authority to
participate in SMR services. Recently, several of our
competitors have introduced pricing plans which offer features
such as unlimited mobile to mobile calling, reduced rates for
calls placed between pre-arranged groups of callers or shared
minutes between groups of callers. We cannot predict the effect
of these competitor plans on our business.

We also expect our digital mobile network business to face
competition from other technologies and services developed and
introduced in the future. See L. Risk Factors 
6. If we are not able to compete

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I.  Agreements with Significant Stockholders

1.  McCaw Interests. In 1995, under the terms
of a securities purchase agreement, as amended, among Nextel,
Digital Radio, L.L.C. and Mr. McCaw and certain other
related agreements:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Digital Radio purchased about 2.4 million shares of our
	class A common stock for an aggregate purchase price of
	$15 million; and     
|
| |  | Digital Radio purchased, for an aggregate purchase price of
	$300 million, an aggregate of 8.2 million units
	consisting of a total of:



| |   |                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | about 8.2 million shares of our class A convertible
	redeemable preferred stock, par value $0.01 per share,
	about 0.5 million of which have been converted to about
	2.8 million shares of our class A common stock and
	distributed to related parties of Mr.  McCaw;
|
| |  | 82 shares of our class B convertible preferred stock, par
	value $0.01 per share; and                                                                                                                                                                                  
|
| |  | options to acquire an aggregate of up to 70.0 million
	shares of our class A common stock at exercise prices ranging
	from $7.75 to $10.75  per share as follows:                                                                                                      



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 30.0 million at $7.75 per share, which were purchased
	in July 1997 for an aggregate cash purchase price of
	$233 million;                                                                                          
|
| |  | 30.0 million at $9.25 per share, including
	6.8 million transferred to a related party of
	Mr. McCaw in November 1997, which were purchased in
	July 1999 for an aggregate cash purchase price of
	$278 million; and
|
| |  | 10.0 million at $10.75 per share, including about
	3.0 million transferred to a related party of
	Mr. McCaw in November 1997, which are exercisable
	through July 2001.                                             

In addition, in connection with the agreements relating to the
exercise of the options exercised in July 1997, an
affiliate of Mr. McCaw, Option Acquisition, L.L.C.,
purchased options to acquire up to 50.0 million shares of
our class A common stock at exercise prices of either
$8.00 per share or $9.00 per share, in either case at
any time through July 1998. At that time, Option
Acquisition acquired about 19.9 million shares of our class
A common stock in a cashless exercise transaction, as permitted
by the terms of those options.

Additionally, in connection with these equity investments, we
reached an agreement with Digital Radio and Mr. McCaw on a
number of matters relating to the ownership, acquisition and
disposition of our class A convertible redeemable preferred
stock and our class B convertible preferred stock,
including without limitation, the granting of registration and
antidilutive rights to Digital Radio and specified affiliates
and limitations on investments by Digital Radio and its
affiliates in excess of about 45% of our voting securities. In
November 1996, upon the issuance of shares in connection
with an acquisition, Digital Radio exercised its antidilutive
rights and received 0.7 million shares of our class A
common stock for $7 million. Also in July 1995,
pursuant to agreements between Digital Radio and Motorola
entered into in connection with the original securities purchase
agreement, Digital Radio purchased 8.0 million shares of
our class A common stock from Motorola and Motorola granted to
Digital Radio the option to purchase up to an additional
18.0 million shares of our class A common stock held by
Motorola, of which

15



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Concurrently with the execution of the securities purchase
agreement with Digital Radio and Mr. McCaw, we entered into
a management support agreement with Eagle River, Inc., an
affiliate of Digital Radio, pursuant to which Eagle River
provides management and consulting services to us, the board of
directors and the operations committee from time to time as
requested. In consideration of the services to be provided to us
under the management support agreement, we entered into an
incentive option agreement granting to Eagle River the option to
purchase an aggregate of 2.0 million shares of our class A
common stock at an exercise price of $6.13 per share. This
option expires in April 2005 and is presently exercisable
in full.

As a result of some distributions, transfers and the option
exercises described above, at December 31, 2000,
Mr. McCaw and his affiliates beneficially owned about
44.7 million shares of class A common stock, about
7.7 million shares of our class A preferred stock
convertible into about 46.2 million shares of our class A
common stock, 82 shares of our class B preferred stock and
options to purchase up to an aggregate of about 9.0 million
shares of our class A common stock from us at prices ranging
from $6.13 to $10.75 per share.

Pursuant to the original securities purchase agreement, our
certificate of incorporation and our by-laws, we, Digital Radio
and Mr. McCaw have established certain arrangements
relating to our corporate governance associated with those
investments, including, without limitation, matters relating to
Digital Radios right to elect a minimum of three
representatives to our board of directors, or that number of
directors representing not less than 25% of all of the members
of the board of directors, if greater. We also agreed to create
a five-member operations committee of the board of directors and
Digital Radio is entitled to have a majority of the members of
this committee selected from among its representatives on the
board of directors.

The operations committee has the authority to formulate key
aspects of our business strategy, including decisions relating
to the technology we use, acquisitions, operating and capital
budgets, marketing and strategic plans, approval of financing
plans and endorsement of nominees to the board of directors and
its committees, as well as nomination and oversight of certain
executive officers. Currently, the two Digital Radio designees
on the board of directors also serve as members of the
operations committee, of which Mr. McCaw is the Chairman.
Digital Radio currently is eligible to nominate a third member
to our board of directors, but presently has not done so. The
board of directors, by a majority vote, may override actions
taken or proposed by the operations committee, although doing so
would give rise to a $25 million liquidated damages payment
to Digital Radio and the commencement of the accrual of a 12%
dividend payable on the stated value of all outstanding shares
of class A preferred stock. The shares of our class A preferred
stock outstanding at December 31, 2000 had an aggregate
stated value of about $283 million. However, the board of
directors, by a defined super-majority vote, retains the power
to override actions taken or proposed by the operations
committee without triggering these obligations. In addition, the
board of directors also may act to terminate the operations
committee, although this action by the board of directors would,
in certain circumstances, result in the obligation to make the
liquidated damages payment and result in the commencement of the
dividend accrual.

The securities purchase agreement with Mr. McCaw, our
certificate of incorporation and our by-laws also delineate a
number of circumstances, chiefly involving or resulting from
some events with respect to Digital Radio or Mr. McCaw, in
which the operations committee could be terminated but the
liquidated damages payment and dividend accrual would not be
required.

The shares of class A preferred stock are redeemable at our
option, and the shares of class B preferred stock are
mandatorily convertible, in the event of a change of control of
our company, as defined in the terms of that stock. Further,
Digital Radio has agreed that, subject to limited exceptions,
including existing securities holdings and relationships, until
one year after the termination of the operations committee,
neither Digital Radio nor its controlled affiliates will
participate in other two-way terrestrial-based mobile wireless
communications systems in any part of North America or South
America, unless

16



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Pursuant to an agreement entered into by us and Motorola in
connection with our securities purchase agreement with Digital
Radio and Mr. McCaw, 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:



| |   |                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the right of any Motorola-designated members of the board of
	directors to vote in a manner consistent with their fiduciary
	duties; and                                                                                                                                    
|
| |  | 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
	our common stock held by Motorola.

2.  Motorola. In July 1995, we acquired
all of Motorolas 800 MHz SMR licenses in the continental
United States in exchange for 83.3 million shares of our
class A common stock and 35.7 million shares of our
nonvoting class B common stock. As a result of the agreement
relating to that acquisition, Motorola has the right to nominate
two persons for election as members of our board of directors.
Motorola has exercised this right only with respect to one
director. We are also party to agreements with Motorola pursuant
to which we purchase Motorola infrastructure equipment and
digital handsets and other services. See H. Our Digital
Mobile Network and Services  3. Technology
commitments. The agreements relating to the acquisition of
Motorolas SMR licenses also provided for the purchase by
us of a portion of Motorolas equity interest in Clearnet
Communications. This equity interest was purchased by us in
exchange for 5.0 million shares of our class A common
stock, and we subsequently transferred this equity interest to
Nextel International. These shares since have been exchanged by
Nextel International for shares of TELUS Corporation . See
E. Year 2000 International Developments 
9. Acquisition of Clearnet Communications by TELUS
Corporation.

In July 1995, Motorola sold to Digital Radio
8.0 million shares of our class A common stock at
$6.13 per share and granted Digital Radio the option to
purchase up to an additional 18.0 million shares of our
class A common stock, 4.0 million over two two-year periods
and 10.0 million over the final two-year period. Digital
Radio exercised the first tranche of this option in September
1997, acquiring 4.0 million shares of our class A common
stock at $7.75 per share. The second tranche of this option
was fully exercised in August 1999 at $9.25 per share,
including options for 0.9 million shares transferred to a
related party in November 1997. The third tranche of
options for 10.0 million shares, including options for
2.2 million shares transferred to a related party of
Mr. McCaw in November 1997, becomes exercisable at
$10.75 per share during the 30-day period commencing
July 28, 2001. In addition, Motorola has granted Digital
Radio a right of first offer or a right of first refusal to
purchase shares of common stock that are owned by Motorola.

J.  Regulation

1.  Licensing. The FCC regulates our SMR
business under the Communications Act of 1934, as amended. The
regulatory framework for SMR services has undergone significant
changes and continues to evolve as new FCC rules and regulations
are adopted pursuant to the Omnibus Budget Reconciliation Act of
1993, referred to as OBRA 93, and the Telecommunications
Act of 1996, referred to as TCA 96. The OBRA 93 and
the TCA 96 both amended portions of the Communications
Act. As described below, rule changes have been intended to
provide SMR operators with a regulatory framework similar to
that imposed on cellular and PCS licensees and impose various
mandates on wireless carriers.

With regard to the licensing of our digital mobile network, our
FCC license-holding subsidiaries hold three kinds of licenses to
deploy SMR radio channels in digital mode in each of their
markets. The first type of SMR license is known as an economic
area license, which, like the spectrum licenses assigned to
cellular and PCS providers, has been granted on a
geographic-area basis. The second type of SMR license, known as
a wide-area SMR license, was originally granted on a
site-by-site basis. We hold thousands of

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FCC rules generally permit both economic area and wide area
licensees to meet their construction requirements using a common
system of benchmark dates tied to their initial license grant
dates. Within three years of the license grant date, the
licensee must provide coverage to one third of the population in
its licensed area, and within five years of the grant date, it
must cover two thirds of the population in its licensed area. On
August 4, 2000, these build-out requirements also were
applied to wide-area SMR licensees operating on non-SMR
channels. This act of regulatory parity eliminated our need to
build out areas covered by numerous wide-area SMR licenses on a
site-by-site basis. On January 9, 2001, we filed a request
with the FCC for extension of the build-out requirements
applicable to some of our 900 MHz licenses. The FCC has sought
public comment on our request and the matter remains pending.

In late 1999, we were granted a waiver of the FCCs rules
to permit us to integrate a limited number of business and
industrial/ land transportation channels into our digital mobile
network. These channels, obtained via assignments from existing
licensees as part of the relocation process described below,
provide us additional capacity in some urban markets. On
November 9, 2000, the FCC adopted rules effective
March 2, 2001, to allow existing non-SMR licensees to
transfer or assign their non-SMR channels to commercial
providers like us for use in a commercial system. This rule
change creates new opportunities for us to acquire additional
spectrum in the 800 MHz band. The FCC is considering whether to
permit similar assignments from 900 MHz non-SMR licenses to
commercial operators.

2.  Spectrum auctions. The FCC began
assigning 800 MHz SMR geographic area licenses in 1997, when it
auctioned the upper 200 channels in three blocks (20 channels,
60 channels and 120 channels) per economic area, or
EA, throughout the U.S. in an auction referred
to as the upper 200 channel auction. These licenses
permit the licensee to construct and operate base stations on
any authorized channel throughout the licensed geographic area
and to make system modifications within the service area without
prior FCC approval, thus providing the same operational
flexibility provided to cellular and PCS licensees. We were the
high bidder on 475 of the 525 EA licenses auctioned at the upper
channel auction, covering areas in all 50 states. As described
above, our system must cover one-third of the population of each
licensed EA within three years and two-thirds of the population
of the economic area within five years, and we must construct
50% of our licensed channels in at least one location within
each EA within three years. Given our existing constructed
analog and digital footprint, these build-out requirements
already have been achieved in a substantial number of the EAs,
and we anticipate meeting all required benchmarks (which are
scheduled to occur in 2001 and 2003).

We are authorized to relocate incumbent providers out of our
EA-licensed areas to the lower 800 MHz channels. Pursuant to the
FCCs relocation rules, we provided relocation notice to
incumbent providers on or before March 4, 1999 and are now
engaged in the relocation of numerous incumbent systems
nationwide. Relocation of these incumbents will provide us the
ability to reuse our EA channels more broadly throughout our
licensed geographic areas. Any incumbents that are not relocated
must be afforded co-channel interference protection.

In December 2000, the FCC concluded its auctions of 800 MHz
SMR spectrum band licenses, relating to the so-called
lower 150 and lower 80 channels. In
these two 800 MHz auctions we paid about $259 million for
about 3,300 licenses. Although auctioned on an economic area
basis, which provides less regulatory burden, these licenses are
for relatively small channel blocks of only five or 25 channels.
Additionally, incumbents on those channels will not be subject
to relocation and we must provide co-channel protection to
incumbents. The build-out requirements on these 800 MHz licenses
are one-third of the covered population within three years of
license grant, and two-thirds of the covered population within
five years. Alternatively, a licensee may show substantial
service to the licensed geographic area within five years.

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In February 2001, the FCC concluded its auctions of 6 MHz
of spectrum in the 700 MHz band, also referred to as the guard
band. In two 700 MHz guard band auctions, we paid nearly
$346 million for 40 licenses. Each license is for 4 MHz of
spectrum. These FCC licenses are issued for a period of
15 years, and are subject to unique operational
requirements, including eligibility and use restrictions, as
well as interference protection requirements that generally will
preclude their use for commercial mobile radio services,
commonly known as CMRS, which includes SMR, cellular and PCS
services. We plan to meet all requirements necessary to secure
the retention and renewal of these FCC licenses. Other spectrum
located in the 700 MHz spectrum band, which can be used for a
broad variety of commercial applications, is presently scheduled
for auction by the FCC beginning September 12, 2001.
However, three previously scheduled auctions for this spectrum
have already been postponed. Currently, incumbent television
licensees are operating on both blocks of this 700 MHz band
spectrum. Under current FCC rules, these licensees are not
required to relinquish these channels until 2006 at the
earliest, limiting the usefulness of this spectrum for other
purposes, including wireless mobile communications, until that
time or later.

In January 2001, the FCC completed its auction of
additional spectrum that can be used for providing commercial
mobile radio services. The FCC auctioned reclaimed C and F block
PCS licenses, including those initially awarded to
NextWave Communications, Inc. and some of its affiliates
which were cancelled by the FCC after NextWave failed to
make timely payments of its government installment payment loans
as required by the terms of the licenses awarded. We
participated, but did not obtain any licenses, in that auction.
Although the Second Circuit Court of Appeals upheld the
FCCs right to cancel and re-auction the licenses,
NextWave continues to pursue legal challenges to the
license cancellation before the U. S. Court of Appeals for
the District of Columbia.

Beginning late last year, the FCC and other federal agencies
began to attempt to identify spectrum that could be allocated
for third generation or 3G advanced
wireless services. In January 2001, the FCC issued a notice
of proposed rulemaking requesting comment on the potential for
reallocation of several spectrum bands to 3G services and noting
the FCCs intention to auction 3G spectrum by
September 2002. Generally, the bands identified are
encumbered by existing governmental or commercial users and
there are substantial unresolved transitional issues related to
the relocation of these incumbents. The FCC is also seeking
comment on whether 3G services could be provided over frequency
bands currently allocated to cellular, PCS and specialized
mobile radio services. We cannot predict when or whether the FCC
will conduct any spectrum auctions or if it will release
additional spectrum to the wireless industry in the future.

3.  Spectrum caps and secondary spectrum
markets. As a CMRS provider, our use and aggregation of
radio spectrum, our technical operation and, in some cases, our
relationships with third parties, are regulated by the FCC.
Since the establishment of the CMRS regulatory framework, the
FCC has permitted cellular licensees and wireline companies to
provide radio dispatch services. The FCC has imposed on us and
other CMRS operators a 45 MHz CMRS spectrum cap in non-rural
areas and a 55 MHz CMRS spectrum cap in rural areas, thus
limiting the amount of CMRS spectrum (e.g., cellular, PCS
and SMR) any single provider can hold in any particular
geographic area. However, no more than 10 MHz of SMR spectrum in
the 800 and 900 MHz SMR service area can be attributed to one
entity under existing rules. Moreover, under existing rules, no
700 MHz licenses count toward the spectrum cap. Accordingly,
only 10 MHz of SMR spectrum is attributed to us in any one
geographic area for purposes of the cap. On January 23,
2001, the FCC released a notice of proposed rulemaking querying:



| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether this 10 MHz SMR attribution limitation should be
	re-evaluated and replaced with the actual amount of spectrum an
	SMR provider holds in a particular geographic area;
|
| |  | whether the spectrum cap is still necessary in todays
	competitive CMRS market;  and                                                                                         
|
| |  | if so, whether it should be increased to allow CMRS carriers to
	hold more than the above amounts in a single market.                                                         

In November 2000, the FCC adopted a policy statement and
notice of proposed rulemaking suggesting ways to promote the
development of secondary markets in radio spectrum. In the
notice of

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4.  911 services. The FCC requires that CMRS
providers be capable of transmitting calls for 911 assistance
from individuals using teletext devices, primarily people with
speech or hearing disabilities. The obligation was scheduled to
take effect October 1, 1998. However, several industry
trade associations petitioned the FCC to extend the deadline
citing unresolved technical and implementation problems. By two
separate actions, the FCC suspended enforcement of the
requirement. However, the FCC recently concluded that all CMRS
carriers must be capable of transmitting 911 calls from teletext
devices by August 2002. We believe we will have the
technical capability to meet this requirement in a timely
fashion.

We and other CMRS providers are also required to make enhanced
911, or E911, service available to customers in
cooperation with local rescue authorities. In the current phase,
Phase I of the E911 mandate, wireless carriers must improve upon
the traditional 911 emergency calling system by providing local
authorities not only the content of each emergency call but also
the callers wireless phone number and approximate
location. In Phase II, which is scheduled to start on
October 1, 2001, wireless carriers must improve
substantially upon the accuracy of the location data. FCC rules
specify that the cost to the carrier of implementing E-911 Phase
I and Phase II are not costs recoverable from the government.
The FCC required all wireless carriers to report the method by
which this improved location information would be implemented.

On November 9, 2000, we submitted a report to the FCC,
along with a waiver request asking to begin implementation of
our Phase II capabilities in October 2002, one year after the
FCCs deadline. If granted, the waiver would permit
Nextels deployment of a location technology in future
handsets beginning October 2002. Thereafter, we would sell
location-capable handsets, ultimately resulting in 95% of our
customers having Phase II E-911 capable handsets by
December 31, 2005, in compliance with the FCCs rules.
Additionally, in our waiver request, we proposed granting
$25 million to public safety organizations to use in
readying their systems for Phase I and Phase II E-911
deployment. If the public safety organizations have not achieved
the necessary equipment upgrades to accept and process wireless
callers location information, our Phase II E-911 equipment
upgrades will provide little incremental public safety benefit.
We anticipate that grant of our waiver request will speed
deployment of public safety Phase II capable hardware and
software.

5.  Numbering. The FCC and state
communications commissions have been increasingly aggressive in
their efforts to conserve numbering resources. These efforts may
disproportionately impact wireless service providers by imposing
additional costs or limiting access to numbering resources. On
March 31, 2000, the FCC released a Report and Order
establishing rules intended to promote the efficient use of
numbering resources while attempting to ensure access to the
numbering resources carriers need to compete effectively. In
particular, the FCC adopted mandatory implementation of
assigning numbers in blocks of a thousand, as opposed to the
previous policy of a ten-thousand block number assignment.
Allocating numbers to carriers in these smaller blocks will
require most carriers to share NXX codes assigned to them, once
carriers become capable of local number portability, which is
mandated for wireless carriers by November 24, 2002. NXX
codes are the first three digits of a seven-digit telephone
number. The FCC also issued a further notice of proposed
rulemaking seeking additional comments on a variety of issues,
including cost recovery, charging for telephone numbers and the
utilization threshold carriers must meet before obtaining new
codes.

On December 29, 2000, the FCC released its Second Report
and Order on numbering issues. The FCC adopted a 60% utilization
threshold for carriers to meet in any applications for new
numbering resources. This threshold will increase by 5% on
June 30, 2002, and annually thereafter until the
utilization threshold reaches 75%. The FCC also requested
further comment on adoption of a number of issues, including
government auctions of numbers, and implementing specified area
codes for specific applications such as wireless services.
Adoption of any of these proposals may affect the ability of all
carriers, including us, to access telephone numbers to assign to
their customers.

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6.  Motor vehicle restrictions. A number of
states and localities are considering banning or restricting the
use of wireless phones while driving a motor vehicle. To date,
no state has banned or limited wireless phone usage but several
county or local jurisdictions have mandated that drivers use
hands-free accessories when using their wireless phones while
driving or have prohibited the use of wireless phones while
driving. States continue to consider restrictions on wireless
phone use while driving, and some states also are beginning to
collect data on whether wireless phone use contributes to
traffic accidents.

7.  Health concerns. Numerous studies in the
U.S. and abroad have examined whether the radio frequency
(RF) energy emitted from wireless antennas or handsets can
cause cancer or other health concerns. Although certain
respected authorities have recently published studies revealing
no link between cellular phones and cancer, some nevertheless
suggested that further research is needed. For example, a study
sponsored by the National Cancer Institute and published in The
Journal of the American Medical Association in December of 2000
found no significant correlation between wireless handsets and
brain tumors but added that further study is needed to determine
whether tumors might appear over a longer period of time.
Similarly, a study published in February 2001 in the
Journal of the National Cancer Institute, which tracked over
400,000 cellular phone users in Denmark over a thirteen-year
period, found no link between wireless phones and cancer but did
not address the potential for other diseases. In June 2000,
the U.S. Food and Drug Administration signed an agreement
with the Cellular Telecommunications and Internet Association
(CTIA) to start their own joint RF study.

The FCCs rules governing RF safety set forth certain
maximum permissible exposure (MPE) limits for wireless
antennas and wireless handsets. The rules were upheld by the
U.S. Court of Appeals for the District of Columbia in
February 2000. We have implemented an RF safety program
governing our antennas, and our wireless handset vendor,
Motorola, has complied with the maximum permissible RF exposure
limits governing our handsets. In addition, Motorola has
participated in a CTIA program which publicly discloses how our
handsets comply with these limits.

8.  CALEA. In 1994, Congress enacted the
Communications Assistance for Law Enforcement Act, known as
CALEA. CALEA essentially requires telecommunications carriers,
including us, to upgrade their networks so the Federal Bureau of
Investigation and other law enforcement agencies can continue
performing lawful wiretaps of telecommunications users as the
carriers transition from analog to digital technology. The
statute spawned legal disputes over a host of issues, most
centrally the issue of what technical capabilities CALEA
requires. By an order released in mid-1999, the FCC determined
which technical capabilities are required. For example, it
required carriers to give law enforcement the capability of
determining a wireless callers geographic location at the
beginning and end of a wireless call. The FCC also announced
extended compliance deadlines for carriers to deploy the
mandated capabilities. On August 15, 2000, the United
States Court of Appeals for the District of Columbia vacated and
remanded portions of the FCC order. In the wake of the Court
decision, the FCC initiated two proceedings: one to resolve the
issues remanded by the Court; and the other to determine whether
to extend further the related compliance deadlines. Both
proceedings remain pending. More recently the FCC granted
another industry-wide extension of the deadline governing the
core phase of CALEA compliance.

We recently have signed two cooperative agreements with the
Federal Bureau of Investigation to bring our network into
compliance with CALEA. The agreements essentially confirm the
validity of our CALEA software solutions, arrange for the
deployment of the solutions in our networks, and provide cost
recovery for most of our CALEA upgrade costs. We have already
deployed the required core CALEA capabilities in our network.

9.  Miscellaneous regulations. The FCC
requires us to permit our services to be resold until
November 2002. In 2000, the FCC concluded an investigation
into our resale policies, determining that we do not violate the
FCCs current resale policies. The FCC also requires
wireless carriers like us to:



| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | permit manual roaming, where technically capable, by users with
	technically compatible equipment;     
|
| |  | contribute to federal and state universal service funds based
	upon our telecommunications revenue;    
|
| |  | comply with rules regarding billing of customers and requiring
	specific disclosures on customer bills;

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| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | average, to some extent, any separately billed interstate
	long-distance rates charged to customers; and
|
| |  | comply with customer proprietary network information use
	restrictions.                                 

Each of these existing and potential regulatory obligations
could increase the costs of our, and our competitors,
operations.

The FCC also is considering the imposition of an automatic
roaming obligation on all CMRS providers. On January 5,
2001, comments were filed with the FCC on this issue, the
majority of which opposed a mandatory automatic roaming
obligation. We oppose any new roaming regulation, although the
second largest iDEN provider in the U.S., Southern
Communications Services, supports a mandate that would apply
only to iDEN providers. We filed reply comments on
February 5, 2001 opposing the adoption of such a narrow
roaming regulation.

The issue of wireless subscriber privacy, and in particular,
location tracking, has been implicated in some of the FCCs
wireless proceedings, including those relating to its E911 and
CALEA mandates. In an effort to obtain clarification of the
privacy regulations governing the use and sharing of location
information, the Cellular Telecommunications and Internet
Association, known as CTIA, has filed a petition proposing
safe-harbor wireless business practices to safeguard
wireless subscriber privacy. The FCC is seeking comment on
CTIAs petition. In particular, CTIAs petition
requests clarification of certain consumer privacy issues,
including appropriate consumer notice and consent as well as the
proper internal use or disclosure by carriers of a wireless
subscribers location information.

As is true for cellular and PCS operators, the interconnection
of subscriber calls from our network with the public switched
telephone network requires us to obtain certain exchange and
interexchange services from telephone companies. In 1996, the
FCC established, and the U.S. Supreme Court generally
upheld, a national regulatory framework that sets pricing
standards and negotiation and arbitration guidelines for
interconnection agreements with incumbent local exchange
carriers, known as ILECs. Most significantly, the agreements
entitle interconnecting carriers such as us to reciprocal
compensation for local calls originated on an ILEC network
and terminated on our network. Previously, we were forced to
compensate the ILECs for their termination services but ILECs
refused to pay us for terminations of their local traffic. We
have renegotiated our interconnection agreements with all major
ILECs to take advantage of these reciprocal compensation rights.
The FCC and Congress are both considering initiatives that would
eliminate reciprocal compensation requirements and would mandate
that carriers reciprocally terminate one anothers local
traffic at no charge.

A proceeding is pending at the FCC to determine how rate
integration requirements apply to typical CMRS offerings,
including single-rate plans. Until this proceeding is concluded,
the FCC will enforce long distance rate integration on our
services only where we separately state a long distance toll
charge and bill those charges to our customers. Like other phone
service providers, to the extent that we offer services subject
to the FCCs rate integration and averaging requirements,
our pricing flexibility is generally reduced.

We also are subject to limitations on foreign government
investment as set forth in the Communications Act, which
currently restricts foreign ownership or control over CMRS
licenses, including SMR licenses. In February 1997, the
United States entered into a World Trade Organization agreement
with respect to telecommunications services. The agreement
requires the United States, among other things, to afford
national treatment to foreign investors of World
Trade Organization countries seeking indirect ownership of CMRS
licenses in the United States. The FCCs rules implementing
the agreement, which became effective on February 9, 1998,
permit additional foreign investment and participation in the
United States wireless marketplace through ownership of
FCC licenses.

In October 1997, the FCC established uniform rules
governing ILEC participation in broadband CMRS within each
ILECs landline telephone region, addressing incentives
ILECs may have to engage in anti-competitive practices against
CMRS providers, such as discriminatory interconnection,
cost-shifting and anti-competitive pricing. These rules will
expire on January 1, 2002 unless extended by the FCC.

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New FCC rules implementing a provision of TCA 96 that
requires telecommunications carriers to make their services
accessible to individuals with disabilities became effective
January 28, 2000. The rules will require modifications to
wireless phones prospectively to make them accessible to persons
with disabilities as long as these measures may be accomplished
without undue burden or expense. At this time, the extent to
which we and our vendor Motorola will be required to make
modifications to our system and handsets is uncertain, but we
are working with Motorola to further compliance with all aspects
of these rules.

Future changes in regulation or legislation affecting digital
mobile network service and any allocation of additional spectrum
by Congress and the FCC could materially adversely affect our
business.

10.  Foreign regulation. The licensing,
construction, ownership and operation of wireless communications
systems and radio frequency allocations are regulated by
governmental entities in the countries in which Nextel
Internationals subsidiaries and affiliates conduct
business. In addition, these matters and other aspects of
wireless communication system operations may be subject to
public utility regulation in the jurisdiction where service is
provided. Changes in the current regulatory environments in such
countries or future judicial or legislative intervention could
have a material adverse affect on Nextel International and its
business and results of operations.

K.  Employees

At December 31, 2000, we had about 19,500 full-time
employees, including about 3,600 full-time employees of Nextel
International and its subsidiaries. None of our employees are
covered by a collective bargaining agreement, and we believe
that our relationship with our employees is good.

L.  Risk Factors



| |    |                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------
| | 1. | We have a history of net losses and negative cash flow and
	may not be able to satisfy our cash needs from
	operations.

Since we began operations in 1987, we have never generated
sufficient cash flow from operations to fund our business and
its expansion. If we cannot achieve profitability, we may not be
able to meet our debt service, working capital or other cash
needs. We expect that losses will continue for the next several
years as we build, expand and enhance our digital mobile
network. We do not know when, if ever, our cash flows from our
internal business operations will support our growth and
continued operations. We had losses attributable to common
stockholders of $1.02 billion during 2000. Our accumulated
deficit was $6.55 billion at December 31, 2000.



| |    |                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------
| | 2. | If we cannot obtain additional funds when needed, we may
	not be able to implement our business plan.

Our long-term cash needs may be much greater than our cash on
hand and availability under our existing financing agreements.
We may not be able to raise additional financing when needed, on
acceptable terms or at all. As a result, we cannot be sure that
we will have adequate capital to:



| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | implement future expansion and enhancement of our digital mobile
	network, including offering contemplated third
	generation or 3G mobile wireless services;        
|
| |  | maintain our current levels of operation;                                                                                                                               
|
| |  | meet our debt service requirements; or                                                                                                                                  
|
| |  | pursue strategic acquisitions or other opportunities to increase
	our spectrum holdings, including those necessary to support or
	provide 3G mobile wireless services.

Our failure to timely achieve each of these goals could result
in the delay or abandonment of some or all of our development,
expansion and acquisition plans and expenditures, which could
have an adverse effect on us.

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Our bank credit facility as in effect on December 31, 2000
provided for total secured financing capacity of up to
$6.0 billion provided we satisfy financial and other
conditions. As of December 31, 2000, we had borrowed $4.5
billion of this secured financing. We recently amended this
facility to modify certain financial covenants to better reflect
our anticipated financial performance and to permit ongoing
compliance with the financial covenants during 2001. The
availability of additional financing under our bank credit
facility is also subject to the satisfaction of covenants under
indentures relating to our public notes. Our access to
additional funds may be limited by:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | the terms of our existing financing agreements, including
	restrictive covenants;             
|
| |  | existing debt service requirements;                                                           
|
| |  | market conditions affecting the telecommunications industry in
	general; and                  
|
| |  | specific factors affecting our attractiveness as a borrower or
	investment vehicle, including:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the terms of options and warrants issued to others, that may
	make equity financings more difficult;                                                                  
|
| |  | the ability to relocate current spectrum licensees from some
	frequencies in order to remove them from spectrum as to which we
	were the highest bidder at an auction;
|
| |  | the potential commercial opportunities and risks associated with
	implementation of our business plan;                                                                
|
| |  | the markets perception of our performance and
	assets; and                                                                                                           
|
| |  | the actual amount of cash we need to pursue our business
	strategy.                                                                                                   

Other than our existing financing agreements, we currently have
no legally binding commitments or agreements with any third
parties to obtain any material amount of additional debt or
equity financing.



| |    |                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | Funding requirements for our international operations and
	growth may cause even greater cash needs, which may result in
	less funding available for our domestic growth and
	operations.

We expect to fund a very substantial portion of the cash needs
of Nextel International, Inc., our substantially wholly owned
subsidiary, during 2001. This may increase our overall cash
needs and will result in a lesser amount of cash availability to
us for domestic use. Based on the funding we expect to make
available to Nextel International during 2001 and on Nextel
Internationals current assessment of the likely business
activity and related cash needs of its subsidiaries and
affiliates that are controlled by or that rely substantially on
Nextel International for further funding, Nextel International
believes that it will have adequate funding to implement its
current business plan during 2001, but that it will need to rely
on external sources of funding to supply the cash needed to
implement its business plans and continue operations after 2001.



| |    |                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------
| | 4. | Our existing financing agreements contain covenants that
	limit how we conduct business, which may affect our ability to
	grow as planned.

As a result of restrictions contained in our financing
agreements, we may be unable to raise additional financing,
compete effectively or take advantage of new business
opportunities. This may affect our ability to generate revenues
and profits. The indentures governing our public notes and our
existing financing agreements contain covenants that limit how
we conduct business by restricting our ability to:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | incur or guarantee additional indebtedness, including additional
	borrowings under existing financing arrangements;
|
| |  | pay dividends and make other distributions;                                                                        
|
| |  | prepay subordinated indebtedness;                                                                                  
|
| |  | make investments and other restricted payments;                                                                    
|
| |  | create liens;                                                                                                      

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| |   |                                        
| | - | ---------------------------------------
| |  | sell assets; and                       
|
| |  | engage in transactions with affiliates.

Any future financing arrangements are expected to contain
covenants similar to or more restrictive than those contained in
our existing debt financing arrangements. These future
agreements may also contain other covenants, including covenants
requiring us to maintain specified financial ratios and satisfy
financial tests.



| |    |                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------
| | 5. | We may not be able to obtain additional spectrum, which
	may adversely impact our ability to implement our business
	plan.

We may seek to acquire additional spectrum, including through
participation as a bidder or member of a bidding group in
government-sponsored auctions of spectrum. We may not be able to
accomplish any spectrum acquisition or the necessary additional
capital for that purpose may not be available on acceptable
terms, or at all. If sufficient additional capital is not
available, to the extent we are able to complete any spectrum
acquisition, the amount of funding available to us for our
existing businesses would be reduced. Even if we are able to
acquire spectrum, we may still require additional capital to
finance the pursuit of any new business opportunities associated
with our acquisitions of additional spectrum, including those
associated with the potential provision of third
generation or 3G wireless services. This
additional capital may not be available.

We cannot be sure that any spectrum auctions will occur or, if
so, on their currently announced schedules. For example, the
Federal Communications Commission already has postponed on three
separate occasions the auction for the majority of the
700 MHz spectrum now being used by broadcast television
stations, and that auction is now scheduled to take place in
September 2001, but may be subject to further postponement.
We also cannot be sure:



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | in which auctions we will participate, alone or as a member of a
	bidding group;                                                                     
|
| |  | whether we or any bidding group in which we are a participant
	will be a successful bidder and will be awarded spectrum
	licenses in any auction; and
|
| |  | what amounts would be required to be bid to prevail in any
	auction.                                                                                 



| |    |                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | If we are not able to compete effectively in the highly
	competitive wireless communications industry, our future growth
	and operating results will suffer.

Our ability to compete effectively with other established and
prospective wireless communications service providers depends on
the following factors, among others.



| |    |                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | If our wireless communications technology does not perform in
	a manner that meets customer expectations, we will be unable to
	attract and retain customers.

Customer acceptance of the services we offer is and will
continue to be affected by technology-based differences and by
the operational performance and reliability of system
transmissions on our digital mobile network. We may have
difficulty attracting and retaining customers if we are unable
to address and resolve satisfactorily performance or other
transmission quality issues as they arise or if those issues:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | limit our ability to expand our network coverage or capacity as
	currently planned; or             
|
| |  | were to place us at a competitive disadvantage to other wireless
	service providers in our markets.



| |    |                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------
| | B. | Our coverage is not as extensive as that of other wireless
	service providers, which may limit our ability to attract and
	retain customers.

Since our digital mobile network does not provide roaming
coverage on a nationwide basis as is available through some
cellular and personal communication services providers, we may
not be able to compete effectively against those providers. The
coverage areas of these other providers include areas where our
network, or that of our affiliate Nextel Partners, has not been
built or will not be built. In addition, some of our competitors
provide their customers with handsets with both digital and
analog capability, which expands their coverage, while we have
only digital capability. We cannot be sure that we,

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| |    |                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | C. | We do not have the extensive direct and indirect channels of
	distribution for our digital mobile network products and
	services that some of our competitors have, which may limit our
	ability to compete effectively.

Many of our competitors have established extensive networks of
retail locations, including locations dedicated solely to the
competitors products, and multiple distribution channels
and therefore have access to more potential customers than we
do. We have increased our reliance on our indirect distributor
network over time and have increased the proportion of customers
we obtain through these channels. However, as we expand our
retail subscriber base through increased reliance on indirect
distribution channels, as price competition in the wireless
industry intensifies and as our product and service offerings
begin to attract increasing numbers of individual and
non-business users, our average revenue per digital handset may
decrease and our customer retention may be adversely affected.
We anticipate utilizing a new direct retail distribution channel
to address more effectively and economically certain existing
and new customer segments that we are targeting. We have entered
into a definitive agreement to acquire a significant portion of
the assets of Lets Talk Cellular & Wireless,
Inc., although that transaction remains subject to a number of
closing conditions, including the receipt of bankruptcy court
approval. We have not previously operated large-scale direct
retail distribution outlets of this type, and we may not achieve
the anticipated benefits of this new distribution channel to the
degree or on the schedule that we hope to achieve them.



| |    |                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | D. | Our ability to grow may be limited by our ability to expand
	system capacity and improve the adequacy and efficiency of our
	information systems and business processes.

Our inability to timely and efficiently meet the demands for our
services could decrease or postpone subscriber growth, or delay
or otherwise impede billing and collection of amounts owed,
which would adversely affect our growth and performance. To
increase the number of subscribers on our digital mobile
network, we must be able to, among other things, successfully
plan for additional system capacity at levels needed to meet
anticipated new subscribers, as well as the related increases in
system usage, and obtain additional spectrum when and where
required. Furthermore, we must secure sufficient transmitter and
receiver sites at appropriate locations in our markets to meet
planned system coverage and capacity targets and obtain adequate
quantities of base radios and other system infrastructure
equipment, as well as adequate volumes and mix of handsets and
related accessories, to meet subscriber demand and system
loading rates. Since we have contractual arrangements with
Nextel International and Nextel Partners that contemplate the
proportionate allocation of this equipment among us and those
entities if there is an equipment shortage, these supplies may
not be available in sufficient quantities for our use.

Our ability to improve the efficiency and speed of the processes
for our customer service and accounts receivable collection
functions will affect our ability to add customers. For example,
the length of time between customer order to activation of
service on the digital mobile network is currently longer than
that of some of our competitors. Additionally, customer reliance
on our customer service functions will increase as we add
digital mobile network customers, especially for those customers
added through channels not involving direct face-to-face contact
with a sales representative, such as phone order sales or sales
through our website.



| |    |                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------
| | E. | Some of our competitors are financially stronger than we are,
	which may limit our ability to compete based on price.

Because of their resources, some of our competitors may be able
to offer services to customers at prices that are below the
prices that we can offer for comparable services. As a result,
if we cannot compete effectively based on the price of our
service offerings, our revenues and growth may be adversely
affected.

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| |    |                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------
| | F. | We may face continuing pressure to reduce prices, which could
	adversely affect operating results.

Over the past several years, as the intensity of competition
among wireless communications providers in our market areas has
increased, our competitors prices in these markets have
generally decreased. This may make it difficult for us to remain
competitive if wireless service providers generally continue to
reduce prices. We may encounter further market pressures to:



| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | further restructure our digital service offering packages to
	offer more value;                                                                                                                                                                    
|
| |  | reduce our digital service offering prices; or                                                                                                                                                                                                     
|
| |  | respond to particular short-term, market specific situations,
	such as special introductory pricing or packages that may be
	offered by providers launching their service, or particular new
	product or service offerings, in a particular market.



| |    |                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------
| | G. | Our digital handsets are more expensive than those of some
	competitors, which may affect our growth and operating
	income.

We currently market multi-function digital handsets. The higher
cost of these handsets, as compared to analog handsets and
digital handsets that do not incorporate a similar
multi-function capability, may make it more difficult or less
profitable for us to attract customers. This may reduce our
growth opportunities or profitability.



| |    |                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------
| | H. | If we do not keep pace with rapid technological changes, we
	may not be able to attract and retain customers.

The wireless telecommunications industry is experiencing
significant technological change. Our digital technology could
become obsolete. We rely on digital technology that is not
compatible with, and that competes with, other forms of digital
and non-digital voice communication technology. Competition
among these differing technologies can:



| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | segment the user markets, which could reduce demand for specific
	technologies, including our technology;                                                                                         
|
| |  | reduce the resources devoted by third party suppliers, including
	Motorola, which supplies all of our current digital technology,
	to developing or improving the technology for our
	systems; and
|
| |  | adversely affect market acceptance of our services.                                                                                                                                               

The digital technology that we use may not successfully compete
with the other forms of communication technologies. Further, new
digital or non-digital communication transmission technology may
be developed that could cause our existing technology to become
obsolete or otherwise impair market acceptance of our services.



| |    |                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | I. | We have recently launched new wireless data and Internet
	connectivity services, and if these new services do not prove to
	be successful, our operations and growth could be adversely
	affected.

In 2000, we began to offer our subscribers access to digital
two-way mobile data and Internet connectivity, that we currently
market under the brand name Nextel Wireless Web. We cannot be
sure that these services will continue to perform
satisfactorily, be utilized by a sufficient number of our
subscribers or produce sufficient levels of customer
satisfaction or revenue. Because we have less spectrum than some
of our competitors, any digital two-way mobile data and Internet
connectivity services that we may offer could be significantly
limited compared to those services offered by other wireless
communications providers with larger spectrum positions.

We expect that this wireless data capability and Internet
connectivity will allow us to perform fulfillment and other
customer support services more economically, to differentiate
ourselves from our competitors and to realize a source of future
incremental revenue to counter the impact of increasing

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| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | we are unable to offer these new services profitably;                                                      
|
| |  | these new service offerings adversely impact the performance or
	reliability of our digital mobile network;
|
| |  | we or third party developers fail to develop new applications
	for our customers; or                       
|
| |  | we otherwise do not achieve a satisfactory level of customer
	acceptance and utilization of these services.

Any resulting customer dissatisfaction, or failure to realize
cost reductions or incremental revenue, could have an adverse
impact on our results of operations, future growth prospects and
perceived value.



| |    |                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | J. | We are considering implementing some third
	generation services in the future, however, if we are
	unable to do so, or to do so in an economical and competitively
	effective fashion, our operations and growth could be adversely
	affected.

We are considering implementing over the next several years
advanced digital technology which will allow high capacity
wireless voice and high speed data transmission, and potentially
other advanced digital services. The technology that we would
deploy to provide these types of broadband wireless telephony
services is sometimes referred to as 3G or
third generation. We are presently evaluating
standards and assessing the potential demand for these third
generation wireless services. We are focusing these activities
on maximizing our ability to deliver 3G capabilities while
continuing to fully utilize our existing digital mobile network.

It is likely that significant capital requirements would be
involved in implementing this third generation technology. Even
if we determine that our testing and assessment activities, and
our need to meet competition from other wireless service
providers who may be moving to deploy similar 3G services,
should lead us to implement such third generation technology,
there can be no guarantee that this technology will provide the
advantages that we expect. The actual amount of the funds
required to finance and implement this technology may
significantly exceed managements current estimate.
Further, any future implementation could require additional
unforeseen capital expenditures in the event of unforeseen
delays, cost overruns, unanticipated expenses, regulatory
changes, engineering design changes, equipment unavailability
and technological or other complications. Finally, as there are
several types of third generation technologies that may not be
fully compatible with each other or with other currently
deployed digital technologies, if the type of technology that we
choose to deploy does not gain widespread acceptance or perform
as expected, our business may be adversely affected.



| |    |                                                                                               
| | -- | ----------------------------------------------------------------------------------------------
| | K. | If competitors provide two-way radio dispatch services, we
	will lose a competitive advantage.

We differentiate ourselves by providing two-way radio dispatch
services that are currently not available through traditional
cellular or personal communication services providers. If either
personal communication services or cellular operators provide
two-way radio dispatch or comparable services in the future, our
competitive advantage may be impaired. Further, some of our
competitors have attempted to compete with our Nextel Direct
Connect service by offering unlimited mobile to mobile calling
plan features and reduced rate calling plan features for
designated small groups. If these calling plan modifications are
perceived by our existing and potential customers as viable
substitutes for our differentiated services, our business may be
adversely affected.



| |    |                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------
| | 7. | Since we rely on one supplier to implement our digital
	mobile network, any failure of that supplier to perform could
	hurt our operations.

Motorola is currently our sole source for most of the digital
mobile network and all of the handset equipment we use
throughout our markets. If Motorola fails to deliver system
infrastructure and handsets, as well as necessary technology
improvements and enhancements, on a timely, cost-effective
basis, we may not be able to adequately service our existing
subscribers or add new subscribers. We expect to rely
principally on Motorola or its licensees for the manufacture of
a substantial portion of the equipment

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| |    |                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------
| | 8. | Agreements with Motorola reduce our operational
	flexibility and may adversely affect our growth or operating
	results.

We have entered into agreements with Motorola that impose
limitations and conditions on our ability to use other
technologies that would displace our existing digital mobile
communications network. These agreements may operate to delay or
prevent us from employing new or different technologies that
perform better or are available at a lower cost because of the
additional economic costs and other impediments to change
arising under the Motorola agreements. For example, our
equipment purchase agreement with Motorola requires us to
provide Motorola with notice of our determination that
Motorolas technology is no longer suited to our needs at
least six months before publicly announcing or entering into a
contract to purchase equipment utilizing an alternate technology.

In addition, if Motorola manufactures, or elects to manufacture,
the equipment utilizing the alternate technology that we elect
to deploy, we must give Motorola the opportunity to supply 50%
of our infrastructure requirements for the alternate technology
for three years. This may limit our ability to negotiate with an
alternate equipment supplier. Finally, if after a switch to an
alternate technology we do not maintain operational Motorola
infrastructure equipment at the majority of our transmitter and
receiver sites that are deployed at the date the switch to an
alternate technology is first publicly announced, Motorola may
require that all financing Motorola has provided to us must then
be repaid.



| |    |                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 9. | Regulatory and other factors could delay or prevent us
	from offering services in new market areas, which could limit
	our access to new customers and affect our growth.

Before fully implementing our digital mobile network in a new
market area or expanding coverage in an existing market area, we
must complete systems design work, find appropriate sites and
construct necessary transmission structures, receive regulatory
approvals, obtain and free up frequency channels now devoted to
non-digital transmissions and begin systems optimization. These
processes take weeks or months to complete, and may be hindered
or delayed by many factors, including unavailability of antenna
sites at optimal locations, land use and zoning controversies
and limitations of available frequencies. We cannot know when,
if ever, our digital technology will be available for commercial
use in new markets or can be expanded in existing markets.



| |     |                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------
| | 10. | Government regulations determine how we operate, which
	could limit our growth and strategy plans.

The Federal Communications Commission regulates the licensing,
operation, acquisition and sale of our specialized mobile radio
businesses. We must meet build-out requirements within specified
time limitations to retain our licenses. Future changes in
regulation or legislation and Congress and the Federal
Communications Commissions continued allocation of
additional spectrum for commercial mobile radio services, which
include specialized mobile radio, cellular or personal
communication services, could impose significant additional
costs on us either in the form of direct out of pocket costs or
additional compliance obligations. These regulations also can
have the effect of introducing additional competitive entrants
to the already crowded wireless communications marketplace. It
is possible that, in the future, we may face additional
regulatory prohibitions or limitations on our services. If any
new regulations prohibit us from providing planned services, it
could be more difficult for us to compete.

Further, some local jurisdictions have adopted legislation
restricting or prohibiting the use of portable communications
devices while driving motor vehicles. If similar laws are
enacted in other jurisdictions, we may experience reduced
subscriber usage and demand for our services which could have a
material adverse effect on our results of operations.

Nextel Internationals operations are subject to similar
effects caused by operating in a regulated industry, since its
operations are regulated by governmental and regulatory bodies
in the foreign countries in which its business is conducted.

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11. We are susceptible to control by significant
stockholders and their interests may differ from yours.

Motorola and entities controlled by Mr. Craig O. McCaw
hold significant blocks of our outstanding stock and have the
ability to exert significant influence over our affairs. In
addition, this concentration of ownership may have the effect of
delaying or preventing an attempt to acquire us, even if that
would be in our stockholders best interests. An affiliate of
Mr. McCaw may designate at least one fourth of our board of
directors and may select, from these McCaw representatives on
the board of directors, a majority of the operations committee
of our board, which has significant authority relating to our
business strategy, budgets, financing arrangements and in the
nomination and oversight of specified executive officers.
Presently, two of the nine members of our board of directors are
designees of Mr. McCaws affiliates. In addition,
Daniel F. Akerson, formerly one of our executive officers,
currently holds positions with XO Communications, Inc., which is
controlled by Mr. McCaw. Mr. Akerson currently serves
as a member of our board of directors and as a member of the
operations committee of our board, but he is not a designee of
Mr. McCaws affiliates. Under its agreements with us,
Motorola may nominate two directors to our board of directors.
In addition, Motorola has agreed to support the decisions and
recommendations of the operations committee and to vote its
shares of common stock accordingly, subject to specified
limitations.

If Mr. McCaw and Motorola choose to act together, they
could have a sufficient number of members on our board of
directors and voting interest in us to exert significant
influence over, among other things:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | approval of amendments to our certificate of incorporation,
	mergers, sales of assets or other major corporate transactions
	as well as other matters submitted for stockholder vote;
|
| |  | any takeover attempt; and                                                                                                                                                            
|
| |  | whether particular matters are submitted for a vote of our
	stockholders.                                                                                                            

Mr. McCaw and his affiliates have and, subject to the terms
of applicable agreements, may acquire an investment or other
interest in entities that provide wireless telecommunications
services that could potentially compete with us. Under the
relevant agreements, Mr. McCaw and his controlled
affiliates may not, until one year after the termination of the
operations committee, participate in other two-way
terrestrial-based mobile wireless communications systems in any
part of North America or South America unless these
opportunities have first been presented to and waived or
rejected by us.



| |     |                                                   
| | --- | --------------------------------------------------
| | 12. | Our interests may conflict with those of Motorola.

Motorola and its affiliates engage in wireless communications
businesses, and may in the future engage in additional
businesses, which do or may compete with some or all of the
services we offer. Motorolas right to nominate two people
for election to our board of directors could give them
additional leverage if any conflict of interest were to arise.
In addition, Motorola is one of our significant stockholders,
which creates potential conflicts of interest, particularly with
regard to significant transactions.



| |     |                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------
| | 13. | Concerns about health risks associated with wireless
	equipment may reduce the demand for our services.

Portable communications devices have been alleged to pose health
risks, including cancer, due to radio frequency emissions from
these devices. The actual or perceived risk of mobile
communications devices could adversely affect us through a
reduction in subscribers, reduced network usage per subscriber
or through reduced financing available to the mobile
communications industry. Further research and studies are
ongoing and we cannot be sure that these studies will not
demonstrate a link between radio frequency emissions and health
concerns.



| |     |                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------
| | 14. | Our investments in joint ventures may affect our growth
	and operating results because we are not in sole control of the
	enterprise.

We have entered into a contractual joint venture regarding our
ownership interests in and arrangements with Nextel Partners,
and may enter into other joint ventures or similar arrangements
in the future. Outside the United States, Nextel International
has entered into joint venture agreements with

30



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##### Table of Contents







| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we do not have the ability to control the joint enterprises;                                                                                                                                                                 
|
| |  | the other participants at any time may have economic, business
	or legal interests or goals that are inconsistent with our goals
	or those of the joint enterprise;                                                          
|
| |  | a participant may be unable to meet its economic or other
	obligations to the joint enterprise, and we may be required to
	fulfill some or all of those obligations or restrict the
	business of the affected enterprise; and
|
| |  | we also may be or become obligated to acquire all or a portion
	of the ownership interest of some or all of the other
	participants in these joint enterprises.                                                              



| |     |                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 15. | We have foreign operations which are subject to foreign
	regulation and international economic forces, which presents
	risks to our operating and financing plans.

We currently own interests in and operate international wireless
companies through Nextel International. These international
operations are subject to foreign regulation and depend upon
foreign economies, which presents additional risks relating to:



| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | political, economic and social conditions in the foreign
	countries where Nextel International conducts operations;  
|
| |  | currency risks and exchange controls;                                                                                
|
| |  | potential inflation in the applicable foreign economies;                                                             
|
| |  | the impact of import duties on the cost or prices of
	infrastructure equipment and handsets;                         
|
| |  | foreign taxation of earnings and payments received by Nextel
	International from its subsidiaries and affiliates; and
|
| |  | regulatory changes affecting the telecommunications industry and
	wireless communications.                           

We cannot be sure that the risks associated with our foreign
operations will not adversely affect our operating results or
prospects, particularly as these operations expand in scope,
scale and significance.



| |     |                                                                                           
| | --- | ------------------------------------------------------------------------------------------
| | 16. | Our commitments to issue additional common stock may
	impair our ability to raise capital.

We currently have outstanding commitments in various forms,
including warrants, options and convertible securities, to issue
a substantial number of new shares of our common stock. An
increase in the number of shares of our common stock that will
become available for sale in the public market may adversely
affect the market price of our common stock and, as a result,
could impair our ability to raise additional capital through the
sale of our equity securities or convertible securities. Some of
the shares subject to issuance commitments are or may be
registered with the Securities and Exchange Commission and thus
are or may become freely tradable, without regard to the volume
limitations of Rule 144 under the Securities Act of 1933.



| |     |                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------
| | 17. | We have significant intangible assets, which may not be
	adequate to satisfy our obligations in the event of a
	liquidation.

If we default on debt or if we were liquidated, the value of our
assets may not be sufficient to satisfy our obligations. We have
a significant amount of intangible assets, such as licenses
granted by the Federal Communications Commission. The value of
these licenses will depend significantly upon the success of our
digital mobile network business and the growth of the
specialized mobile radio and wireless communications industries
in general. We had a net tangible book value deficit of
$3.95 billion as of December 31, 2000.



| |     |                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | 18. | Our forward-looking statements are subject to a variety of
	factors that could cause actual results to differ materially
	from current beliefs.

Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995: A number of
statements made in, or incorporated by reference into, this
annual report are not historical or current facts,

31



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##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general economic conditions in the geographic areas and
	occupational market segments that we are targeting for our
	digital mobile network service;                                                                                                                                                                           
|
| |  | the availability of adequate quantities of system infrastructure
	and subscriber equipment and components to meet service
	deployment and marketing plans and customer demand;                                                                                                                                                 
|
| |  | the availability and cost of acquiring additional spectrum;                                                                                                                                                                                                                                                                    
|
| |  | the timely development and availability of new handsets with
	expanded applications and features;                                                                                                                                                                                                                              
|
| |  | the success of efforts to improve, and satisfactorily address
	any issues relating to, our digital mobile network performance;                                                                                                                                                                                                 
|
| |  | the continued successful performance of the technology being
	deployed in our various market areas and the success of the
	technology deployed in connection with our Nextel Wireless Web
	services;                                                                                                                           
|
| |  | market acceptance of our new service offerings, including our
	Nextel Wireless Web services and Nextel Worldwide;                                                                                                                                                                                                              
|
| |  | the successful implementation of new technologies deployed in
	connection with any future third generation or 3G
	services we may offer;                                                                                                                                                                                     
|
| |  | the ability to achieve market penetration and average subscriber
	revenue levels sufficient to provide financial viability to our
	digital mobile network business;                                                                                                                                                            
|
| |  | our ability to timely and successfully accomplish required
	scale-up of our billing, collection, customer care and similar
	back-office operations to keep pace with customer growth,
	increased system usage rates and growth in levels of accounts
	receivables being generated by the digital mobile network
	customer base;
|
| |  | access to sufficient debt or equity capital to meet operating
	and financing needs;                                                                                                                                                                                                                                            
|
| |  | the quality and price of similar or comparable wireless
	communications services offered or to be offered by our
	competitors, including providers of cellular and personal
	communication services;                                                                                                                           
|
| |  | future legislation or regulatory actions relating to specialized
	mobile radio services, other wireless communications services or
	telecommunications generally; and                                                                                                                                                          
|
| |  | other risks and uncertainties described from time to time in our
	reports and, with specific reference to risk factors relating to
	international operations, in Nextel Internationals
	reports, filed with the Securities and Exchange Commission.                                                                           




Item 2.  Properties

We currently lease our principal executive and administrative
offices, which are located at 2001 and 2003 Edmund Halley Drive,
in Reston, Virginia. This facility is about 330,000 square feet,
and the lease

32



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##### Table of Contents





|                        |  |             |         |                    |  |  |               | 
|----------------------- |  | ----------- | ------- | ------------------ |  |  | ------------- | 
|Location                |  | Square feet |         | Year of Expiration
|                        |  |             |         |                   
|Reston, Virginia        |  |             | 330,000 |                    |  |  | 2009          | 
|                       
|                       
|                       
|                       
|Denver, Colorado        |  |             | 248,000 |                    |  |  | 2004 and 2008 | 
|                       
|                       
|                       
|                       
|Hampton Roads, Virginia |  |             | 160,000 |                    |  |  | 2009 and 2010 | 
|                       
|                       
|                       
|                       
|Herndon, Virginia       |  |             | 132,000 |                    |  |  | 2013          | 
|                       
|                       
|                       
|                       
|McLean, Virginia        |  |             | 129,000 |                    |  |  | 2006          | 
|                       
|                       
|                       
|                       
|Irvine, California      |  |             | 117,000 |                    |  |  | 2005          | 
|                       
|                       
|                       
|                       
|Rutherford, New Jersey  |  |             | 116,000 |                    |  |  | 2008          | 
|                       
|                       
|                       
|                       
|Temple, Texas           |  |             | 109,000 |                    |  |  | 2015          | 
|                       
|                       
|                       
|                       
|Farmington, Michigan    |  |             | 108,000 |                    |  |  | 2008          | 

None of the expiration dates for these leases include extensions
related to the exercise of renewal options. We also lease
smaller office facilities for sales, maintenance and
administrative operations in our markets. We have about 240 of
these leases in effect at December 31, 2000, generally with
terms ranging from 1 to 15 years, not including extensions
related to the exercise of renewal options.

We lease transmitter and receiver sites for the transmission of
our radio service under various individual site leases as well
as master site lease agreements. The terms of these leases
generally range from month-to-month to 20 years. As of
December 31, 2000, we had about 12,700 constructed sites at
leased locations in the United States for our digital mobile
network. We also own properties and a limited number of
transmission towers where management considers it in our best
interest.




Item 3.  Legal Proceedings

Beginning in the second quarter of 2000, allegations of
employment discrimination and harassment were leveled against us
in the press and some related complaints subsequently were filed
with the Equal Employment Opportunity Commission. Those
complaints have since been withdrawn. Together with the law firm
that represents our current and former employees who have
asserted these allegations, we have structured mutually
acceptable arrangements for processing and resolving these
claims. Substantially all of the claimants have agreed to have
their claims addressed exclusively under these arrangements.
Based on the specific claim details and our related
investigative results to date, we do not believe that the claims
that have come to our attention are likely to result in a
material liability to us.

We have publicly stated and reiterated our commitment to
creating and sustaining a work environment that encourages
innovation and excellence and accordingly prohibits
discrimination or harassment on the basis of race, gender,
sexual orientation, religion or other inappropriate grounds. We
remain committed to assuring compliance with our long
established and clearly stated policies on those topics, and
will take appropriate actions to remedy any violations that are
established.

We are subject to other claims and legal actions that may arise
in the ordinary course of business. We do not believe that any
of these other pending claims or legal actions will have a
material effect on our business or results of operation.




Item 4.  Submission of Matters to a Vote of
Security Holders

No matters were submitted to a vote of our security holders
during the fourth quarter of 2000.

Executive Officers of the Registrant

The following is information regarding those persons serving as
our executive officers as of April 2, 2001. These executive
officers were elected to their present positions by action of
our board of directors to serve until their successors have been
elected. There is no family relationship between any of our
executive officers or between any of these officers and any of
our directors.

33



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Timothy M. Donahue. Mr. Donahue is
52 years old and has served as our Chief Executive Officer
since July 1999. Mr. Donahue also has served as
President since joining us in February 1996 and also served
as Chief Operating Officer from February 1996 until
July 1999. Mr. Donahue has served as one of our
directors since June 1996. From 1986 to January 1996,
Mr. Donahue held various senior management positions with
AT&T Wireless Services, Inc. including Regional President
for the Northeast. Mr. Donahue serves as a of director of
Nextel International, Nextel Partners and SpectraSite.

Morgan E. OBrien. Mr. OBrien is
56 years old and has served as Vice Chairman of our board
of directors since March 1996. Mr. OBrien also
has been one of our directors since co-founding Nextel in 1987.
From 1987 to March 1996, Mr. OBrien served as
Chairman of our board of directors and from 1987 to
October 1994, Mr. OBrien also served as our
General Counsel.

Steven P. Dussek. Mr. Dussek is 44 years
old and in March 2000 was appointed as our Executive Vice
President and Chief Operating Officer. From July 1999 until
March 2000, Mr. Dussek served as our Executive Vice
President, Operations and from September 1999 until
March 2000 served as Chief Executive Officer of Nextel
International. From March until September 1999,
Mr. Dussek was President and Chief Operating Officer of
Nextel International. From May 1996 to March 1999,
Mr. Dussek served in various senior management positions
for Nextel. From May 1995 to May 1996, he was Vice
President and General Manager of the Northeast Region for the
PCS division of AT&T Wireless. Mr. Dussek serves as a
director of Nextel International.

Thomas N. Kelly, Jr. Mr. Kelly is 53 years
old, joined us in April 1996 and serves as Executive Vice
President, Marketing & Strategic Planning. Between 1993
and 1996, Mr. Kelly was Regional Vice President of
Marketing for AT&T Wireless. Prior to joining AT&T
Wireless, Mr. Kelly worked for 12 years with the
marketing consulting firm of Howard Bedford Nolan, where he was
most recently an Executive Vice President.

Barry J. West. Mr. West is 55 years old, joined
us in March 1996 and serves as Executive Vice President and
Chief Technology Officer. Previously, Mr. West served in
various senior positions with British Telecom plc for more than
five years, most recently as Director of Value-Added Services
and Corporate Marketing at Cellnet, a cellular communications
subsidiary of British Telecom. Mr. West serves as a
director of U.S. Wireless Corp.

John S. Brittain, Jr. Mr. Brittain is
42 years old and since December 2000 has served as our
Chief Financial Officer. Since joining us in March 1999, he also
has served as Vice President and Treasurer. From 1994 to March
1999, Mr. Brittain was Senior Vice President and Treasurer
of Sothebys Holdings, Inc., an international art auction
and related services firm. Prior to joining Sothebys,
Mr. Brittain was the Assistant Corporate Treasurer of the
Great Atlantic & Pacific Tea Company and was an officer
of The Chase Manhattan Bank.

Leonard J. Kennedy. Mr. Kennedy is
49 years old, joined us in January 2001 and serves as
Senior Vice President and General Counsel. From 1995 until
joining us, Mr. Kennedy was a member of the law firm Dow,
Lohnes & Albertson, specializing in telecommunications
law and regulatory policy.

William G. Arendt. Mr. Arendt is 43 years
old and has served as our Vice President and Controller since
joining us in May 1997. From June 1996 until joining
us, Mr. Arendt was Vice President and Controller for Pocket
Communications, Inc., a personal communications services
company. From September 1992 until June 1996, he was
Controller for American Mobile Satellite Corporation.

Steven M. Shindler. Mr. Shindler is
38 years old, and since March 2000 has served as the
Chief Executive Officer of Nextel International. From May 1996
until December 2000, Mr. Shindler served as our
Executive Vice President and Chief Financial Officer. Between
1987 and 1996, Mr. Shindler was an officer with Toronto
Dominion Bank, where most recently he was a Managing Director in
its Communications Finance Group. Mr. Shindler also serves
as a director of Nextel International and SpectraSite.

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##### Table of Contents






PART II




Item 5.  Market for the Registrants
Common Equity and Related Stockholder Matters

A.  Market for Common Stock

Our class A common stock is traded on the Nasdaq National
Market under the trading symbol NXTL. The following
table lists, on a per share basis for the periods indicated, the
high and low closing sale prices for the common stock as
reported by the Nasdaq National Market for the periods
indicated, as adjusted to reflect our two-for-one common stock
split effective June 6, 2000:

|              |  |                                     |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|------------- |  | ----------------------------------- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|              |  |                                    
|              |  | Quarterly Common Stock Price Ranges
|              |  | Year Ended December 31,            
|              |  |                                    
|              |  |                                     |       |     
|              |  | 2000                                |       | 1999
|              |  |                                     |       |     
|Quarter Ended |  | High                                |       | Low  |  | High |       | Low
|              |  |                                     |       |      |  |      |       |    
|March 31      |  | $                                   | 79.81 |      |  | $    | 46.28 |     |  | $ | 19.22 |  |  | $ | 12.94 | 
|             
|             
|             
|             
|June 30       |  |                                     | 71.31 |      |  |      | 38.03 |     |  |   | 25.09 |  |  |   | 17.31 | 
|             
|             
|             
|             
|September 30  |  |                                     | 72.50 |      |  |      | 44.19 |     |  |   | 37.59 |  |  |   | 23.00 | 
|             
|             
|             
|             
|December 31   |  |                                     | 43.81 |      |  |      | 23.00 |     |  |   | 57.53 |  |  |   | 35.13 | 

B.  Number of Stockholders of Record

As of March 16, 2001, there were about 3,400 holders of
record of our class A common stock. We have the authority
to issue shares of nonvoting common stock, which are convertible
on a share-for-share basis into shares of class A common
stock. As of March 16, 2001, there was a single stockholder
of record holding all of the 35,660,000 outstanding shares of
nonvoting common stock.

C.  Dividends

We have not paid any dividends on our common stock and do not
plan to pay dividends on our common stock for the foreseeable
future. The indentures governing our public notes and our bank
credit agreement and other financing documents prohibit, and are
expected to continue to prohibit, us from paying dividends,
except in compliance with specified financial covenants. In
addition, some of the collateral security mechanisms and related
provisions associated with our bank credit agreement limit the
amount of cash available to make dividends, loans and cash
distributions to us from our subsidiaries that operate our
digital mobile network. Provisions in the indentures and loan
agreements to which Nextel International is a party also place
significant restrictions on our ability to receive cash from
Nextel International or any of its subsidiaries. Accordingly,
while these restrictions are in place, any profits generated by
these subsidiaries will not be available to us for, among other
things, payment of dividends.

We anticipate that for the foreseeable future any cash flow
generated from our operations will be used to develop and expand
our business and operations. Any future determination as to the
payment of dividends on our common stock will be at the
discretion of our board of directors and will depend upon our
operating results, financial condition and capital requirements,
contractual restrictions, general business conditions and other
factors that our board of directors deems relevant. There can be
no assurance that we will pay dividends on our common stock at
any time in the future. Under specific limited circumstances, we
may be obligated to pay dividends on our class A preferred stock
and, after specified dates, will be obligated to pay cash
dividends on our series D preferred stock and series E preferred
stock. See Part I, Item 1. Business 
I. Agreements with Significant Stockholders  1. McCaw
Interests.

D.  Recent Sales of Unregistered Securities

We sold securities that were not registered under the Securities
Act of 1933 in the following transaction during the early
portion of 2001. On January 26, 2001, we completed the
issuance and sale in a private placement of $1.25 billion
aggregate principal amount of our 9.5% senior serial redeemable
notes due 2011. Goldman, Sachs & Co., Banc of America
Securities LLC, Credit Suisse First Boston, Deutsche

35



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##### Table of Contents








Item 6.  Selected Financial Data

The table below sets forth selected consolidated financial data
for the periods or dates indicated and should be read in
conjunction with the consolidated financial statements, related
notes and other financial information in this annual report on
Form 10-K.

Change in accounting principle. We adopted the
Securities and Exchange Commissions Staff Accounting
Bulletin, or SAB, No. 101, Revenue Recognition in
Financial Statements, which became effective in the fourth
quarter of 2000. Based upon the new guidance, we changed our
revenue recognition method. We now recognize handset sales as
operating revenues on a straight-line basis over periods of up
to four years, the estimated customer relationship periods.
Costs of handset sales are recognized over the same periods in
amounts equivalent to the revenues recognized from the handset
sales. The direct and incremental handset costs in excess of the
revenues generated from handset sales are expensed immediately
as these amounts exceed our minimum contractual revenues. Under
the prior method of accounting, we recognized revenues from
sales and related costs of handsets sold when title passed to
the customer.

We have accounted for the adoption of SAB No. 101 as a
change in accounting principle effective January 1, 2000,
and therefore have not restated the financial statements of
prior years. Additional information regarding this accounting
change can be found in note 1 to the consolidated financial
statements appearing at the end of this annual report on
Form 10-K.

For all periods presented, we have reclassified revenues from
digital handset and accessory sales to operating revenues and
the related costs of digital handset and accessory sales to cost
of revenues. We had previously classified these amounts within
selling, general and administrative expense.

Other income (expense), net. As more fully
discussed in note 4 to the consolidated financial
statements appearing at the end of this annual report on
Form 10-K, other income (expense), net in 2000 includes a
$275 million gain realized from the exchange of our stock
in Clearnet Communications, Inc. for stock in TELUS Corporation
as a result of the acquisition of Clearnet by TELUS.

Income tax provision. In 1997, due to operating
losses and the change in useful lives of some intangible assets,
we increased our valuation allowance for deferred tax assets
resulting in a tax provision of $259 million.

36



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##### Table of Contents



Stock split. The financial information below and
elsewhere in this annual report on Form 10-K reflects the
effect of a 2-for-1 stock split in the form of a stock dividend
paid on June 6, 2000 to stockholders of record as of
May 26, 2000.

|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------- | ----- | ------ | - | ---- | ----- | ------ | - | ---- | ----- | ------ | - | - | ----- | ------ | - | - | ----- | ----- | -
|                                                                                |                                                                     |                                        
|                                                                                |                                                                     | Year Ended December 31,                
|                                                                                |                                                                     |                                        
|                                                                                |                                                                     | 2000                                    |       | 1999   |   | 1998 |       | 1997   |   | 1996
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |     
|                                                                                |                                                                     |                                        
|                                                                                |                                                                     | (in millions, except per share amounts)
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|STATEMENT OF OPERATIONS DATA:                                                   |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Operating revenues                                                              |                                                                     | $                                       | 5,714 |        |   | $    | 3,786 |        |   | $    | 2,295 |        |   | $ | 985   |        |   | $ | 462   |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Cost of revenues                                                                |                                                                     |                                         | 2,172 |        |   |      | 1,579 |        |   |      | 1,218 |        |   |   | 686   |        |   |   | 402   |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Selling, general and administrative                                             |                                                                     |                                         | 2,278 |        |   |      | 1,672 |        |   |      | 1,297 |        |   |   | 711   |        |   |   | 305   |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Depreciation and amortization                                                   |                                                                     |                                         | 1,265 |        |   |      | 1,004 |        |   |      | 832   |        |   |   | 526   |        |   |   | 401   |      
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                                | Operating loss                                                      |                                         |       | (1     | ) |      |       | (469   | ) |      |       | (1,052 | ) |   |       | (938   | ) |   |       | (646  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Interest expense, net                                                           |                                                                     |                                         | (849  | )      |   |      | (782  | )      |   |      | (622  | )      |   |   | (378  | )      |   |   | (206  | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Other income (expense), net                                                     |                                                                     |                                         | 106   |        |   |      | (47   | )      |   |      | (37   | )      |   |   | 7     |        |   |   | (11   | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Income tax benefit (provision)                                                  |                                                                     |                                         | 33    |        |   |      | 28    |        |   |      | 192   |        |   |   | (259  | )      |   |   | 307   |      
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                                | Loss before extraordinary item                                      |                                         |       | (711   | ) |      |       | (1,270 | ) |      |       | (1,519 | ) |   |       | (1,568 | ) |   |       | (556  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Extraordinary item  loss on early retirement of debt,
	net of income tax of $0 |                                                                     |                                         | (104  | )      |   |      | (68   | )      |   |      | (133  | )      |   |   | (46   | )      |   |   |      |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Mandatorily redeemable preferred stock dividends                                |                                                                     |                                         | (209  | )      |   |      | (192  | )      |   |      | (149  | )      |   |   | (29   | )      |   |   |      |      
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                                | Loss attributable to common stockholders                            |                                         | $     | (1,024 | ) |      | $     | (1,530 | ) |      | $     | (1,801 | ) |   | $     | (1,643 | ) |   | $     | (556  | )
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|Loss per share attributable to common stockholders, basic and
	diluted:         |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Loss before extraordinary item attributable to common
	stockholders |                                         | $     | (1.21  | ) |      | $     | (2.29  | ) |      | $     | (2.99  | ) |   | $     | (3.21  | ) |   | $     | (1.25 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Extraordinary item                                                  |                                         |       | (0.14  | ) |      |       | (0.10  | ) |      |       | (0.24  | ) |   |       | (0.09  | ) |   |       |      |  
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|                                                                                |                                                                     | $                                       | (1.35 | )      |   | $    | (2.39 | )      |   | $    | (3.23 | )      |   | $ | (3.30 | )      |   | $ | (1.25 | )    
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      
|Weighted average number of common shares outstanding                            |                                                                     |                                         | 756   |        |   |      | 639   |        |   |      | 557   |        |   |   | 498   |        |   |   | 446   |      
|                                                                                |                                                                     |                                         |       |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |      

|                                                                                 |  |               |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|-------------------------------------------------------------------------------- |  | ------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- |  |  | - | ----- | 
|                                                                                 |  |              
|                                                                                 |  | December 31, 
|                                                                                 |  |              
|                                                                                 |  | 2000          |        | 1999 |  | 1998 |        | 1997 |  | 1996
|                                                                                 |  |               |        |      |  |      |        |      |  |     
|                                                                                 |  |              
|                                                                                 |  | (in millions)
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|BALANCE SHEET DATA:                                                              |  |               |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cash, cash equivalents and short-term investments, including
	restricted portion |  | $             | 4,674  |      |  | $    | 5,808  |      |  | $    | 321    |  |  | $ | 433   |  |  | $ | 145   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Property, plant and equipment, net                                               |  |               | 8,791  |      |  |      | 6,152  |      |  |      | 4,915  |  |  |   | 3,226 |  |  |   | 1,804 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Intangible assets, net                                                           |  |               | 5,982  |      |  |      | 4,889  |      |  |      | 5,183  |  |  |   | 4,875 |  |  |   | 4,143 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Total assets                                                                     |  |               | 22,686 |      |  |      | 18,410 |      |  |      | 11,573 |  |  |   | 9,228 |  |  |   | 6,472 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Long-term debt, capital lease and finance obligations including
	current portion |  |               | 14,731 |      |  |      | 11,503 |      |  |      | 7,719  |  |  |   | 5,046 |  |  |   | 2,785 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Mandatorily redeemable preferred stock                                           |  |               | 1,881  |      |  |      | 1,770  |      |  |      | 1,578  |  |  |   | 529   |  |  |   |      | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Stockholders equity                                                             |  |               | 2,028  |      |  |      | 2,574  |      |  |      | 230    |  |  |   | 1,913 |  |  |   | 2,809 | 






|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

A.  Overview

The following is a discussion and analysis of:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | our consolidated financial condition and results of operations
	for each of the three years in the period ended
	December 31, 2000; and
|
| |  | significant factors that could affect our prospective financial
	condition and results of operations.                                  

Historical results may not indicate future performance. See
Part I, Item 1. Business  L. Risk
Factors  18. Our forward-looking statements are
subject to a variety of factors that could cause actual results
to differ materially from current beliefs.

Our consolidated financial statements include the accounts of
Nextel International and its consolidated subsidiaries. However,
additional more detailed and focused information relating to
Nextel International may be found in the periodic and other
reports filed by Nextel International with the Securities and
Exchange Commission pursuant to the rules under the Securities
Exchange Act of 1934.

37



---



##### Table of Contents



Operating revenues primarily consist of service revenues and
revenues generated from the sales of digital handsets and
accessories. Service revenues primarily include monthly access
charges for digital mobile telephone service and digital two-way
radio service, charges for airtime and digital two-way radio
usage in excess of plan minutes and long distance charges
derived from calls placed by our customers. See
Item 6. Selected Financial Data for a
description of a change in our revenue recognition method
related to digital handsets.

Cost of revenues primarily includes the cost of providing
wireless service and the cost of digital handset and accessory
sales. Cost of providing wireless service consists primarily of
costs of interconnection with local exchange carrier facilities
and direct switch and transmitter and receiver site costs, such
as property taxes, insurance costs, utility costs and rent for
the network switches and sites used to operate our digital
mobile networks. Interconnection costs have fixed and variable
components. The fixed component of interconnection costs
consists of monthly flat-rate fees for facilities leased from
local exchange carriers. The variable component of
interconnection costs, which fluctuates in relation to the level
and duration of wireless calls, generally consists of per-minute
use fees charged by wireline and wireless providers for wireless
calls terminating on their networks. Cost of digital handset and
accessory sales consists primarily of the cost of the digital
handset and accessories, order fulfillment and installation
related expenses and write-downs of digital handset and related
accessory inventory for shrinkage and obsolescence. We sell
digital handsets and accessories at prices below our cost as an
incentive for new customers to subscribe to our services and as
a retention inducement for existing customers.

Our operating revenues and the variable component of the cost of
digital handset and accessory sales are driven primarily by the
number of digital handsets sold or in service and not
necessarily by the number of customers, as one customer may
purchase one or many digital handsets.

B.  Results of Operations



| |    |                                                               
| | -- | --------------------------------------------------------------
| | 1. | Year ended December 31, 2000 vs. year ended
	December 31, 1999

a.  Operating revenues.

|                                                                                       |                    |                       |       |              |       |              |    |              |   |                 |       |         |       |  |    |     |   |   |       |       |       |  |     |    |     |  
|-------------------------------------------------------------------------------------- | ------------------ | --------------------- | ----- | ------------ | ----- | ------------ | -- | ------------ | - | --------------- | ----- | ------- | ----- |  | -- | --- | - | - | ----- | ----- | ----- |  | --- | -- | --- | -
|                                                                                       |                    |                       |       |              |       |              |    |              |   |                
|                                                                                       |                    |                       |       |              |       |              |    |              |   | Increase       
|                                                                                       |                    |                       |       | % of         |       |              |    | % of         |   | (Decrease) from
|                                                                                       |                    |                       |       | Consolidated |       |              |    | Consolidated |   | Previous Year  
|                                                                                       |                    | December 31,          |       | Operating    |       | December 31, |    | Operating    |   |                
|                                                                                       |                    | 2000                  |       | Revenues     |       | 1999         |    | Revenues     |   | Dollars         |       | Percent
|                                                                                       |                    |                       |       |              |       |              |    |              |   |                 |       |        
|                                                                                       |                    |                      
|                                                                                       |                    | (dollars in millions)
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Domestic                                                                               |                    | $                     | 5,385 |              |       |              | 94 | %            |   | $               | 3,662 |         |       |  | 97 | %   |   | $ | 1,723 |       |       |  | 47  | % 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|International                                                                          |                    |                       | 330   |              |       |              | 6  | %            |   |                 | 124   |         |       |  | 3  | %   |   |   | 206   |       |       |  | 166 | % 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Intercompany eliminations                                                              |                    |                       | (1    | )            |       |              |   |              |   |                 |      |         |       |  |   |     |   |   | (1    | )     |       |  | NM  |   
|                                                                                       |                    |                       |       |              |       |              |    |              |   |                 |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|                                                                                       | Operating revenues |                       | $     | 5,714        |       |              |    | 100          | % |                 | $     | 3,786   |       |  |    | 100 | % |   | $     | 1,928 |       |  |     | 51 | %  
|                                                                                       |                    |                       |       |              |       |              |    |              |   |                 |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|Digital handsets in service at year end for consolidated
	subsidiaries
	(in thousands) |                    |                       |       |              |       |              |    |              |   |                 |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                    | Domestic              |       |              | 6,678 |              |    |              |  |                 |       |         | 4,516 |  |    |     |  |   |       |       | 2,162 |  |     |    | 48  | %
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                    | International         |       |              | 783   |              |    |              |  |                 |       |         | 279   |  |    |     |  |   |       |       | 504   |  |     |    | 181 | %




NM   Not Meaningful

The increase in domestic operating revenues in 2000 consists
primarily of a 55% increase in wireless service and other
revenues of $1.76 billion to $4.98 billion offset by a
net decrease in revenues from digital handset and accessory
sales of $35 million to $405 million. As a result of
the adoption of SAB No. 101, we changed our revenue
recognition method for digital handset sales effective
January 1, 2000. The adoption of SAB No. 101 resulted
in a $40 million reduction to revenues from digital handset
and accessory sales in 2000. Had we adopted SAB No. 101
effective January 1, 1999, revenues from domestic digital
handset and accessory sales in 2000 would have increased by
$87 million or 27%. We continue to sell digital handsets at
prices below our cost to attract new customers and as a
retention inducement for existing customers. Additionally, as
competition has intensified, the prices at which we sell digital
handsets to our new and existing customers have declined.
Accordingly, revenues from domestic digital handset and

38



---



##### Table of Contents





Domestic service revenues increased in 2000 principally as a
result of a 48% increase in domestic digital handsets in
service. Average monthly revenue per domestic digital handset
grew slightly from about $73 during 1999 to about $74 during
2000. Total system minutes of use grew 75% in 2000, principally
due to the larger number of handsets in service during 2000 as
compared to 1999. Additionally, average monthly minutes of use
per subscriber increased 13% in 2000 to about 470 minutes, which
we attribute to increased phone usage primarily driven by the
introduction of pricing plans designed to provide additional
value to our customers. These new pricing plans, developed in
part to meet competitive demands, generally provide lower
per-minute rates made available in conjunction with fixed-rate
service plans. These plans typically include a fixed amount of
interconnect minutes combined with unlimited digital two-way
radio service, unlimited Nextel Wireless Web services, free
incoming calls or free long distance service, all for a stated
package price. The growth in digital handsets in service is the
result of a number of factors, principally:



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | declining digital handset prices, reflecting both reductions in
	our costs of acquiring handsets and increases in our
	subsidization of the resale prices of our handsets, including
	through two-for-one promotions;              
|
| |  | the introduction of more competitive service pricing plans
	targeted at meeting more of our customers needs, including a
	variety of fixed-rate plans offering bundled monthly minutes and
	other integrated services and features;
|
| |  | expanded network coverage and capacity;                                                                                                                                                                                            
|
| |  | differentiated products and services, including Nextel Direct
	Connect;                                                                                                                                                            
|
| |  | the increased number of indirect distributors;                                                                                                                                                                                     
|
| |  | increased advertising and marketing campaigns; and                                                                                                                                                                                 
|
| |  | increased sales force and marketing staff.                                                                                                                                                                                         

Our average monthly revenue per digital handset may decrease in
the future if our customers migrate to lower priced service
offering packages or if competitive pressures require us to:



| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | further restructure our digital service offering packages to
	offer more value;                                                                                                                                                                    
|
| |  | reduce our digital service offering prices; or                                                                                                                                                                                                     
|
| |  | respond to particular short-term, market specific situations,
	such as special introductory pricing or packages that may be
	offered by providers launching their service, or particular new
	product or service offerings, in a particular market.

Operating revenues for our international operations increased in
2000 primarily as a result of a 165% increase in the number of
digital handsets in service in Nextel Internationals Latin
American markets. The implementation of calling party pay
programs and the launch of new services, such as international
roaming and digital mobile telephone service, in some Latin
American markets in 2000 also contributed to the increase. Had
we adopted SAB No. 101 effective January 1, 1999,
international operating revenues in 2000 would have increased by
$213 million or 182% as compared to 1999.

39



---



##### Table of Contents



b.  Cost of
revenues.

|                          |                  |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------------------- | ---------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | --------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                          |                  |                       |       |              |  |              |    |              |   |                
|                          |                  |                       |       |              |  |              |    |              |   | Increase       
|                          |                  |                       |       | % of         |  |              |    | % of         |   | (Decrease) from
|                          |                  |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year  
|                          |                  | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |                
|                          |                  | 2000                  |       | Revenues     |  | 1999         |    | Revenues     |   | Dollars         |       | Percent
|                          |                  |                       |       |              |  |              |    |              |   |                 |       |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|                         
|                         
|                         
|                         
|Domestic                  |                  | $                     | 1,991 |              |  |              | 35 | %            |   | $               | 1,483 |         |  |  | 39 | %  |   | $ | 508 |     |  |  | 34 | % 
|                         
|                         
|                         
|                         
|International             |                  |                       | 182   |              |  |              | 3  | %            |   |                 | 96    |         |  |  | 3  | %  |   |   | 86  |     |  |  | 90 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (1    | )            |  |              |   |              |   |                 |      |         |  |  |   |    |   |   | (1  | )   |  |  | NM |   
|                          |                  |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                          | Cost of revenues |                       | $     | 2,172        |  |              |    | 38           | % |                 | $     | 1,579   |  |  |    | 42 | % |   | $   | 593 |  |  |    | 38 | %
|                          |                  |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   




NM  Not Meaningful

The increase in cost of revenues for our domestic operations in
2000 consists of a 46% increase in cost of providing wireless
services of $300 million to $956 million and an
increase in cost of digital handset and accessory sales of
$208 million to $1.03 billion. Cost of digital handset
and accessory sales increased due to the increase in the number
of digital handsets sold to new and existing customers, offset,
in part, by a decrease in the average cost we paid for the
digital handsets sold and by the deferral of $40 million of
digital handset costs attributable to the adoption of SAB
No. 101 in 2000. Had SAB No. 101 been implemented
effective January 1, 1999, the domestic cost of digital
handset and accessory sales would have increased by
$330 million or 47%.

Domestic cost of service revenues increased in 2000 primarily as
a result of variable costs related to interconnect fees on
higher minutes of use and increased site ground lease and
utility costs that we incurred. These costs increased due to an
increase of about 44% in transmitter and receiver sites and
related equipment and an increase of about 63% in the number of
switches we placed in service during 2000.

The increase in international cost of revenues in 2000 consists
of an increase in cost of providing wireless services of
$40 million or 96% and an increase in cost of digital
handset and accessory sales of $46 million or 84%. Had SAB
No. 101 been implemented effective January 1, 1999,
the cost of digital handset and accessory sales in our
international operations would have increased by
$53 million or 112%. The increase in the cost of providing
international wireless service is primarily attributable to:



| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in variable costs related to interconnect fees on
	higher minutes of use; and                                                                                                                         
|
| |  | an increase in site ground lease and utility expenses incurred
	due to an increase of about 92% in the number of transmitter and
	receiver sites placed in service in Nextel Internationals
	markets during 2000.

The increase in international cost of digital handset and
accessory sales in 2000 is primarily due to the increase in the
number of digital handsets sold partially offset by the deferral
of $21 million of digital handset costs attributable to the
adoption of SAB No. 101 in 2000.

We expect the amount of cost of revenues to increase as we place
more switches and sites into service, as customer usage of the
digital mobile network increases and as we sell more digital
handsets and accessories to new customers and provide retention
inducements to existing customers.

40



---



##### Table of Contents



c. 
Selling, general and administrative expenses.

|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|----------------------------------- | -------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | --------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                                    |                            |                       |       |              |  |              |    |              |   |                
|                                    |                            |                       |       |              |  |              |    |              |   | Increase       
|                                    |                            |                       |       | % of         |  |              |    | % of         |   | (Decrease) from
|                                    |                            |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year  
|                                    |                            | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |                
|                                    |                            | 2000                  |       | Revenues     |  | 1999         |    | Revenues     |   | Dollars         |       | Percent
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |        
|                                    |                            |                      
|                                    |                            | (dollars in millions)
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                            | $                     | 2,278 |              |  |              | 40 | %            |   | $               | 1,672 |         |  |  | 44 | %  |   | $ | 606 |     |  |  | 36 | % 
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 1,003 |              |  |              | 18 | %            |   | $               | 756   |         |  |  | 20 | %  |   | $ | 247 |     |  |  | 33 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 143   |              |  |              | 2  | %            |   |                 | 77    |         |  |  | 2  | %  |   |   | 66  |     |  |  | 86 | % 
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 1,146        |  |              |    | 20           | % |                 | $     | 833     |  |  |    | 22 | % |   | $   | 313 |  |  |    | 38 | %
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 996   |              |  |              | 18 | %            |   | $               | 725   |         |  |  | 19 | %  |   | $ | 271 |     |  |  | 37 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 138   |              |  |              | 2  | %            |   |                 | 114   |         |  |  | 3  | %  |   |   | 24  |     |  |  | 21 | % 
|                                   
|                                   
|                                   
|                                   
|Intercompany eliminations           |                            |                       | (2    | )            |  |              |   |              |   |                 |      |         |  |  |   |    |   |   | (2  | )   |  |  | NM |   
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 1,132        |  |              |    | 20           | % |                 | $     | 839     |  |  |    | 22 | % |   | $   | 293 |  |  |    | 35 | %
|                                    |                            |                       |       |              |  |              |    |              |   |                 |       |         |  |  |    |    |   |   |     |     |  |  |    |   




NM  Not Meaningful

The increase in domestic selling and marketing expenses in 2000
primarily reflects increased costs incurred in connection with
higher consolidated sales of digital handsets including:



| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $125 million, or a 38% increase in commissions and
	residuals earned by indirect dealers and distributors as a
	result of increased digital handset sales through, and increased
	reliance on, indirect dealers and distributors in 2000;
|
| |  | $57 million, or a 23% increase in sales and marketing
	payroll and related expenses including increased commissions for
	our direct sales force;                                                                                         
|
| |  | $41 million, or a 28% increase in advertising expenses, due
	to aggressive marketing campaigns directed at growing our
	customer base; and                                                                                               
|
| |  | a $24 million increase in other general marketing expenses.                                                                                                                                                                              

The increase in international selling and marketing expenses in
2000 is primarily attributable to increased direct sales labor
costs attributable to a larger direct sales force, increased
commissions attributable to higher levels of digital handset
sales and increased advertising costs throughout all Latin
American markets.

Domestic general and administrative expenses increased in 2000
primarily as a result of activities to support a larger customer
base, specifically:



| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $132 million, or a 58% increase in expenses related to
	billing, collection, customer retention and customer care
	activities, including the costs associated with our fourth
	customer care center which became fully operational in 2000;
|
| |  | $95 million, or a 25% increase in personnel, facilities and
	general corporate expenses primarily reflecting increased
	staffing for information technology and other administrative
	activities; and                                      
|
| |  | $44 million, or a 37% increase in bad debt expense.                                                                                                                                                                                        

International general and administrative expenses increased in
2000 primarily due to a $41 million increase in general
corporate expenses including payroll and related expenses for
collection and customer care activities to support a growing
customer base, and facilities and information technology related
costs to support the growth of operations. This increase was
offset by a $17 million reduction in bad debt expense due
to Nextel Internationals increased focus on credit and
collection activities.

41



---



##### Table of Contents



The aggregate amount of selling, general and administrative
expenses is expected to increase both domestically and
internationally as a result of a number of factors, including
but not limited to:



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing commission and residual payments owed to indirect
	dealers and distributors as we sell more digital handsets
	through these channels;
|
| |  | increasing costs as a result of opening and operating additional
	customer care centers;                                                        
|
| |  | increasing sales, marketing and administrative support staffing,
	including costs associated with employee turnover;                            
|
| |  | increasing costs associated with the implementation of our new
	billing system for domestic operations;                                         
|
| |  | continuing aggressive marketing and advertising campaigns in
	response to increasing competition for wireless
	subscribers; and                 
|
| |  | increasing costs associated with customer retention activities.                                                                                 

d.  Segment
earnings (losses).

|                          |                           |                       |       |              |  |              |    |              |   |                 |      |         |  |  |    |    |   |   |     |     |  |  |     |     |  
|------------------------- | ------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | --------------- | ---- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | --- | --- | -
|                          |                           |                       |       |              |  |              |    |              |   |                
|                          |                           |                       |       |              |  |              |    |              |   | Increase       
|                          |                           |                       |       | % of         |  |              |    | % of         |   | (Decrease) from
|                          |                           |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year  
|                          |                           | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |                
|                          |                           | 2000                  |       | Revenues     |  | 1999         |    | Revenues     |   | Dollars         |      | Percent
|                          |                           |                       |       |              |  |              |    |              |   |                 |      |        
|                          |                           |                      
|                          |                           | (dollars in millions)
|                         
|                         
|                         
|                         
|Domestic earnings         |                           | $                     | 1,395 |              |  |              | 24 | %            |   | $               | 698  |         |  |  | 18 | %  |   | $ | 697 |     |  |  | 100 | %  
|                         
|                         
|                         
|                         
|International losses      |                           |                       | (133  | )            |  |              | (2 | )%           |   |                 | (163 | )       |  |  | (4 | )% |   |   | 30  |     |  |  | 18  | %  
|                         
|                         
|                         
|                         
|Intercompany eliminations |                           |                       | 2     |              |  |              |   |              |   |                 |     |         |  |  |   |    |   |   | 2   |     |  |  | NM  |    
|                          |                           |                       |       |              |  |              |    |              |   |                 |      |         |  |  |    |    |   |   |     |     |  |  |     |    
|                          | Segment earnings (losses) |                       | $     | 1,264        |  |              |    | 22           | % |                 | $    | 535     |  |  |    | 14 | % |   | $   | 729 |  |  |     | 136 | %
|                          |                           |                       |       |              |  |              |    |              |   |                 |      |         |  |  |    |    |   |   |     |     |  |  |     |    




NM  Not Meaningful

We define segment earnings as earnings before interest, taxes,
depreciation and amortization and other nonoperating charges.
Based on the current stage of development of each of our
reportable segments, most of our operating revenues and
identifiable assets, and all of our segment earnings, pertain to
our domestic operations. In 2000, domestic segment earnings
improved significantly and increased as a percentage of
consolidated operating revenues. This improvement is primarily
due to a 47% increase in domestic operating revenues, which has
exceeded the 35% increase in domestic operating expenses. In
2000, our increasing customer base generated higher operating
revenues resulting in lower operating expenses as a percentage
of revenues due to the economies of scale achieved as a result
of increases in system usage.

International segment losses improved slightly in 2000,
primarily due to the decrease in bad debt expense and increasing
revenues from growth in digital handset sales. We expect
international segment losses to continue while we are building
out our digital mobile networks and expanding our presence in
international markets.

e. 
Depreciation and amortization.

|             |                               |                       |       |              |  |              |    |              |   |                 |     |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------ | ----------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | --------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|             |                               |                       |       |              |  |              |    |              |   |                
|             |                               |                       |       |              |  |              |    |              |   | Increase       
|             |                               |                       |       | % of         |  |              |    | % of         |   | (Decrease) from
|             |                               |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year  
|             |                               | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |                
|             |                               | 2000                  |       | Revenues     |  | 1999         |    | Revenues     |   | Dollars         |     | Percent
|             |                               |                       |       |              |  |              |    |              |   |                 |     |        
|             |                               |                      
|             |                               | (dollars in millions)
|            
|            
|            
|            
|Depreciation |                               | $                     | 1,063 |              |  |              | 19 | %            |   | $               | 791 |         |  |  | 21 | %  |   | $ | 272 |     |  |  | 34 | % 
|            
|            
|            
|            
|Amortization |                               |                       | 202   |              |  |              | 3  | %            |   |                 | 213 |         |  |  | 6  | %  |   |   | (11 | )   |  |  | (5 | )%
|             |                               |                       |       |              |  |              |    |              |   |                 |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|             | Depreciation and amortization |                       | $     | 1,265        |  |              |    | 22           | % |                 | $   | 1,004   |  |  |    | 27 | % |   | $   | 261 |  |  |    | 26 | %
|             |                               |                       |       |              |  |              |    |              |   |                 |     |         |  |  |    |    |   |   |     |     |  |  |    |   

Depreciation and amortization increased in 2000 primarily due to
the increase in depreciation as a result of placing into
service, as well as modifying, additional transmitter and
receiver sites and switches in

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Amortization decreased $27 million in 2000 as some of our
domestic intangible assets were fully amortized in 1999. This
decrease was offset by a $16 million increase in
amortization attributable to international acquisition
activities during 2000. We expect the amount of amortization to
increase as we acquire, place into service and continue to
amortize intangible assets, such as licenses and customer lists.

f. 
Interest expense, interest income and other.

|                                              |  |                       |       |              |  |              |    |              |  |                 |       |         |  |  |    |   |  |   |      |   |  |  |     |   
|--------------------------------------------- |  | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ |  | --------------- | ----- | ------- |  |  | -- | - |  | - | ---- | - |  |  | --- | --
|                                              |  |                       |       |              |  |              |    |              |  |                
|                                              |  |                       |       |              |  |              |    |              |  | Increase       
|                                              |  |                       |       | % of         |  |              |    | % of         |  | (Decrease) from
|                                              |  |                       |       | Consolidated |  |              |    | Consolidated |  | Previous Year  
|                                              |  | December 31,          |       | Operating    |  | December 31, |    | Operating    |  |                
|                                              |  | 2000                  |       | Revenues     |  | 1999         |    | Revenues     |  | Dollars         |       | Percent
|                                              |  |                       |       |              |  |              |    |              |  |                 |       |        
|                                              |  |                      
|                                              |  | (dollars in millions)
|                                             
|                                             
|                                             
|                                             
|Interest expense                              |  | $                     | 1,245 |              |  |              | 22 | %            |  | $               | 878   |         |  |  | 23 | % |  | $ | 367  |   |  |  | 42  | % 
|                                             
|                                             
|                                             
|                                             
|Interest income                               |  |                       | 396   |              |  |              | 7  | %            |  |                 | 96    |         |  |  | 3  | % |  |   | 300  |   |  |  | 313 | % 
|                                             
|                                             
|                                             
|                                             
|Realized gain on exchange of investment       |  |                       | 275   |              |  |              | 5  | %            |  |                 |      |         |  |  |   |   |  |   | 275  |   |  |  | NM  |   
|                                             
|                                             
|                                             
|                                             
|Equity in losses of unconsolidated affiliates |  |                       | 152   |              |  |              | 3  | %            |  |                 | 73    |         |  |  | 2  | % |  |   | 79   |   |  |  | 108 | % 
|                                             
|                                             
|                                             
|                                             
|Foreign currency transaction losses           |  |                       | 25    |              |  |              |   |              |  |                 | 61    |         |  |  | 2  | % |  |   | (36  | ) |  |  | (59 | )%
|                                             
|                                             
|                                             
|                                             
|Other income, net                             |  |                       | 8     |              |  |              |   |              |  |                 | 87    |         |  |  | 2  | % |  |   | (79  | ) |  |  | (91 | )%
|                                             
|                                             
|                                             
|                                             
|Income tax benefit                            |  |                       | 33    |              |  |              | 1  | %            |  |                 | 28    |         |  |  | 1  | % |  |   | 5    |   |  |  | 18  | % 
|                                             
|                                             
|                                             
|                                             
|Extraordinary loss                            |  |                       | 104   |              |  |              | 2  | %            |  |                 | 68    |         |  |  | 2  | % |  |   | 36   |   |  |  | 53  | % 
|                                             
|                                             
|                                             
|                                             
|Loss attributable to common stockholders      |  |                       | 1,024 |              |  |              | 18 | %            |  |                 | 1,530 |         |  |  | 40 | % |  |   | (506 | ) |  |  | (33 | )%




NM  Not Meaningful

The increase in interest expense in 2000 resulted from the
issuance of our senior notes in November 1999 and in 2000,
as well as a higher average level of outstanding borrowings and
higher weighted average interest rates under our bank and vendor
credit facilities. This increase was partially offset by a
decrease in the weighted average interest rate on our senior
notes outstanding during 2000.

The increase in interest income in 2000 is primarily due to
income recognized on the investment of:



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the net proceeds we received in November 1999 from the
	public offering of our class A common stock and the issuance of
	our 9.375% senior serial redeemable notes due 2009;
|
| |  | the net proceeds we received in January 2000 and by Nextel
	International in August 2000 from the issuance of senior
	notes; and                                            
|
| |  | the additional borrowings under our domestic bank credit
	facility in the first half of 2000 and the related investment of
	these borrowed amounts pending our use of them. 

The realized gain on exchange of investment resulted from the
exchange of our stock in Clearnet for stock in TELUS as a result
of the acquisition of Clearnet by TELUS in October 2000.

The increase in 2000 in equity in losses of unconsolidated
affiliates is due primarily to increased losses attributable to
our equity method investment in Nextel Partners, Inc.

The foreign currency transaction loss in 2000 is due primarily
to the weakening of the Brazilian real and Philippine peso
relative to the U.S. dollar during the fourth quarter of
2000, which has continued in early 2001 with respect to the
Brazilian real. The 1999 foreign currency transaction loss is
primarily due to the devaluation of the Brazilian real relative
to the U.S. dollar during the early part of 1999.

43



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The decrease in 2000 in other income, net primarily relates to
the $70 million gain recognized in 1999 on the sale of our
interest in a joint venture.

The extraordinary loss in 2000 and 1999 relates to the early
retirement of some of our senior notes during the first quarter
of 2000 and the fourth quarter of 1999. The increase in the loss
is due to the increase in the amount of debt we retired in 2000
over 1999.



|   |                                                               
|-- | --------------------------------------------------------------
|2. | Year ended December 31, 1999 vs. year ended
	December 31, 1998

a.  Operating revenues.

|                                                                                      |                    |                       |       |              |  |              |     |              |  |               |       |         |  |  |     |      |  |   |       |       |  |  |     |      | 
|------------------------------------------------------------------------------------- | ------------------ | --------------------- | ----- | ------------ |  | ------------ | --- | ------------ |  | ------------- | ----- | ------- |  |  | --- | ---- |  | - | ----- | ----- |  |  | --- | ---- | 
|                                                                                      |                    |                       |       |              |  |              |     |              |  |              
|                                                                                      |                    |                       |       | % of         |  |              |     | % of         |  | Increase from
|                                                                                      |                    |                       |       | Consolidated |  |              |     | Consolidated |  | Previous Year
|                                                                                      |                    | December 31,          |       | Operating    |  | December 31, |     | Operating    |  |              
|                                                                                      |                    | 1999                  |       | Revenues     |  | 1998         |     | Revenues     |  | Dollars       |       | Percent
|                                                                                      |                    |                       |       |              |  |              |     |              |  |               |       |        
|                                                                                      |                    |                      
|                                                                                      |                    | (dollars in millions)
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Domestic                                                                              |                    | $                     | 3,662 |              |  |              | 97% |              |  | $             | 2,228 |         |  |  | 97% |      |  | $ | 1,434 |       |  |  | 64% |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|International                                                                         |                    |                       | 124   |              |  |              | 3%  |              |  |               | 67    |         |  |  | 3%  |      |  |   | 57    |       |  |  | 85% |     
|                                                                                      |                    |                       |       |              |  |              |     |              |  |               |       |         |  |  |     |      |  |   |       |       |  |  |     |     
|                                                                                      | Operating revenues |                       | $     | 3,786        |  |              |     | 100%         |  |               | $     | 2,295   |  |  |     | 100% |  |   | $     | 1,491 |  |  |     | 65%  | 
|                                                                                      |                    |                       |       |              |  |              |     |              |  |               |       |         |  |  |     |      |  |   |       |       |  |  |     |     
|Digital handsets in service at year end for consolidated
	subsidiaries (in thousands) |                    |                       |       |              |  |              |     |              |  |               |       |         |  |  |     |      |  |   |       |       |  |  |     |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Domestic           |                       |       | 4,516        |  |              |     |             |  |               |       | 2,790   |  |  |     |     |  |   |       | 1,726 |  |  |     | 62%  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | International      |                       |       | 279          |  |              |     |             |  |               |       | 101     |  |  |     |     |  |   |       | 178   |  |  |     | 176% | 

The increase in domestic operating revenues in 1999 consisted of
a 79% increase in wireless service and other revenues of
$1.42 billion to $3.22 billion and a 4% increase in
revenues from digital handset and accessory sales of
$17 million to $440 million. Domestic service revenues
increased in 1999 principally as a result of a 62% increase in
domestic digital handsets in service. We experienced a 94%
increase in system minutes of use in 1999, along with an
increase in the average monthly revenue per digital handset from
about $69 during 1998 to about $73 during 1999. These factors
contributed to domestic wireless service revenues growing at a
faster pace than digital handset growth during 1999.

We continued selling digital handsets at prices below our cost
to attract customers. As competition has intensified, our
digital handset prices have declined. Accordingly, revenues from
domestic digital handset and accessory sales have not increased
in proportion to the increase in number of digital handsets
sold. The growth in digital handsets in service was the result
of a number of factors, principally:



| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | expanded network coverage and capacity;                                 
|
| |  | differentiated products and services including Nextel Direct
	Connect;  
|
| |  | the increased number of indirect distribution channels;                 
|
| |  | increased consumer awareness and acceptance of wireless
	communications;
|
| |  | pricing plans targeted at particular market segments; and               
|
| |  | increased sales force and marketing staff.                              

International operating revenues increased in 1999 primarily as
a result of a 174% increase in digital handsets in service for
international consolidated entities, offset by the effect of the
Brazilian real devaluation in 1999. The increase in digital
handsets in service reflected the launch of digital wireless
communications services in major markets in Brazil, Argentina
and Mexico in the second half of 1998 and Peru in the second
quarter of 1999.

44



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b.  Cost of revenues.

|              |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------- | ---------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|              |                  |                       |       |              |  |              |    |              |   |              
|              |                  |                       |       | % of         |  |              |    | % of         |   | Increase from
|              |                  |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year
|              |                  | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |              
|              |                  | 1999                  |       | Revenues     |  | 1998         |    | Revenues     |   | Dollars       |       | Percent
|              |                  |                       |       |              |  |              |    |              |   |               |       |        
|              |                  |                      
|              |                  | (dollars in millions)
|             
|             
|             
|             
|Domestic      |                  | $                     | 1,483 |              |  |              | 39 | %            |   | $             | 1,161 |         |  |  | 51 | %  |   | $ | 322 |     |  |  | 28 | % 
|             
|             
|             
|             
|International |                  |                       | 96    |              |  |              | 3  | %            |   |               | 57    |         |  |  | 2  | %  |   |   | 39  |     |  |  | 68 | % 
|              |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|              | Cost of revenues |                       | $     | 1,579        |  |              |    | 42           | % |               | $     | 1,218   |  |  |    | 53 | % |   | $   | 361 |  |  |    | 30 | %
|              |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   

The increase in cost of revenues in 1999 for our domestic
operations consisted of an increase in cost of providing
wireless services of $160 million or 32% and an increase in
cost of digital handset and accessory sales of $162 million
or 24%. Domestic cost of service revenues increased in 1999
primarily as a result of a 53% increase in the number of
switches and a 44% increase in transmitter and receiver sites
and related equipment we placed in service during 1999, as well
as increases in airtime usage. Increased airtime usage resulted
primarily from increased digital handsets in service and
increased average system minutes of use per customer. Cost of
digital handset and accessory sales increased in 1999 due to the
increase in the number of digital handsets sold, offset, in
part, by a decrease in the average cost we paid for the digital
handsets sold.

The increase in the international cost of revenues in 1999 was
attributable primarily to the increase in the number of
transmitter and receiver sites and switches placed in service
during 1999, as well as increases in international expenses
associated with increased airtime usage resulting from
additional digital handsets sold and in service.

c.  Selling, general and administrative
expenses.

|                           |                                     |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | --- | ------------ |  | ------------ | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |     |              |  |              |    |              |   |              
|                           |                                     |                       |     | % of         |  |              |    | % of         |   | Increase from
|                           |                                     |                       |     | Consolidated |  |              |    | Consolidated |   | Previous Year
|                           |                                     | December 31,          |     | Operating    |  | December 31, |    | Operating    |   |              
|                           |                                     | 1999                  |     | Revenues     |  | 1998         |    | Revenues     |   | Dollars       |     | Percent
|                           |                                     |                       |     |              |  |              |    |              |   |               |     |        
|                           |                                     |                      
|                           |                                     | (dollars in millions)
|                          
|                          
|                          
|                          
|Selling and marketing      |                                     | $                     | 833 |              |  |              | 22 | %            |   | $             | 700 |         |  |  | 31 | %  |   | $ | 133 |     |  |  | 19 | % 
|                          
|                          
|                          
|                          
|General and administrative |                                     |                       | 839 |              |  |              | 22 | %            |   |               | 597 |         |  |  | 26 | %  |   |   | 242 |     |  |  | 41 | % 
|                           |                                     |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|                           | Selling, general and administrative |                       | $   | 1,672        |  |              |    | 44           | % |               | $   | 1,297   |  |  |    | 57 | % |   | $   | 375 |  |  |    | 29 | %
|                           |                                     |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   

The increase in selling, general and administrative expenses in
1999 consisted of an increase in domestic expenses of
$316 million and an increase in international expenses of
$59 million.

The increase in selling and marketing expenses in 1999 primarily
reflected increased costs incurred in connection with higher
consolidated sales of digital handsets including:



| |   |                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $111 million of increased domestic commission and residual
	payments owed to indirect dealers and distributors as a result
	of increased digital handset sales through indirect distribution
	channels; and                                                                                                                                                              
|
| |  | $22 million of increased advertising and marketing expenses
	from international operations due to aggressive marketing
	campaigns directed at growing the customer base and increasing
	customer awareness of digital services primarily in major
	markets launched in 1998, as well as an increase in the size of
	the international sales force to support this growth.

The increase in general and administrative expenses in 1999 was
primarily attributable to the following:



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | $76 million of increased domestic expenses related to
	billing, collection and customer care activities as a result of
	a larger customer base;

45



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $85 million of increased domestic personnel, facilities and
	general corporate expenses primarily reflecting increased
	staffing for back-office activities required to serve the larger
	customer base;                                                                                                                                                                                                                                                                                                                                                  
|
| |  | $44 million of increased domestic bad debt expense due to
	the larger customer base; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | $37 million of increased international general and
	administrative expenses incurred to support the growth in our
	international markets, including a $26 million increase in
	bad debt expense resulting from a concerted program initiated in
	the first quarter of 1999 to enhance credit policies and
	aggressively review and take action on past due receivables.
	Following the institution of these initiatives, bad debt expense
	decreased $13 million from $23  million for the first
	half of 1999 to $10 million for the second half of 1999.

d.  Segment earnings (losses).

|                           |                           |                       |      |              |  |              |     |              |  |                 |      |         |   |  |    |     |    |   |     |     |  |  |     |    | 
|-------------------------- | ------------------------- | --------------------- | ---- | ------------ |  | ------------ | --- | ------------ |  | --------------- | ---- | ------- | - |  | -- | --- | -- | - | --- | --- |  |  | --- | -- | 
|                           |                           |                       |      |              |  |              |     |              |  |                
|                           |                           |                       |      |              |  |              |     |              |  | Increase       
|                           |                           |                       |      | % of         |  |              |     | % of         |  | (Decrease) from
|                           |                           |                       |      | Consolidated |  |              |     | Consolidated |  | Previous Year  
|                           |                           | December 31,          |      | Operating    |  | December 31, |     | Operating    |  |                
|                           |                           | 1999                  |      | Revenues     |  | 1998         |     | Revenues     |  | Dollars         |      | Percent
|                           |                           |                       |      |              |  |              |     |              |  |                 |      |        
|                           |                           |                      
|                           |                           | (dollars in millions)
|                          
|                          
|                          
|                          
|Domestic earnings (losses) |                           | $                     | 698  |              |  |              | 18% |              |  | $               | (99  | )       |   |  | (5 | )%  |    | $ | 797 |     |  |  | NM  |   
|                          
|                          
|                          
|                          
|International losses       |                           |                       | (163 | )            |  |              | (4  | )%           |  |                 | (121 | )       |   |  | (5 | )%  |    |   | (42 | )   |  |  | (35 | )%
|                           |                           |                       |      |              |  |              |     |              |  |                 |      |         |   |  |    |     |    |   |     |     |  |  |     |   
|                           | Segment earnings (losses) |                       | $    | 535          |  |              |     | 14%          |  |                 | $    | (220    | ) |  |    | (10 | )% |   | $   | 755 |  |  |     | NM | 
|                           |                           |                       |      |              |  |              |     |              |  |                 |      |         |   |  |    |     |    |   |     |     |  |  |     |   




NM  Not meaningful

We define segment earnings as earnings before interest, taxes,
depreciation and amortization and other nonoperating charges.
Based on the stage of development of each of our reportable
segments, most of our operating revenues and identifiable assets
and all of our segment earnings pertain to our domestic
operations. Domestic segment earnings improved significantly in
1999 due to an increasing customer base, driving increasing
operating revenues, and decreasing operating expenses as a
percentage of revenues due to the economies of scale achieved as
a result of increases in system usage.

e.  Depreciation and amortization.

|             |                               |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------ | ----------------------------- | --------------------- | --- | ------------ |  | ------------ | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|             |                               |                       |     |              |  |              |    |              |   |              
|             |                               |                       |     | % of         |  |              |    | % of         |   | Increase from
|             |                               |                       |     | Consolidated |  |              |    | Consolidated |   | Previous Year
|             |                               | December 31,          |     | Operating    |  | December 31, |    | Operating    |   |              
|             |                               | 1999                  |     | Revenues     |  | 1998         |    | Revenues     |   | Dollars       |     | Percent
|             |                               |                       |     |              |  |              |    |              |   |               |     |        
|             |                               |                      
|             |                               | (dollars in millions)
|            
|            
|            
|            
|Depreciation |                               | $                     | 791 |              |  |              | 21 | %            |   | $             | 627 |         |  |  | 27 | %  |   | $ | 164 |     |  |  | 26 | % 
|            
|            
|            
|            
|Amortization |                               |                       | 213 |              |  |              | 6  | %            |   |               | 205 |         |  |  | 9  | %  |   |   | 8   |     |  |  | 4  | % 
|             |                               |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|             | Depreciation and amortization |                       | $   | 1,004        |  |              |    | 27           | % |               | $   | 832     |  |  |    | 36 | % |   | $   | 172 |  |  |    | 21 | %
|             |                               |                       |     |              |  |              |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   

Depreciation and amortization increased in 1999 primarily due to
the increase in depreciation as a result of placing into
service, as well as modifying, additional transmitter and
receiver sites and switches in existing domestic and in existing
and new international markets launched in the second half of
1998. The transmitter and receiver sites and switches were
placed into service primarily to enhance the coverage and
capacity of our digital mobile network in our domestic and
international markets. System assets relating to the development
and expansion of the digital mobile networks, both domestically
and internationally, represent the largest portion of capital
expenditures during the periods. Depreciation begins when system
assets are placed into service in the relevant markets.

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f.  Interest expense, interest income and
other.

|                                              |  |                       |       |              |  |              |     |              |  |                 |       |         |  |  |     |    |  |   |      |   |  |  |      |   
|--------------------------------------------- |  | --------------------- | ----- | ------------ |  | ------------ | --- | ------------ |  | --------------- | ----- | ------- |  |  | --- | -- |  | - | ---- | - |  |  | ---- | --
|                                              |  |                       |       |              |  |              |     |              |  |                
|                                              |  |                       |       |              |  |              |     |              |  | Increase       
|                                              |  |                       |       | % of         |  |              |     | % of         |  | (Decrease) from
|                                              |  |                       |       | Consolidated |  |              |     | Consolidated |  | Previous Year  
|                                              |  | December 31,          |       | Operating    |  | December 31, |     | Operating    |  |                
|                                              |  | 1999                  |       | Revenues     |  | 1998         |     | Revenues     |  | Dollars         |       | Percent
|                                              |  |                       |       |              |  |              |     |              |  |                 |       |        
|                                              |  |                      
|                                              |  | (dollars in millions)
|                                             
|                                             
|                                             
|                                             
|Interest expense                              |  | $                     | 878   |              |  |              | 23% |              |  | $               | 656   |         |  |  | 29% |    |  | $ | 222  |   |  |  | 34%  |   
|                                             
|                                             
|                                             
|                                             
|Interest income                               |  |                       | 96    |              |  |              | 3%  |              |  |                 | 34    |         |  |  | 1%  |    |  |   | 62   |   |  |  | 182% |   
|                                             
|                                             
|                                             
|                                             
|Equity in losses of unconsolidated affiliates |  |                       | 73    |              |  |              | 2%  |              |  |                 | 12    |         |  |  | 1%  |    |  |   | 61   |   |  |  | NM   |   
|                                             
|                                             
|                                             
|                                             
|Foreign currency transaction (losses) gains   |  |                       | (61   | )            |  |              | (2  | )%           |  |                 | 10    |         |  |  |    |    |  |   | (71  | ) |  |  | NM   |   
|                                             
|                                             
|                                             
|                                             
|Realized gain on sale of investment           |  |                       | 70    |              |  |              | 2%  |              |  |                 |      |         |  |  |    |    |  |   | 70   |   |  |  | NM   |   
|                                             
|                                             
|                                             
|                                             
|Other income (expense), net                   |  |                       | 17    |              |  |              |    |              |  |                 | (35   | )       |  |  | (2  | )% |  |   | 52   |   |  |  | 149% |   
|                                             
|                                             
|                                             
|                                             
|Income tax benefit                            |  |                       | 28    |              |  |              | 1%  |              |  |                 | 192   |         |  |  | 8%  |    |  |   | (164 | ) |  |  | (85  | )%
|                                             
|                                             
|                                             
|                                             
|Extraordinary loss                            |  |                       | 68    |              |  |              | 2%  |              |  |                 | 133   |         |  |  | 6%  |    |  |   | (65  | ) |  |  | (49  | )%
|                                             
|                                             
|                                             
|                                             
|Loss attributable to common stockholders      |  |                       | 1,530 |              |  |              | 40% |              |  |                 | 1,801 |         |  |  | 78% |    |  |   | (271 | ) |  |  | (15  | )%




NM  Not Meaningful

The increase in interest expense in 1999 resulted from the
issuance of our senior notes during November 1998,
June 1999 and November 1999, as well as a higher
average level of outstanding borrowings under our domestic bank
credit facility and Nextel Internationals bank and vendor
credit facilities.

The increase in interest income in 1999 is primarily due to
income recognized on the investment of the net proceeds received
in November 1999 from the public offering of our class A
common stock and the issuance of our 9.375% senior serial
redeemable notes due 2009.

The increase in equity in losses of unconsolidated affiliates in
1999 is primarily due to our equity method investment in Nextel
Partners and increased losses in our Philippine and Japanese
affiliates. The increase in the foreign currency transaction
losses is due primarily to the devaluation of the Brazilian real
relative to the U.S. dollar during 1999. A $70 million
gain was recognized in 1999 on the sale of our 50% ownership
interest in a joint venture.

We recorded an income tax benefit of $28 million in 1999,
reflecting an effective tax rate of about 2%, compared to
$192 million in 1998, reflecting an effective tax rate of
about 11%. The change in the effective tax rate primarily
resulted from a change in the tax law in 1998 which extended the
net operating loss carryforward period from 15 to 20 years
for losses generated in or after 1998. Therefore, in 1998, more
income tax benefit was recorded reflecting the increase in the
net operating loss carryforward period. In certain
circumstances, Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, limits
the recognition of income tax benefits for net operating losses
to the amount of deferred tax liabilities that are expected to
reverse within the statutory carryforward period. We increased
the valuation allowance related to net operating losses by
$448 million in 1999 and $487 million in 1998 since a
significant portion of our deferred tax liabilities will reverse
after existing net operating losses expire. The financial
statement limitation on the recognition of income tax benefits
for net operating losses will not have an impact on our ability
to use our net operating losses for income tax purposes.

The extraordinary loss in 1999 and 1998 relates to the early
retirement of some of our senior notes during the fourth quarter
of 1999 and the second quarter of 1998. The decrease in the loss
is due to the decrease in the amount of debt we retired in 1999
as compared to 1998.

C.  Liquidity and Capital Resources

We had losses attributable to common stockholders of
$1.02 billion for 2000 and $1.53 billion for 1999. The
operating expenses and capital expenditures associated with
developing, enhancing and operating

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Cash Flows. Net cash provided by operating
activities of $800 million during 2000 improved by
$476 million compared to net cash provided by operating
activities of $324 million during 1999. This improvement in
net cash provided by operating activities is primarily
attributable to domestic operations and reflects increasing
operating revenues and improved domestic financial performance
resulting from the growth in our customer base.

Capital expenditures to fund the continued expansion and
enhancement of our digital mobile network continue to represent
the largest use of our funds for investing activities. Net cash
used in investing activities of $5.69 billion during 2000
increased $2.8 billion as compared to $2.89 billion in
1999 primarily due to the $1.57 billion increase in cash
paid for capital expenditures and $1.22 billion increase in
cash paid for acquisitions and purchases of licenses. Cash
payments for capital expenditures totaled $3.52 billion
during 2000 and $1.95 billion during 1999, including
$369 million during 2000 and $145 million during 1999
for international operations. Cash paid for capital expenditures
in 2000 increased by 81% as compared to 1999. This increase was
primarily driven by a 63% increase in the number of switches
placed in service and a 44% increase in the number of
transmitter and receiver sites and related equipment placed in
service. The increase in our customer base has placed increasing
demands on our digital mobile network. As a result, we incurred
additional capital expenditures in 2000 to enhance our existing
infrastructure to improve the capacity and quality of our
digital mobile network. We also increased our build activities
in 2000 to accommodate anticipated future increases in our
customer base and in system usage. Cash payments for
acquisitions and license purchases during 2000 consisted
primarily of $556 million for licenses purchased in FCC
auctions, $386 million for international acquisitions and
investments, $263 million in other license purchases and
$116 million for escrow deposits for future domestic
acquisitions and license purchases.

Net cash provided by financing activities of $2.8 billion
during 2000 consisted primarily of $1.79 billion in gross
proceeds from the issuance of debt securities and
$1.85 billion in proceeds from borrowings under our
domestic bank credit facility, partially offset by
$1.21 billion used for the retirement of debt securities.

In January 2001, we raised $1.245 billion in net
proceeds from the private placement of our 9.5% senior serial
redeemable notes due 2011.

D.  Future Capital Needs and Resources

We anticipate that, for the foreseeable future, significant
amounts of available cash flows will be utilized both
domestically and internationally for:



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | capital expenditures for the expansion and enhancement of the
	digital mobile networks;                                                          
|
| |  | operating expenses relating to our digital mobile networks;                                                                                      
|
| |  | potential acquisitions, including any negotiated acquisitions,
	of spectrum from third parties and any future governmental
	auctions of spectrum;
|
| |  | debt service requirements; and                                                                                                                   
|
| |  | other general corporate expenditures.                                                                                                            

We anticipate that our cash utilization for capital expenditures
and other investing activities will continue to exceed our
positive cash flows from domestic operating activities
throughout 2001, as we build out, expand and enhance our digital
mobile networks. See Part I, Item 1.
Business  L. Risk Factors 

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During the first quarter of 2001, our domestic operations have
begun to feel the impact of a slowing economy, resulting in
reduced sales to our business customers, and we are incurring
higher operating costs in our business. As a result, we expect
decreased operating cash flow from our domestic business in the
first quarter of 2001 as compared to the fourth quarter of 2000.
To offset these factors, we are taking various actions to reduce
costs and increase profitability. However, we cannot be sure
that our actions will be successful in controlling costs to the
degree required to achieve our desired level of operating cash
flow in 2001.

As of December 31, 2000, our domestic bank credit facility
provided for total secured financing capacity of up to
$6.0 billion, subject to the satisfaction or waiver of
applicable borrowing conditions. This facility consists of a
$1.5 billion revolving loan and $3.5 billion in term
loans that mature over a period from December 31, 2007 to
December 31, 2008, as well as a $1.0 billion term loan
borrowed in March 2000, maturing March 31, 2009. At
December 31, 2000, we had borrowed the entire
$4.5 billion of term loans available under our bank credit
facility. Amounts outstanding under this bank credit facility
are secured by liens on assets of substantially all our domestic
subsidiaries and bear interest payable quarterly at an
adjustable rate calculated based either on the U.S. prime
rate or the London Interbank Offered Rate, or LIBOR. The
maturity dates of the loans can accelerate if our credit ratings
are below specified levels and if the aggregate amount of
specified debt obligations that mature before June 30,
2009, including the redemption price of redeemable stock that is
mandatorily redeemable before June 30, 2009, exceed
specified amounts. The availability of financing under this bank
credit facility is subject to requirements under the indentures
governing our public notes and the terms applicable to some of
our preferred stock. As of December 31, 2000, under our
bank credit agreement, as then in effect, we were able to access
the entire $6.0 billion available in compliance with our
financial ratio tests, the debt incurrence covenants contained
in our indentures and the relevant terms of applicable issues of
preferred stock.

Currently, we expect to maintain a level of domestic capital
expenditures during 2001 comparable to our domestic capital
expenditures for 2000. Our capital spending is expected to be
driven by several factors, including:



| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the contemplated expansion and enhancement of digital mobile
	network coverage around most major domestic market areas;                                                                                                                           
|
| |  | the contemplated construction of additional transmitter and
	receiver sites to increase system capacity and maintain system
	quality and the installation of related switching equipment in
	the existing domestic core market coverage areas; and
|
| |  | the potential enhancement of our digital mobile network
	employing contemplated third generation or
	3G technology.                                                                                                                           

In March 2001, due to market conditions, Nextel
International announced its decision to discontinue its initial
public offering at that time and withdrew its registration
statement. As a result, Nextel International is currently in the
process of reviewing its 2001 business plans. Nextel
International will require a significant amount of capital to
fund its operations and any planned network build-out for at
least the next several years. We provided Nextel International
with significant financial support during 2000. In addition, we
have committed to provide Nextel International with an aggregate
of $750 million in additional funding, comprised of
$500 million of additional equity in the form of an
investment in additional shares of its series A
exchangeable redeemable preferred stock and a $250 million
loan secured by certain of their assets. Nextel International is
also reviewing various other potential sources of financing,
including public or private debt or equity financing and sales
of nonstrategic assets. However, Nextel International may not be
able to obtain any such funds from those other sources on
satisfactory terms, if at all.

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If Nextel International is unable to raise additional funds or
obtain funds from other sources on acceptable terms and in a
timely manner, Nextel International may be required to conserve
its available cash for use in funding its existing business
activities, by slowing enhancement and expansion of its digital
mobile networks and minimizing or eliminating certain
expenditures. Although we have no legal obligation to make any
equity investments in, or otherwise advance funds to, Nextel
International, to the extent Nextel International is unable to
obtain necessary funding from other sources, we may supply
Nextel International with additional funds, including the
commitments outlined above. Any funding that we elect to provide
to Nextel International will reduce the amount of funding
available for our domestic operations.

Based on available cash resources and the anticipated cash needs
of our domestic and international operations for capital
expenditures and acquisitions and the combined anticipated
operating cash flow of our domestic and international wireless
businesses, we believe that we will be able to fully fund both
our domestic and international operations through calendar year
2001. See Part I, Item 1. Business 
L. Risk Factors  18. Our forward-looking statements
are subject to a variety of factors that could cause actual
results to differ materially from current beliefs. In
making this assessment, we have considered:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidated cash, cash equivalents and short-term investments
	on hand as of December 31, 2000 of $4.67 billion;                                      
|
| |  | the availability of $1.5 billion of incremental funding
	over the amounts outstanding as of December 31, 2000 under
	our domestic bank credit facility;
|
| |  | the net proceeds of $1.245 billion from the
	January 2001 private placement of our 9.5% senior serial
	notes due 2011;                                 
|
| |  | the anticipated level of domestic capital expenditures;                                                                                                
|
| |  | domestic and international debt service requirements; and                                                                                              
|
| |  | our participation in supplying a substantial portion of the
	funding expected to be required for Nextel Internationals
	operations during 2001.       

If our or Nextel Internationals business plans change, or
if economic conditions in any of our combined markets generally
or competitive practices in the mobile wireless
telecommunications industry change materially from those
currently prevailing or from those now anticipated in 2001, or
if other presently unexpected circumstances are encountered that
have a material effect on the cash flow or profitability of the
domestic or international mobile wireless businesses conducted
by us or Nextel International, the anticipated cash needs of
those businesses, and the conclusions as to the adequacy of the
available sources, each also could change significantly.
Finally, our conclusion that we will be able to fully fund both
our domestic and international operations through 2001 does not
take into account the impact of our participation in any
auctions for the purchase of licenses other than those already
concluded or any significant acquisition transactions or the
pursuit of any significant new business opportunities other than
those currently being pursued by us or Nextel International. Any
acquisition or new business opportunity could involve
significant additional funding needs in excess of the identified
currently available sources, and could require us or Nextel
International to raise additional equity and debt funding to
meet those needs.

The availability of borrowings under our domestic bank credit
facility is subject to certain conditions and limitations, and
we cannot be sure that those conditions will continue to be met.
The instruments relating to our financing arrangements and
preferred stock contain provisions that operate to limit the
amount of borrowings that we may incur. The terms of the
domestic bank credit facility and Nextel Internationals
financing agreements also require us and our subsidiaries at
specified times to maintain compliance with specified operating
and financial covenants or ratios, including specified covenants
and ratios related to leverage, which become more stringent over
time. In March 2001, we amended our $6.0 billion domestic
bank credit facility to modify certain financial covenants to
better reflect our anticipated financial performance and to
permit ongoing compliance with the financial covenants during

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In addition, our capital needs, and our ability to adequately
address those needs through debt or equity funding sources, are
subject to a variety of factors that we cannot presently predict
with certainty, for example:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | the commercial success of our domestic and international digital
	mobile networks;
|
| |  | the amount and timing of our capital expenditures and operating
	income or losses;
|
| |  | the volatility and demand of the equity and debt
	markets; and                    
|
| |  | the market price of our common stock.                                             

We have 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. At present, other than the existing equity or
debt financing arrangements that have been consummated or are
described in this annual report, we have no legally binding
commitments or understandings with any third parties to obtain
any material amount of equity or debt financing. Under the terms
of the agreements between us and Motorola pursuant to which we
acquired substantially all of Motorolas domestic 800 MHz
specialized mobile radio licenses in 1995, we have agreed, under
specified circumstances, not to grant superior governance rights
to any third-party investor without Motorolas consent,
which may make securing certain strategic equity investments
more difficult. Our ability to incur additional indebtedness,
including, in certain circumstances, indebtedness incurred under
our domestic bank credit agreement, is and will be limited by
the terms of our financing agreements and the terms of some
series of our outstanding preferred stock.

E.  Effect of Inflation and Foreign Currency
Exchange

Inflation is not a material factor affecting our business.
General operating expenses such as salaries, employee benefits
and lease costs are, however, subject to normal inflationary
pressures. From time to time, we may experience price changes in
connection with the purchase of system infrastructure equipment
and handsets, but we do not currently believe that any of these
price changes will be material to our business.

The net assets of the subsidiaries of Nextel International are
subject to foreign currency exchange risks since they are
primarily maintained in local currency. Additionally, the
long-term debt of Nextel International and its subsidiaries is
almost entirely in U.S. dollar denominated form, which also
exposes such entities to foreign currency exchange risks.
Certain subsidiaries conduct business in countries in which the
rate of inflation is significantly higher than that of the
United States. Nextel International will seek to protect its
earnings from inflation and possible currency devaluation by
trying to periodically adjust the local currency prices charged
by the relevant subsidiary for sales of handsets and services to
its customers. However, Nextel International may not be able to
offset the devaluation of a foreign currency against the
U.S. dollar by a corresponding price increase. While it
routinely assesses its foreign currency exposure, Nextel
International has not entered into any hedging transactions.

F.  Effect of New Accounting Standards

1.  Statement of Financial Accounting Standard
No. 133

In June 1998, the Financial Accounting Standards Board, or
FASB, issued Statement of Financial Accounting Standards, or
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which, as amended by SFAS
No. 138, establishes accounting and reporting standards for
derivative instruments, including some derivative instruments
embedded in other contracts, and for hedging activities. SFAS
No. 133 requires that all derivatives be recognized on our
balance sheet as either assets or liabilities and measured at
fair value. Additionally, it requires that changes in the
derivative instruments

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Currently, we hedge the cash flows on some of our long-term debt
using interest rate swaps. These instruments are used to achieve
a desired proportion of fixed rate versus variable rate debt. In
an interest rate swap, we agree to exchange, at specified
intervals, the difference between a variable interest rate and
either a fixed or another variable interest rate, multiplied by
a notional principal amount.

As of December 31, 2000 and 1999, under accounting
principles generally accepted in the United States, our interest
rate swaps were not recorded on the balance sheet at fair value
and the net quarterly cash settlements were recognized as either
an increase in or reduction to interest expense. Some of our
interest rate swaps do not qualify for hedge accounting under
SFAS No. 133. Upon adoption of SFAS No. 133 on
January 1, 2001, we recorded a transition adjustment of
$20 million to increase the liabilities related to our
interest rate swaps to their fair value of $65 million.
This transition adjustment is reflected in other comprehensive
loss as the cumulative effect of a change in accounting
principle in 2001, and will be reclassified into earnings over
the lives of the respective interest rate swaps. After adoption,
SFAS No. 133 requires the changes in the fair values of
those interest rate swaps that do not qualify for hedge
accounting to be recognized in our statement of operations in
the period of the change. For our interest rate swap that does
qualify for cash flow hedge accounting, the effective portion of
the change in its fair value will be reported as other
comprehensive income (loss) and will be reclassified into
earnings in the same period during which the hedged transaction
affects earnings. The ineffective portion of the change in the
fair value of this interest rate swap will be recognized in our
statement of operations in the period of the change.

2.  Emerging Issues Task Force Issue
No. 00-14

In May 2000, the Emerging Issues Task Force reached a
consensus on EITF Issue No. 00-14, Accounting for
Certain Sales Incentives, which addresses the recognition,
measurement and statement of operations classification for sales
incentives offered voluntarily by vendors, without cost to
consumers, as a result of a single exchange transaction. We are
required to and will adopt EITF Issue No. 00-14 in the
second quarter of 2001. Based on our analysis to date, we do not
believe that the implementation of this consensus will have a
material impact on our financial position or results of
operations.




Item 7A.  Quantitative and Qualitative
Disclosures about Market Risk

We primarily use mandatorily redeemable preferred stock, senior
notes and bank and vendor credit facilities to finance our
obligations. These on-balance sheet financial instruments, to
the extent they provide for variable rates of interest, expose
us to interest rate risk. Our primary interest rate risk
exposure results from changes in LIBOR, the U.S. prime
rate, Eurodollar Rate and Adjusted Base Rate, or ABR, which are
used to determine the interest rates that are applicable to
borrowings under our bank and vendor credit agreements. We use
off-balance sheet derivative financial instruments, including
interest rate swap agreements, to partially hedge interest rate
exposure associated with on-balance sheet financial instruments.
All of our derivative financial instrument transactions are
entered into for non-trading purposes. The terms and
characteristics of the derivative financial instruments are
matched with the existing on-balance sheet instruments and thus
do not constitute speculative or leveraged positions independent
of these exposures.

Nextel Internationals revenues are denominated in foreign
currencies while a significant portion of its operations are
financed through senior notes and bank and vendor credit
facilities, which are denominated in U.S. dollars. As a
result, fluctuations in exchange rates relative to the
U.S. dollar, primarily those related to the Brazilian real,
Mexican peso and Philippine peso, expose us to foreign currency
exchange risks.

As of December 31, 2000, we held $2.06 billion of debt
securities in the form of commercial paper and corporate bonds
as short-term investments. As the weighted average maturity from
the date of

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At December 31, 2000, we had investments in the common
stock of publicly traded companies, which had an aggregate fair
value of $542 million as of December 31, 2000. These
investments are reported at their market value in our financial
statements. Negative fluctuations in the stock prices of these
companies expose us to equity price risks. A 10% decline in
their stock price would result in a $54 million decrease in
the fair value of our investments in these public companies.

The information below summarizes our market risks associated
with fluctuations in interest rates as of December 31, 2000
in U.S. dollars. To the extent that our financial
instruments expose us to interest rate and foreign currency
exchange risk, these instruments are presented within each
market risk category in the table below. The table presents
principal cash flows and related interest rates by year of
maturity for our mandatorily redeemable preferred stock, senior
notes, bank and vendor credit facilities and capital lease and
finance obligations in effect at December 31, 2000. In the
case of the mandatorily redeemable preferred stock and senior
notes, the table excludes the potential exercise of the relevant
redemption or conversion features. This table also assumes that
we will repay our senior notes to levels necessary to avoid an
earlier repayment obligation with respect to our domestic bank
credit agreement. See D. Future Capital Needs and
Resources. For interest rate swap agreements, the table
presents notional amounts and the related reference interest
rates by year of maturity. Fair values included in this section
have been determined based on:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | quoted market prices for mandatorily redeemable preferred stock
	and senior notes;                                              
|
| |  | carrying value for the bank and vendor credit facilities at
	December 31, 2000 as interest rates are reset periodically;        
|
| |  | estimates for the capital lease and finance obligations based on
	interest rates for current term loans with similar
	terms; and
|
| |  | estimates obtained from dealers to settle interest rate swap
	agreements.                                                       

Notes 4, 6, 7 and 10 to the consolidated financial
statements contain descriptions of our senior notes, bank and
vendor credit facilities, capital lease and finance obligations,
interest rate risk management agreements and mandatorily
redeemable preferred stock and should be read in conjunction
with the following table. A description of significant changes
in outstanding amounts of senior notes, available bank

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|                                                                                                  |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------- |  | -------------------------- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | ----- | --- | ----- |  | - | --- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                  |  |                            |     |      |  |     
|                                                                                                  |  | Year of Maturity           |     |      |  |     
|                                                                                                  |  |                            |     |      |  | Fair
|                                                                                                  |  | 2001                       |     | 2002 |  | 2003 |     | 2004 |  | 2005 |     | Thereafter |  | Total |     | Value
|                                                                                                  |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |      
|                                                                                                  |  |                           
|                                                                                                  |  | (U.S. dollars in millions)
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|I. Interest Rate Sensitivity                                                                      |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|Mandatorily Redeemable Preferred Stock, Long-term Debt and
	Capital Lease and Finance Obligations |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Fixed Rate                                                                                        |  | $                          | 69  |      |  | $    | 76  |      |  | $    | 84  |            |  | $     | 84  |       |  | $ | 72  |   |  | $ | 12,774 |   |  | $ | 13,159 |   |  | $ | 10,039 |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Interest Rate                                                                             |  |                            | 9   | %    |  |      | 9   | %    |  |      | 9   | %          |  |       | 9   | %     |  |   | 9   | % |  |   | 9      | % |  |   | 9      | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Variable Rate                                                                                     |  | $                          | 33  |      |  | $    | 121 |      |  | $    | 417 |            |  | $     | 419 |       |  | $ | 507 |   |  | $ | 3,526  |   |  | $ | 5,023  |   |  | $ | 5,023  |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Interest Rate                                                                             |  |                            | 12  | %    |  |      | 11  | %    |  |      | 11  | %          |  |       | 10  | %     |  |   | 10  | % |  |   | 10     | % |  |   | 10     | % |  |   |        |  
|Interest Rate Swaps                                                                               |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Variable to Fixed(1)                                                                              |  | $                          |    |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $ |    |   |  | $ | 570    |   |  | $ | 570    |   |  | $ | (60    | )
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Pay Rate                                                                                  |  |                            |    |      |  |      |    |      |  |      |    |            |  |       |    |       |  |   |    |   |  |   | 8      | % |  |   | 8      | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Receive Rate                                                                              |  |                            |    |      |  |      |    |      |  |      |    |            |  |       |    |       |  |   |    |   |  |   | 7      | % |  |   | 7      | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Variable to Variable                                                                              |  | $                          | 100 |      |  | $    |    |      |  | $    | 400 |            |  | $     |    |       |  | $ |    |   |  | $ |       |   |  | $ | 500    |   |  | $ | (5     | )
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Pay Rate                                                                                  |  |                            | 6   | %    |  |      |    |      |  |      | 7   | %          |  |       |    |       |  |   |    |   |  |   |       |   |  |   | 7      | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Receive Rate                                                                              |  |                            | 7   | %    |  |      |    |      |  |      | 7   | %          |  |       |    |       |  |   |    |   |  |   |       |   |  |   | 7      | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|II.  Foreign Exchange Rate Sensitivity                                                            |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|Long-Term Debt                                                                                    |  |                            |     |      |  |      |     |      |  |      |     |            |  |       |     |       |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Fixed Rate                                                                                        |  | $                          | 1   |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $ |    |   |  | $ | 2,332  |   |  | $ | 2,333  |   |  | $ | 1,521  |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Interest Rate                                                                             |  |                            | 14  | %    |  |      |    |      |  |      |    |            |  |       |    |       |  |   |    |   |  |   | 13     | % |  |   | 13     | % |  |   |        |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Variable Rate                                                                                     |  | $                          | 33  |      |  | $    | 74  |      |  | $    | 219 |            |  | $     | 94  |       |  | $ | 75  |   |  | $ | 28     |   |  | $ | 523    |   |  | $ | 523    |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Average Interest Rate                                                                             |  |                            | 12  | %    |  |      | 12  | %    |  |      | 12  | %          |  |       | 12  | %     |  |   | 12  | % |  |   | 12     | % |  |   | 12     | % |  |   |        |  




|    |                                                                     
|--- | --------------------------------------------------------------------
|(1) | This interest rate swap requires a cash
	settlement in October 2003.




Item 8.  Financial Statements and
Supplementary Data

Our consolidated financial statements are filed under this item,
beginning on page F-1 of this annual report on Form 10-K.
The financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of this
annual report on Form 10-K.




Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

None.

54



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##### Table of Contents






PART III




Item 10.  Directors and Executive Officers of
the Registrant

Information regarding our directors is incorporated by reference
to the information set forth under the caption Election of
Directors in our proxy statement relating to our 2001
annual meeting of stockholders, which is scheduled to be filed
with the Securities and Exchange Commission in definitive form
on or before April 18, 2001. Information regarding our
executive officers is set forth in Part I of this report under
the caption Executive Officers of the Registrant.
Information regarding compliance with Section 16(a) of the
Securities and Exchange Act of 1934 by our directors, executive
officers and holders of ten percent of a registered class of our
equity securities is incorporated by reference to the
information set forth under the caption Section 16(a)
Beneficial Ownership Reporting Compliance in our proxy
statement relating to our 2001 annual meeting of stockholders.




Item 11.  Executive Compensation

Information regarding compensation of executive officers and
directors is incorporated by reference to the information set
forth under the captions Election of Directors 
Compensation of Directors and Executive
Compensation in our proxy statement relating to our 2001
annual meeting of stockholders, which is scheduled to be filed
with the Securities and Exchange Commission in definitive form
on or before April 18, 2001.




Item 12.  Security Ownership of Certain
Beneficial Owners and Management

Information required by this item is incorporated by reference
to the caption Securities Ownership of Certain Beneficial
Owners and Management in our proxy statement relating to
our 2001 annual meeting of stockholders, which is scheduled to
be filed with the Securities and Exchange Commission in
definitive form on or before April 18, 2001.




Item 13.  Certain Relationships and Related
Transactions

Information required by this item is incorporated by reference
to the caption Certain Relationships and Related
Transactions in our proxy statement relating to our 2001
annual meeting of stockholders, which is scheduled to be filed
with the Securities and Exchange Commission in definitive form
on or before April 18, 2001.

55



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##### Table of Contents






PART IV




Item 14.  Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.



| |          |                                                                                                           
| | -------- | ----------------------------------------------------------------------------------------------------------
| | (a)  (1) | The following Financial Statements are included beginning on
	page F-1 of this annual report on Form 10-K:

|                                                                                                                  |  |      |     | 
|----------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                  |  | Page
|                                                                                                                  |  |     
|Independent Auditors Report                                                                                      |  |      | F-2 | 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Consolidated Balance Sheets as of December 31, 2000 and
	1999.                                                    |  |      | F-3 | 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Consolidated Statements of Operations for the Years Ended
	December 31, 2000, 1999 and 1998.                      |  |      | F-4 | 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Consolidated Statements of Changes in Stockholders Equity
	for the Years Ended December 31, 2000, 1999 and 1998. |  |      | F-5 | 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Consolidated Statements of Cash Flows for the Years Ended
	December 31, 2000, 1999 and 1998.                      |  |      | F-6 | 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Notes to Consolidated Financial Statements                                                                        |  |      | F-7 | 



| |     |                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The following Financial Statement Schedules are submitted with
	this annual report on Form 10-K and are included in
	Item 14(d) below. Schedules other than those listed below
	are omitted because they are either not required or not
	applicable.

|            |  |  |      | 
|----------- |  |  | ---- | 
|           
|           
|           
|           
|Schedule I  |  |  | F-41 | 
|           
|           
|           
|           
|Schedule II |  |  | F-45 | 



| |     |                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | List of Exhibits: The exhibits filed as part of this report are
	listed in the Exhibit Index, which is incorporated in this
	item by reference.

(b)  Reports on Form 8-K:



| |     |                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Current Report on Form 8-K dated and filed with the
	Commission on October 5, 2000, reporting under Item 5
	specified preliminary third quarter results and other data.
|
| | (2) | Current Report on Form 8-K dated and filed with the
	Commission on October 26, 2000, reporting under Item 5
	our third quarter results and other data.                 

(c)  Exhibits listed above in Item 14(a)(3) are
included herein.



| |     |                                                                                        
| | --- | ---------------------------------------------------------------------------------------
| | (d) | Financial Statement Schedules listed above in Item 14(a)(2)
	are included in this item.

56



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                            
| | ---------------------------
| | NEXTEL COMMUNICATIONS, INC.



| |     |                          
| | --- | -------------------------
| | By: | /s/ JOHN S. BRITTAIN, JR.

| | 
| | 
| | 



| |                                                       
| | ------------------------------------------------------
| | John S. Brittain, Jr.                                 
| | Chief Financial Officer, Vice President and
	Treasurer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated below.

|                                                 |  |                                                                                      |  |               |  | 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------ |  | ------------- |  | 
|Signature                                        |  | Title                                                                                |  | Date         
|                                                 |  |                                                                                      |  |              
|/s/ WILLIAM E. CONWAY, JR.William E. Conway, Jr. |  | Chairman of the Board of Directors                                                   |  | April 2, 2001
|/s/ TIMOTHY M. DONAHUETimothy M. Donahue         |  | President, Chief Executive Officer
	and Director                                     |  | April 2, 2001
|/s/ JOHN S. BRITTAIN, JR.John S. Brittain, Jr.   |  | Chief Financial Officer, Vice President and Treasurer (principal
	financial officer) |  | April 2, 2001
|/s/ WILLIAM G. ARENDTWilliam G. Arendt           |  | Vice President and Controller
	(principal accounting officer)                        |  | April 2, 2001
|/s/ MORGAN E. OBRIENMorgan E. OBrien           |  | Vice Chairman of the Board                                                           |  | April 2, 2001
|/s/ DANIEL F. AKERSONDaniel F. Akerson           |  | Director                                                                             |  | April 2, 2001
|/s/ KEITH J. BANEKeith J. Bane                   |  | Director                                                                             |  | April 2, 2001
|/s/ CRAIG O. MCCAWCraig O. McCaw                 |  | Director                                                                             |  | April 2, 2001
|/s/ JANET HILLJanet Hill                         |  | Director                                                                             |  | April 2, 2001
|/s/ DENNIS M. WEIBLINGDennis M. Weibling         |  | Director                                                                             |  | April 2, 2001
|/s/ FRANK M. DRENDELFrank M. Drendel             |  | Director                                                                             |  | April 2, 2001

57



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##### Table of Contents



Exhibit Index

All references to documents filed pursuant to the Securities
Exchange Act of 1934, including Forms 10-K, 10-Q and 8-K, were
filed by Nextel Communications, Inc., file no. 0-19656, unless
otherwise indicated.

|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | 
|Number  |       | 
|        |       | 
|        | 3.1.1 |  |  | Restated Certificate of Incorporation of Nextel (filed
	June  1, 2000 as Exhibit 3.1 to Nextels
	post-effective amendment no. 2 to registration statement no.
	33-1290 on Form S-4 and incorporated herein by reference).                                                                                                                                            
|        | 3.1.2 |  |  | Certificate of Designation of the Powers, Preferences and
	Relative, Participating, Optional and Other Special Rights of
	13% Series D Exchangeable Preferred Stock and
	Qualifications, Limitations and Restrictions Thereof (filed
	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).
|        | 3.1.3 |  |  | Certificate of Designation of the Powers, Preferences and
	Relative, Participating, Optional and Other Special Rights of
	11.125% Series E Exchangeable Preferred Stock and
	Qualifications, Limitations and Restrictions Thereof (filed
	February 12, 1998 as Exhibit 4.1 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).            
|        | 3.1.4 |  |  | Certificate of Designation of the Powers, Preferences and
	Relative, Participating, Optional and Other Special Rights of
	Zero Coupon Convertible Preferred Stock due 2013 and
	Qualifications, Limitations and Restrictions Thereof (filed
	February 10, 1999 as Exhibit 4.16 to Nextels
	registration statement on Form S-4 and incorporated herein
	by reference).
|        | 3.2   |  |  | Amended and Restated By-Laws of Nextel (filed July 31, 1995
	as Exhibit 4.2 to Nextels post-effective amendment
	no. 1 on Form S-8 to registration statement no. 33-91716 on
	Form  S-4 and incorporated herein by reference).                                                                                                                                       
|        | 4.1   |  |  | Indenture dated March 6, 1997 between Nextel International
	and The Bank of New York, as Trustee, relating to Nextel
	Internationals 13.0% Senior Discount Notes due 2007 (filed
	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).        
|        | 4.2   |  |  | Warrant Agreement dated March 6, 1997, between Nextel
	International and The Bank of New York (filed March 31,
	1997 as Exhibit 4.26 to the 1996 Form 10-K and
	incorporated herein by reference).                                                                                                                                                                    
|        | 4.3   |  |  | Indenture dated September 17, 1997 between Nextel and
	Harris Trust and Savings Bank, as Trustee, relating to
	Nextels 10.65% Senior Redeemable Discount Notes due 2007
	(filed September 22, 1997 as Exhibit 4.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                    
|        | 4.4   |  |  | Indenture dated October 22, 1997 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	9.75% Senior Serial Redeemable Discount Notes due 2007 (filed
	October 23, 1997 as Exhibit 4.1 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).                                                                  
|        | 4.5   |  |  | Indenture dated February 11, 1998 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	9.95% Senior Serial Redeemable Discount Notes due 2008 (filed
	February 12, 1998 as Exhibit 4.2 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).                                                                
|        | 4.6   |  |  | Indenture dated November 4, 1998 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	12.0% Senior Serial Redeemable Notes due 2008 (filed
	February 10, 1999 as Exhibit 4.13.1 to Nextels
	registration statement on Form S-4 and incorporated herein
	by reference).                                                               

58



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##### Table of Contents



|        |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        | 
|Number  |        | 
|        |        | 
|        | 4.7    |  |  | Indenture dated March 12, 1998 between Nextel International
	and The Bank of New York, as Trustee, relating to Nextel
	Internationals 12.125% Senior Serial Redeemable Discount
	Notes due 2008 (filed May 14, 1998 as Exhibit 4.1 to
	Nextel Internationals quarterly report on Form 10-Q
	for the quarter ended March 31, 1998 and incorporated
	herein by reference).                                                                    
|        | 4.8    |  |  | Indenture dated June 16, 1999 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	4.75% Convertible Senior Redeemable Notes due 2007 (filed
	June 23, 1999 as Exhibit 4.1 to Nextels current
	report on Form 8-K and incorporated herein by reference).                                                                                                                                                     
|        | 4.9    |  |  | Indenture dated November 12, 1999 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	9.375% Senior Serial Redeemable Notes due 2009 (filed
	November 15, 1999 as Exhibit 4.1 to the quarterly
	report on Form 10-Q for the quarter ended
	September 30, 1999 (the 1999 Third Quarter
	10-Q) and incorporated herein by reference).                                                                        
|        | 4.10   |  |  | Indenture dated January 26, 2000 between Nextel and Harris
	Trust and Savings Bank, as Trustee, relating to Nextels
	5.25% Convertible Senior Redeemable Notes due 2010 (filed
	January 26, 2000 as Exhibit 4.1 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).                                                                                                                                              
|        | 4.11   |  |  | Indenture dated August 1, 2000 between Nextel International
	and The Bank of New York, as Trustee, relating to Nextel
	Internationals 12.75% Senior Serial Redeemable Notes due
	2010 (filed August 2, 2000 as Exhibit 4.1 to Nextel
	Internationals current report on Form 8-K dated
	August 1, 2000 and incorporated herein by reference).                                                                                                
|        | 4.12.1 |  |  | Indenture dated January 26, 2001, between Nextel and BNY
	Midwest Trust Company, as Trustee, relating to Nextels
	9.5% Senior Serial Redeemable Notes due 2011 (filed
	January 29, 2001 as Exhibit 4.1 to Nextels
	current report on Form 8-K incorporated herein by reference)                                                                                                                                                             
|        | 4.12.2 |  |  | Registration Rights Agreement dated January 26, 2001
	between Nextel and Goldman Sachs & Co. relating to
	Nextels 9.5% Senior Serial Redeemable Notes due 2011
	(filed January  29, 2001 as Exhibit 4.2 to
	Nextels current report on Form  8-K and incorporated
	herein by reference).                                                                                                                                                     
|        | 4.13.1 |  |  | Amended and Restated Credit Agreement dated November 9,
	1999 among Nextel, Nextel Finance Company, the other Restricted
	Companies party thereto, the Lenders Party thereto, Toronto
	Dominion (Texas) Inc., as Administrative Agent, and The Chase
	Manhattan Bank as Collateral Agent (filed November 15, 1999
	as Exhibit 4.3 to the 1999 Third Quarter 10-Q and
	incorporated herein by reference).                                      
|        | 4.13.2 |  |  | Tranche D Term Loan Agreement dated March 15, 2000 among
	Nextel, Nextel Finance Company, the other Restricted Companies
	party thereto, the Lenders Party thereto, Toronto Dominion
	(Texas), as Administrative Agent, and The Chase Manhattan Bank
	as Collateral Agent (filed March 15, 2000 as
	Exhibit 4.1 to the current report on Form 8-K and
	incorporated herein by reference).                                                     
|        | 4.13.3 |  |  | Amendment no. 1 dated April 26, 2000 to the Amended and
	Restated Credit Agreement dated November 9, 1999 among
	Nextel, Nextel Finance Company, the Other Restricted Companies
	party thereto, the Lenders party thereto, Toronto Dominion
	(Texas), as Administrative Agent, and The Chase Manhattan Bank,
	as Collateral Agent (filed May 5, 2000 as Exhibit 4.1
	to the current report on Form 8-K and incorporated herein
	by reference).
|        | 4.13.4 |  |  | Amendment no. 2 dated March 29, 2001 to the Amended and
	Restated Credit Agreement dated November 9, 1999, as
	amended, among Nextel, Nextel Finance Company, the Other
	Restricted Companies party thereto, the Lenders party thereto,
	Toronto Dominion (Texas), as Administrative Agent, and The Chase
	Manhattan Bank, as Collateral Agent.                                                                                               

59



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##### Table of Contents



|        |          |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -------- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          | 
|Number  |          | 
|        |          | 
|        | 10.1.1*  |  |  | Letter Agreement between Motorola, Inc. and Nextel dated
	November 4, 1991 (filed November 15, 1991 as
	Exhibit  10.47 to the registration statement no. 33-43415
	on Form  S-1 (the S-1 Registration Statement)
	and incorporated herein by reference).                                                                                                                                                                                                                                                                     
|        | 10.1.2*  |  |  | 1991 Enhanced Specialized Mobile Radio System Purchase Agreement
	between Motorola and Nextel dated November 4, 1991 (filed
	November 15, 1991 as Exhibit 10.48 to the S-1
	Registration Statement and incorporated herein by reference).                                                                                                                                                                                                                                                                                      
|        | 10.1.3*  |  |  | Amendment dated August 4, 1994 to the Enhanced Specialized
	Mobile Radio System Equipment Purchase Agreement between Nextel
	and Motorola dated November 1, 1991, as amended, and to the
	Letter Agreement between Nextel and Motorola dated
	November 4, 1991, as amended (collectively the
	Equipment Purchase Agreements) (filed April 28,
	1995 as Exhibit  10.02 to registration statement no.
	33-91716 on Form S-4 of ESMR, Inc. (the ESMR
	Form S-4 Registration Statement) and incorporated
	herein by reference).
|        | 10.1.4*  |  |  | Second Amendment to Equipment Purchase Agreements dated
	April 4, 1995 (filed April 28, 1995 as
	Exhibit 10.03 to the ESMR Form S-4 Registration
	Statement and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                             
|        | 10.1.5*  |  |  | Amendment 004 to the Enhanced Specialized Mobile Radio System
	Purchase Agreement dated April 28, 1996 between Nextel and
	Motorola (filed July 5, 1996 as Exhibit 99.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                                                                                                                                                                                                        
|        | 10.1.6*  |  |  | Nextel/ Motorola Agreement dated March 27, 1997 (filed
	May  15, 1997 as Exhibit 10.1 to Nextels
	quarterly report on Form 10-Q for the quarter ended
	March 31, 1997 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                  
|        | 10.1.7*  |  |  | iDEN Infrastructure [*] Supply Agreement between Motorola and
	Nextel dated April 13, 1999 (filed August 16, 1999 as
	Exhibit 10.2 to the quarterly report on Form 10-Q for
	the quarter ended June 30, 1999 and incorporated herein by
	reference).                                                                                                                                                                                                                                                                           
|        | 10.1.8*  |  |  | Amendment dated December 29, 1999 to the iDEN Subscriber
	Supply Agreement dated November 4, 1991 between Nextel and
	Motorola (filed March 30, 2000 as Exhibit 10.2.7 to
	Nextels annual report on Form 10-K for the year ended
	December 31, 1999 and incorporated herein by reference).                                                                                                                                                                                                                                    
|        | 10.1.9*  |  |  | Amendment 001 dated December 29, 1999 to the iDEN
	Infrastructure [*] Supply Agreement dated April 13, 1999
	between Nextel and Motorola (filed March 30, 2000 as
	Exhibit 10.2.8 to Nextels annual report on
	Form 10-K for the year ended December 31, 1999 and
	incorporated herein by reference).                                                                                                                                                                                                                         
|        | 10.1.10* |  |  | Amendment 002 dated December 30, 1999 to the iDEN
	Infrastructure [*] Supply Agreement dated April 13, 1999
	between Nextel and Motorola (filed March 30, 2000 as
	Exhibit 10.2.9 to Nextels annual report on
	Form 10-K for the year ended December 31, 1999 and
	incorporated herein by reference.                                                                                                                                                                                                                          
|        | 10.1.11* |  |  | Amendment dated December 28, 2000 to iDEN Subscriber Supply
	Agreement dated November 4, 1991 between Nextel and
	Motorola.                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.1.12* |  |  | Amendment dated December 28, 2000 to iDEN Infrastructure
	[*] Supply Agreement dated April 13, 1999, as amended,
	between Nextel and Motorola.                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.2     |  |  | Agreement and Plan of Contribution and Merger dated August 
	4, 1994, as amended, among Nextel, Motorola, ESMR, Inc., ESMR
	Sub, Inc. and others (filed April 28, 1995 as Exhibit 
	2.01 to the ESMR Form S-4 Registration Statement and
	incorporated herein by reference).                                                                                                                                                                                                                                                   
|        | 10.3     |  |  | Registration Rights Agreement dated July 28, 1995 between
	Nextel and Motorola (filed November 14, 1995 as
	Exhibit  10.8 to Nextels quarterly report on
	Form 10-Q for the quarter ended September 30, 1995 and
	incorporated herein by reference).                                                                                                                                                                                                                                                                          

60



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|        |          |   |  |                                                                                                                                                                                                                                                                            
|------- | -------- | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |  
|Number  |          |  
|        |          |  
|        | 10.4.1   |   |  | Securities Purchase Agreement between Nextel, Digital Radio,
	L.L.C and Craig O. McCaw, dated April 4, 1995 (filed
	April 11, 1995 as Exhibit 2.1 to Nextels current
	report on Form 8-K dated April 10, 1995 and
	incorporated herein by reference).                     
|        | 10.4.2   |   |  | Management Support Agreement dated April 4, 1995 between
	Nextel and Eagle River, Inc. (filed on April 11, 1995 as
	Exhibit 99.2 to Nextels current report on
	Form 8-K dated April 10, 1995 and incorporated herein
	by reference).                                      
|        | 10.4.3   |   |  | Forms of Option Agreements dated April 6, 1995 between
	Nextel, Digital Radio and Craig O. McCaw (filed
	March 31, 1997 as Exhibit 10.26 to the 1996
	Form 10-K and incorporated herein by reference).                                                                     
|        | 10.4.4   |   |  | Form of Registration Rights Agreement dated July 28, 1995
	among Nextel and Digital Radio (filed March 31, 1997 as
	Exhibit 10.38 to the 1996 Form 10-K and incorporated
	herein by reference).                                                                            
|        | 10.4.5   |   |  | First Amendment to the Registration Rights Amendment (dated
	July 28, 1995) among Nextel, Digital Radio and Option
	Acquisition, L.L.C., dated June 18, 1997 (filed
	July 9, 1997 as Exhibit 10.7 to the current report on
	Form 8-K and incorporated herein by reference).
|        | 10.4.6   |   |  | Option Exercise and Lending Commitment Agreement between Nextel
	and Digital Radio dated June 16, 1997 (filed July  9,
	1997 as Exhibit 10.1 to the current report on Form 8-K
	and incorporated herein by reference).                                                     
|        | 10.4.7   |   |  | Incentive Option Agreement between Nextel and Eagle River dated
	April 4, 1995 (filed April 11, 1995 as
	Exhibit 99.3 to Nextels current report on
	Form 8-K dated April 10, 1995 and incorporated herein
	by reference).                                                 
|        | 10.5.1   |   |  | Option Purchase Agreement among Nextel, Unrestricted Subsidiary
	Funding Company and Option Acquisition dated June 16, 1997
	(filed July 9, 1997 as Exhibit 10.3 to the current
	report on Form 8-K and incorporated herein by reference).                                 
|        | 10.5.2   |   |  | Registration Rights Agreement between Nextel and Option
	Acquisition dated June 18, 1997 (filed July 9, 1997 as
	Exhibit 10.6 to the current report on Form 8-K and
	incorporated herein by reference).                                                                    
|        | 10.6**   |   |  | Form of Indemnification Agreement and exhibits thereto between
	Nextel and each of its directors (filed June 24, 1992 as
	Exhibit 10.56 to Nextels annual report on Form 
	10-K for the year ended March 31, 1992 and incorporated
	herein by reference).                 
|        | 10.7**   |   |  | Employment Agreement dated March 26, 1992 between Nextel
	and Robert Foosaner (filed May 27, 1993 as
	Exhibit 10.41 to Nextels annual report on
	Form 10-K for the year ended March 31, 1993 and
	incorporated herein by reference).                                      
|        | 10.8**   |   |  | Nextel Amended and Restated Incentive Equity Plan.                                                                                                                                                                                                                         
|        | 10.9**   |   |  | Nextel Severance Benefits Plan.                                                                                                                                                                                                                                            
|        | 10.10**  |   |  | Nextel Associate Stock Purchase Plan (filed June 21, 1996
	as Exhibit 4.3 to Nextels registration statement no.
	333-06523 on Form S-8 and incorporated herein by reference).                                                                                             
|        | 10.11**  |   |  | Nextel Cash Compensation Deferral Plan (filed December 17,
	1997 as Exhibit 4.1 to Nextels registration statement
	No.  333-42537 on Form S-8 and incorporated herein by
	reference).                                                                                     
|        | 10.12**  |   |  | Nextel Change of Control Retention Bonus and Severance Pay Plan
	dated July 14, 1999.                                                                                                                                                                                      
|        | 10.13.1* | * |  | Employment Agreement dated February 1, 1996 between Tim
	Donahue and Nextel (filed March 31, 1997 as
	Exhibit 10.36 to the 1996 Form 10-K and incorporated
	herein by reference).                                                                                          

61



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|        |          |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -------- | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |  
|Number  |          |  
|        |          |  
|        | 10.13.2* | * |  | Addendum to Employment Agreement between Tim Donahue and Nextel
	dated March 24, 1997 (filed March 31, 1997 as
	Exhibit 10.37 to the 1996 Form 10-K and incorporated
	herein by reference).                                                                                                                                                                                                                                                                                                               
|        | 10.14.1  |   |  | Joint Venture Agreement among Nextel Partners, Inc., Nextel
	Partners Operating Corp. and Nextel WIP Corp. dated
	January  29, 1999 (filed February 24, 1999 as
	Exhibit 10.1 to the current report on Form 8-K and
	incorporated herein by reference).                                                                                                                                                                                                                                                   
|        | 10.14.2  |   |  | Amended and Restated Shareholders Agreement among Nextel
	Partners and the shareholders named therein dated February 
	18, 2000 (filed by Nextel Partners February 22, 2000 as
	Exhibit 10.2 to amendment no. 2 to the registration
	statement on Form S-1 and incorporated herein by reference).                                                                                                                                                                                                        
|        | 10.14.3  |   |  | Amendment no. 1 dated February 22, 2000 to the Amended and
	Restated Shareholders Agreement among Nextel Partners and
	the shareholders named therein dated February 18, 2000
	(filed by Nextel Partners on October 23, 2000 as
	Exhibit  10.2 to the registration statement on
	Form S-4 and incorporated herein by reference).                                                                                                                                                                         
|        | 10.14.4  |   |  | Agreement Specifying Obligations of, and Limiting Liability and
	Recourse to, Nextel dated January 29, 1999 (filed
	February 24, 1999 as Exhibit 10.3 to the current
	report on Form 8-K and incorporated herein by reference).                                                                                                                                                                                                                                                                           
|        | 10.15    |   |  | Investment Agreement between Nextel and Microsoft Corporation
	dated May 7, 1999 (including the form of Registration
	Rights Agreement attached as Exhibit A thereto) (filed on
	May 13, 1999 as Exhibits 10.1 and 10.2, respectively, to
	the current report on Form 8-K dated May  12, 1999 and
	incorporated herein by reference).                                                                                                                                                                     
|        | 10.16    |   |  | Master Site Lease Agreement among Nextel of New York, Inc.
	Nextel Communications of the Mid-Atlantic, Inc., Nextel South
	Corp., Nextel of Texas, Inc. Nextel West Corp., and Nextel of
	California, Inc. and Tower Asset Sub Inc. and the Landlord
	Parties as defined therein (filed April 29, 1999 as
	Exhibit 10.33 to SpectraSite Holdings, Inc.s
	registration statement no. 333-67043 on Form S-4 (the
	SpectraSite Holdings S-4 Registration Statement) and
	incorporated herein by reference)
|        | 10.17    |   |  | Master Site Commitment Agreement among Nextel, Nextel of New
	York, Nextel Communications of the Mid-Atlantic, Nextel South
	Corp., Nextel of Texas, Nextel West Corp., Nextel of California,
	Tower Parent Corp., SpectraSite Holdings and Tower Asset Sub
	(filed April 29, 1999 as Exhibit 10.34 to the
	SpectraSite Holdings S-4 Registration Statement and incorporated
	herein by reference).                                                                                                       
|        | 10.18    |   |  | NEXTBAND Interests Purchase Agreement dated March 3, 1999
	between Nextel Spectrum Acquisition Corp. and XO Communications
	Inc. (formerly NEXTLINK Communications, Inc.) (including the
	Form of Registration Rights Agreement attached as Exhibit A
	thereto) (filed April 11, 1999 as Exhibit 10.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                                                     
|        | 10.19    |   |  | Second Amended and Restated Right of First Opportunity Agreement
	dated August 1, 2000 between Nextel and Nextel
	International (filed August 14, 2000 as Exhibit 10.4
	to Nextel Internationals quarterly report on
	Form 10-Q and incorporated herein by reference).                                                                                                                                                                                                                                   

62



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|        |      |  |  |                                                                                                                                                                                   
|------- | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      | 
|Number  |      | 
|        |      | 
|        | 21   |  |  | Subsidiaries of Nextel.                                                                                                                                                           
|        | 23   |  |  | Consent of Deloitte & Touche LLP.                                                                                                                                                 
|        | 99.1 |  |  | Memorandum Opinion and Order of the FCC dated February 13,
	1991 (filed December 5, 1992 as Exhibit 28.1 to the
	S-1 Registration Statement and incorporated herein by reference).






|   |                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------
|*  | Portions of this exhibit have been omitted and filed separately
	with the Commission pursuant to a request for confidential
	treatment.
|** | Management contract or compensatory plan or arrangement                                                                                

63



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements and

Financial Statement Schedules


|                                  |                                                                                                                  |      |     |      | 
|--------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ---- | --- | ---- | 
|                                  |                                                                                                                  | Page
|                                  |                                                                                                                  |     
|INDEPENDENT AUDITORS REPORT      |                                                                                                                  |      | F-2 |     
|                                 
|                                 
|                                 
|                                 
|CONSOLIDATED FINANCIAL STATEMENTS |                                                                                                                  |      |     |     
|                                 
|                                 
|                                 
|                                 
|                                  | Consolidated Balance Sheets as of December 31, 2000 and 1999                                                     |      |     | F-3  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Consolidated Statements of Operations for the Years Ended
	December 31, 2000, 1999 and 1998                      |      |     | F-4  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Consolidated Statements of Changes in Stockholders Equity
	for the Years Ended December 31, 2000, 1999 and 1998 |      |     | F-5  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Consolidated Statements of Cash Flows for the Years Ended
	December 31, 2000, 1999 and 1998                      |      |     | F-6  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Notes to Consolidated Financial Statements                                                                       |      |     | F-7  | 
|                                 
|                                 
|                                 
|                                 
|FINANCIAL STATEMENT SCHEDULES     |                                                                                                                  |      |     |     
|                                 
|                                 
|                                 
|                                 
|                                  | Schedule I  Condensed Financial Information of
	Registrant                                                      |      |     | F-41 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Schedule II  Valuation and Qualifying Accounts                                                                  |      |     | F-45 | 

F-1



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Stockholders and Board of Directors of Nextel
Communications, Inc.

We have audited the accompanying consolidated balance sheets of
Nextel Communications, Inc. and subsidiaries (the
Company) as of December 31, 2000 and 1999, and
the related consolidated statements of operations, changes in
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2000. Our audits
also included the financial statement schedules listed in the
Index at Item 14(a)(2). These consolidated financial
statements and financial statement schedules are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on
our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Nextel Communications, Inc. and subsidiaries at
December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

As discussed in note 1 to the consolidated financial statements,
Nextel Communications, Inc. and subsidiaries adopted the
provisions of Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements, in 2000.

DELOITTE & TOUCHE LLP

McLean, Virginia





F-2



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2000 and 1999


(in millions)


|                                                     |                                                                                 |                            |        |        |        |   |        |        |        | 
|---------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                     |                                                                                 | 2000                       |        | 1999  
|                                                     |                                                                                 |                            |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|ASSETS                                              
|                                                    
|                                                    
|                                                    
|                                                    
|Current assets                                       |                                                                                 |                            |        |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash and cash equivalents, of which $474 and $1,365 is restricted               |                            | $      | 2,609  |        |   | $      | 4,701  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Short-term investments                                                          |                            |        | 2,065  |        |   |        | 1,107  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts and notes receivable, net                                              |                            |        | 864    |        |   |        | 619    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Handset and accessory inventory                                                 |                            |        | 183    |        |   |        | 113    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Prepaid expenses and other current assets                                       |                            |        | 737    |        |   |        | 80     |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | Total current assets       |        |        | 6,458  |   |        |        | 6,620  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Investments                                          |                                                                                 |                            | 756    |        |        |   | 591    |       
|                                                    
|                                                    
|                                                    
|                                                    
|Property, plant and equipment, net                   |                                                                                 |                            | 8,791  |        |        |   | 6,152  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Intangible assets, net                               |                                                                                 |                            | 5,982  |        |        |   | 4,889  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Other assets                                         |                                                                                 |                            | 699    |        |        |   | 158    |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | $                          | 22,686 |        |        | $ | 18,410 |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|LIABILITIES AND STOCKHOLDERS EQUITY                
|                                                    
|                                                    
|                                                    
|                                                    
|Current liabilities                                  |                                                                                 |                            |        |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts payable                                                                |                            | $      | 953    |        |   | $      | 559    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accrued expenses and other                                                      |                            |        | 1,244  |        |   |        | 643    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Due to related parties                                                          |                            |        | 423    |        |   |        | 438    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Current portion of long-term debt, capital lease and finance
	obligations       |                            |        | 102    |        |   |        | 1,191  |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | Total current liabilities  |        |        | 2,722  |   |        |        | 2,831  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Long-term debt                                       |                                                                                 |                            | 13,763 |        |        |   | 9,760  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Capital lease and finance obligations                |                                                                                 |                            | 866    |        |        |   | 552    |       
|                                                    
|                                                    
|                                                    
|                                                    
|Deferred income taxes                                |                                                                                 |                            | 912    |        |        |   | 799    |       
|                                                    
|                                                    
|                                                    
|                                                    
|Deferred revenues and other (note 1)                 |                                                                                 |                            | 514    |        |        |   | 124    |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | Total liabilities          |        |        | 18,777 |   |        |        | 14,066 | 
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|Commitments and contingencies (notes 2, 6, 9 and 13) |                                                                                 |                            |        |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|Mandatorily redeemable preferred stock               |                                                                                 |                            | 1,881  |        |        |   | 1,770  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Stockholders equity                                 |                                                                                 |                            |        |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Convertible preferred stock, 8 shares issued and outstanding                    |                            |        | 283    |        |   |        | 291    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Common stock, class A, 727 and 702 shares issued and outstanding                |                            |        | 1      |        |   |        | 1      |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Common stock, class B, nonvoting convertible, 36 shares issued
	and outstanding |                            |        |       |        |   |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Paid-in capital                                                                 |                            |        | 8,370  |        |   |        | 8,046  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accumulated deficit                                                             |                            |        | (6,554 | )      |   |        | (5,739 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Treasury stock, at cost                                                         |                            |        | (2     | )      |   |        | (6     | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deferred compensation, net                                                      |                            |        | (28    | )      |   |        | (23    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accumulated other comprehensive (loss) income                                   |                            |        | (42    | )      |   |        | 4      |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | Total stockholders equity |        |        | 2,028  |   |        |        | 2,574  | 
|                                                     |                                                                                 |                            |        |        |        |   |        |       
|                                                     |                                                                                 | $                          | 22,686 |        |        | $ | 18,410 |       
|                                                     |                                                                                 |                            |        |        |        |   |        |       

The accompanying notes are an integral part of these
consolidated financial statements.

F-3



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2000, 1999 and 1998


(in millions, except per share amounts)


|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |       |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ----- | - | - | ------ | ----- | -
|                                                                                |                                                                     | 2000 |        | 1999   |   | 1998
|                                                                                |                                                                     |      |        |        |   |     
|Operating revenues                                                              |                                                                     | $    | 5,714  |        |   | $    | 3,786  |       |   | $ | 2,295  |      
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Operating expenses                                                              |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cost of revenues                                                    |      |        | 2,172  |   |      |        | 1,579 |   |   |        | 1,218 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Selling, general and administrative                                 |      |        | 2,278  |   |      |        | 1,672 |   |   |        | 1,297 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation and amortization                                       |      |        | 1,265  |   |      |        | 1,004 |   |   |        | 832   |  
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                                |                                                                     |      | 5,715  |        |   |      | 4,255  |       |   |   | 3,347  |      
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Operating loss                                                                  |                                                                     |      | (1     | )      |   |      | (469   | )     |   |   | (1,052 | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Other income (expense)                                                          |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest expense                                                    |      |        | (1,245 | ) |      |        | (878  | ) |   |        | (656  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest income                                                     |      |        | 396    |   |      |        | 96    |   |   |        | 34    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Realized gain on exchange of investment (note 4)                    |      |        | 275    |   |      |        |      |   |   |        |      |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Equity in losses of unconsolidated affiliates                       |      |        | (152   | ) |      |        | (73   | ) |   |        | (12   | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other, net                                                          |      |        | (17    | ) |      |        | 26    |   |   |        | (25   | )
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                                |                                                                     |      | (743   | )      |   |      | (829   | )     |   |   | (659   | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Loss before income tax benefit and extraordinary item                           |                                                                     |      | (744   | )      |   |      | (1,298 | )     |   |   | (1,711 | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Income tax benefit                                                              |                                                                     |      | 33     |        |   |      | 28     |       |   |   | 192    |      
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Loss before extraordinary item                                                  |                                                                     |      | (711   | )      |   |      | (1,270 | )     |   |   | (1,519 | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Extraordinary item  loss on early retirement of
	debt, net of income tax of $0 |                                                                     |      | (104   | )      |   |      | (68    | )     |   |   | (133   | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Net loss                                                                        |                                                                     |      | (815   | )      |   |      | (1,338 | )     |   |   | (1,652 | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Mandatorily redeemable preferred stock dividends                                |                                                                     |      | (209   | )      |   |      | (192   | )     |   |   | (149   | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Loss attributable to common stockholders                                        |                                                                     | $    | (1,024 | )      |   | $    | (1,530 | )     |   | $ | (1,801 | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Loss per share attributable to common stockholders, basic and
	diluted          |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Loss before extraordinary item attributable to common
	stockholders |      | $      | (1.21  | ) |      | $      | (2.29 | ) |   | $      | (2.99 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Extraordinary item                                                  |      |        | (0.14  | ) |      |        | (0.10 | ) |   |        | (0.24 | )
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|                                                                                |                                                                     | $    | (1.35  | )      |   | $    | (2.39  | )     |   | $ | (3.23  | )    
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      
|Weighted average number of common shares outstanding                            |                                                                     |      | 756    |        |   |      | 639    |       |   |   | 557    |      
|                                                                                |                                                                     |      |        |        |   |      |        |       |   |   |        |      

The accompanying notes are an integral part of these
consolidated financial statements.

F-4



---



##### Table of Contents



| |                                             
| | --------------------------------------------
| | NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY

For the Years Ended December 31, 2000, 1999 and 1998


(in millions)


|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|-------------------------- | ---------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------------------- | - | ------------ | --- | ------- | -- | ------ | --- | ------ | -- | ------- | - | - | - |  | -- |  |  | - | - |  |  | - | ----- | ---- | ----- |  |  | 
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |        
|                           |                                                            | Convertible                                       |                                                        | Class A                                                   |   | Class B      |     |        
|                           |                                                            | Preferred Stock                                   |                                                        | Common Stock                                              |   | Common Stock |     |        
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     | Paid-in
|                           |                                                            | Shares                                            |                                                        | Amount                                                    |   | Shares       |     | Amount  |    | Shares |     | Amount |    | Capital
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |        
|Balance, December 31, 1997 |                                                            |                                                   | 8                                                      |                                                           |   | $            | 291 |         |    |        | 506 |        |    | $       | 1 |   |   |  | 36 |  |  | $ |  |  |  | $ | 4,378 |     
|                          
|                          
|                          
|                          
|                           | Net loss                                                   |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive loss, net of income tax:      |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Unrealized loss on available-for-sale securities       |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|                          
|                          
|                          
|                          
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |              |     |         |    |        |     |        | 8  |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 28    | 
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      | 
|                          
|                          
|                          
|                          
|                           |                                                            | Acquisitions                                      |                                                        |                                                           |   |              |     |         |    |        |     |        | 10 |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 121   | 
|                          
|                          
|                          
|                          
|                           |                                                            | Option Acquisition exercise                       |                                                        |                                                           |   |              |     |         |    |        |     |        | 20 |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      |      | 
|                          
|                          
|                          
|                          
|                           | Deferred compensation                                      |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |     |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | (149 | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |     
|Balance, December 31, 1998 |                                                            |                                                   | 8                                                      |                                                           |   |              | 291 |         |    |        | 544 |        |    |         | 1 |   |   |  | 36 |  |  |   |  |  |  |   | 4,378 |     
|                          
|                          
|                          
|                          
|                           | Net loss                                                   |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive income, net of income tax:    |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Unrealized gain on available-for-sale securities       |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|                          
|                          
|                          
|                          
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |              |     |         |    |        |     |        | 56 |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 467   | 
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      | 3     | 
|                          
|                          
|                          
|                          
|                           |                                                            | Public offering, net of issuance costs            |                                                        |                                                           |   |              |     |         |    |        |     |        | 68 |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 2,752 | 
|                          
|                          
|                          
|                          
|                           | Issuance of restricted stock                               |                                                   |                                                        |                                                           |   |              |     |         |    |        |     | 34     |    |         |   |  |   |  |    |  |  |   |   |  |  |   |       | 600  |      
|                          
|                          
|                          
|                          
|                           | Deferred compensation and other                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | 38   |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | (192 | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |     
|Balance, December 31, 1999 |                                                            |                                                   | 8                                                      |                                                           |   |              | 291 |         |    |        | 702 |        |    |         | 1 |   |   |  | 36 |  |  |   |  |  |  |   | 8,046 |     
|                          
|                          
|                          
|                          
|                           | Net loss                                                   |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive loss, net of income tax:      |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Net unrealized gains on available-for-sale securities: |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Unrealized holding gains arising during the period        |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Reclassification adjustment for gain included in net loss |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |       |  |  | 
|                          
|                          
|                          
|                          
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |              |     |         |    |        |     |        | 7  |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 74    | 
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |      | 15    | 
|                          
|                          
|                          
|                          
|                           |                                                            | Conversion of debt securities and preferred stock |                                                        |                                                           |  |              |     |         | (8 | )      |     |        | 18 |         |   |   |  |  |    |  |  |   |   |  |  |   |       |      | 344   | 
|                          
|                          
|                          
|                          
|                           | Gain on issuance of equity by affiliate, net of income tax |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | 87   |      
|                          
|                          
|                          
|                          
|                           | Deferred compensation                                      |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | 13   |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       | (209 | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |     
|Balance, December 31, 2000 |                                                            |                                                   | 8                                                      |                                                           |   | $            | 283 |         |    |        | 727 |        |    | $       | 1 |   |   |  | 36 |  |  | $ |  |  |  | $ | 8,370 |     
|                           |                                                            |                                                   |                                                        |                                                           |   |              |     |         |    |        |     |        |    |         |   |   |   |  |    |  |  |   |   |  |  |   |       |     

The accompanying notes are an integral part of these
consolidated financial statements



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY

For the Years Ended December 31, 2000, 1999 and 1998


(in millions)


|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |      |        |  
|-------------------------- | ---------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------------------- | - | -------- | - | --------------------------- | -- | ----------------- | --- | ---------- | - | ----- | --- | --- | - | - | --- |  |  | --- | ---- | - |  | ---- | ----- | ------ | ----- | ---- | ------ | -
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |           
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    | Accumulated Other |     |           
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   | Comprehensive Income (Loss) |    |                  
|                           |                                                            |                                                   |                                                        | Treasury Stock                                            |   |          |   |                             |    |                  
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   | Unrealized                  |    | Cumulative        |     |           
|                           |                                                            | Accumulated                                       |                                                        |                                                           |   | Deferred |   | Gain (Loss)                 |    | Translation       |     |           
|                           |                                                            | Deficit                                           |                                                        | Shares                                                    |   | Amount   |   | Compensation                |    | on Investments    |     | Adjustment |   | Total
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |      
|Balance, December 31, 1997 |                                                            | $                                                 | (2,749                                                 | )                                                         |   |          | 2 |                             |    | $                 | (23 | )          |   | $     | (8  | )   |   | $ | 23  |  |  | $   |     |   |  | $    | 1,913 |       
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Net loss                                                   |                                                   |                                                        | (1,652                                                    | ) |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (1,652 | )    
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive loss, net of income tax:      |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |     
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  | (24  | )     |        |       | (24  | )     
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Unrealized loss on available-for-sale securities       |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  | (23 | )    |   |  |      |       |        |       | (23  | )     
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |      | (1,699 | )
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |          |   |                             |   |                   |     |            | 2 |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 30    |     
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |          |   |                             |   |                   |     |            | 8 |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 8     |     
|                          
|                          
|                          
|                          
|                           |                                                            | Acquisitions                                      |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 121   |     
|                          
|                          
|                          
|                          
|                           |                                                            | Option Acquisition exercise                       |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |      |     
|                          
|                          
|                          
|                          
|                           | Deferred compensation                                      |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     | 6   |   |   |     |  |  |     |      |   |  |      |       | 6      |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (149   | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|Balance, December 31, 1998 |                                                            |                                                   | (4,401                                                 | )                                                         |   |          | 2 |                             |    |                   | (13 | )          |   |       | (2  | )   |   |   |    |  |  |     | (24  | ) |  |      | 230   |       
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Net loss                                                   |                                                   |                                                        | (1,338                                                    | ) |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (1,338 | )    
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive income, net of income tax:    |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |     
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  | (114 | )     |        |       | (114 | )     
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Unrealized gain on available-for-sale securities       |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  | 142 |      |   |  |      |       |        |       | 142  |       
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |      | (1,310 | )
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |          |   |                             |   |                   |     |            |  |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 467   |     
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |          |   |                             | (2 | )                 |     |            | 9 |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 12    |     
|                          
|                          
|                          
|                          
|                           |                                                            | Public offering, net of issuance costs            |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 2,752 |     
|                          
|                          
|                          
|                          
|                           | Issuance of restricted stock                               |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | 600    |      
|                          
|                          
|                          
|                          
|                           | Deferred compensation and other                            |                                                   |                                                        |                                                           |   |          |   |                            |    |                   |     | (2         | ) |       |     | (21 | ) |   |     |  |  |     |      |   |  |      |       | 15     |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (192   | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|Balance, December 31, 1999 |                                                            |                                                   | (5,739                                                 | )                                                         |   |          |  |                             |    |                   | (6  | )          |   |       | (23 | )   |   |   | 142 |  |  |     | (138 | ) |  |      | 2,574 |       
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Net loss                                                   |                                                   |                                                        | (815                                                      | ) |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (815   | )    
|                          
|                          
|                          
|                          
|                           |                                                            | Other comprehensive loss, net of income tax:      |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |     
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Foreign currency translation adjustment                |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  | 4    |       |        |       | 4    |       
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   | Net unrealized gains on available-for-sale securities: |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |      |       
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Unrealized holding gains arising during the period        |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     | 225  |   |  |      |       |        |       |      | 225    |  
|                          
|                          
|                          
|                          
|                           |                                                            |                                                   |                                                        | Reclassification adjustment for gain included in net loss |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     | (275 | ) |  |      |       |        |       |      | (275   | )
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           |                                                            |                                                   |                                                        | Total comprehensive loss                                  |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |       |      | (861   | )
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|                           | Issuance of common stock:                                  |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        |      
|                          
|                          
|                          
|                          
|                           |                                                            | Exercise of options and warrants                  |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 74    |     
|                          
|                          
|                          
|                          
|                           |                                                            | Employee stock purchase plan                      |                                                        |                                                           |   |          |   |                             |   |                   |     |            | 4 |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 19    |     
|                          
|                          
|                          
|                          
|                           |                                                            | Conversion of debt securities and preferred stock |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |        | 336   |     
|                          
|                          
|                          
|                          
|                           | Gain on issuance of equity by affiliate, net of income tax |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | 87     |      
|                          
|                          
|                          
|                          
|                           | Deferred compensation                                      |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     | (5  | ) |   |     |  |  |     |      |   |  |      |       | 8      |      
|                          
|                          
|                          
|                          
|                           | Mandatorily redeemable preferred stock dividends           |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       | (209   | )    
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       
|Balance, December 31, 2000 |                                                            | $                                                 | (6,554                                                 | )                                                         |   |          |  |                             |    | $                 | (2  | )          |   | $     | (28 | )   |   | $ | 92  |  |  | $   | (134 | ) |  | $    | 2,028 |       
|                           |                                                            |                                                   |                                                        |                                                           |   |          |   |                             |    |                   |     |            |   |       |     |     |   |   |     |  |  |     |      |   |  |      |       |       

The accompanying notes are an integral part of these
consolidated financial statements

F-5



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2000, 1999 and 1998


(in millions)


|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |        |      |      |        |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------- | ----- | ---- | ------ | ------ | ----- | ---- | ------ | ------ | ---- | ---- | ------ | -
|                                                              |                                                                                            | 2000                                                                                                                          |                                              | 1999                                                |       | 1998
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |     
|Cash flows from operating activities                          |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Net loss                                                                                   |                                                                                                                               | $                                            | (815                                                | )     |      | $      | (1,338 | )     |      | $      | (1,652 | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Adjustments to reconcile net loss to net cash provided by (used
	in) operating activities: |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |        |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Amortization of debt financing costs and accretion of senior
	redeemable discount notes, net of accreted interest capitalized |                                              |                                                     | 389   |      |        |        | 409   |      |        |        | 491  |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Provision for losses on accounts receivable                                                                                   |                                              |                                                     | 179   |      |        |        | 152   |      |        |        | 82   |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Stock-based compensation                                                                                                      |                                              |                                                     | 10    |      |        |        | 16    |      |        |        | 5    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Depreciation and amortization                                                                                                 |                                              |                                                     | 1,265 |      |        |        | 1,004 |      |        |        | 832  |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Realized gain on exchange of investment                                                                                       |                                              |                                                     | (275  | )    |        |        |      |      |        |        |     |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Equity in losses of unconsolidated affiliates                                                                                 |                                              |                                                     | 152   |      |        |        | 73    |      |        |        | 12   |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Net foreign currency transaction losses (gains)                                                                               |                                              |                                                     | 25    |      |        |        | 61    |      |        |        | (10  | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Loss on interest rate protection agreement                                                                                    |                                              |                                                     |      |      |        |        |      |      |        |        | 47   |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Gain on exchange and sale of assets, net                                                                                      |                                              |                                                     | (19   | )    |        |        | (68   | )    |        |        |     |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Income tax benefit                                                                                                            |                                              |                                                     | (33   | )    |        |        | (28   | )    |        |        | (192 | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Extraordinary loss on retirement of debt                                                                                      |                                              |                                                     | 104   |      |        |        | 68    |      |        |        | 133  |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Other, net                                                                                                                    |                                              |                                                     | (73   | )    |        |        | 1     |      |        |        | 15   |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            | Change in assets and liabilities, net of effects from
	acquisitions:                                                          |                                              |                                                     |       |      |        |        |       |      |        |        |      |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            |                                                                                                                               | Accounts and notes receivable                |                                                     |       | (406 | )      |        |       | (337 | )      |        |      | (298 | )     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            |                                                                                                                               | Handset and accessory inventory              |                                                     |       | (78  | )      |        |       | (65  | )      |        |      | 20   |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            |                                                                                                                               | Other assets                                 |                                                     |       | (288 | )      |        |       | 5    |        |        |      | (15  | )     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                            |                                                                                                                               | Accounts payable, accrued expenses and other |                                                     |       | 663  |        |        |       | 371  |        |        |      | 195  |       
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                              |                                                                                            |                                                                                                                               |                                              | Net cash provided by (used in) operating activities |       |      | 800    |        |       |      | 324    |        |      |      | (335   | )
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|Cash flows from investing activities                          |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Capital expenditures                                                                       |                                                                                                                               |                                              | (3,518                                              | )     |      |        | (1,947 | )     |      |        | (2,060 | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Purchases of short-term investments                                                        |                                                                                                                               |                                              | (5,801                                              | )     |      |        | (1,100 | )     |      |        | (95    | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from maturities and sales of short-term investments                               |                                                                                                                               |                                              | 4,950                                               |       |      |        |       |       |      |        | 224    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Payments for purchase of licenses and other                                                |                                                                                                                               |                                              | (935                                                | )     |      |        | (97    | )     |      |        | (215   | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Payments for acquisitions, net of cash acquired                                            |                                                                                                                               |                                              | (386                                                | )     |      |        |       |       |      |        | (125   | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other investments and advances to affiliates                                               |                                                                                                                               |                                              | (20                                                 | )     |      |        | (44    | )     |      |        | (256   | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from sale of assets                                                               |                                                                                                                               |                                              | 17                                                  |       |      |        | 294    |       |      |        |       |     
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                              |                                                                                            |                                                                                                                               |                                              | Net cash used in investing activities               |       |      | (5,693 | )      |       |      | (2,894 | )      |      |      | (2,527 | )
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|Cash flows from financing activities                          |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Borrowings under long-term credit facilities                                               |                                                                                                                               |                                              | 1,907                                               |       |      |        | 1,077  |       |      |        | 1,019  |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Issuance of debt securities                                                                |                                                                                                                               |                                              | 1,791                                               |       |      |        | 2,600  |       |      |        | 1,697  |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Retirement of debt securities                                                              |                                                                                                                               |                                              | (1,208                                              | )     |      |        | (546   | )     |      |        | (741   | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from sale-leaseback transactions                                                  |                                                                                                                               |                                              | 376                                                 |       |      |        | 587    |       |      |        |       |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Repayments under long-term credit facilities                                               |                                                                                                                               |                                              | (79                                                 | )     |      |        |       |       |      |        | (152   | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Sale of common stock and exercise of stock options, warrants and
	other                    |                                                                                                                               |                                              | 74                                                  |       |      |        | 3,819  |       |      |        | 30     |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Revolving line of credit (repayments) borrowings, net                                      |                                                                                                                               |                                              |                                                    |       |      |        | (423   | )     |      |        | 222    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Issuance of redeemable preferred stock                                                     |                                                                                                                               |                                              |                                                    |       |      |        |       |       |      |        | 900    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Debt financing costs and other                                                             |                                                                                                                               |                                              | (63                                                 | )     |      |        | (148   | )     |      |        | (93    | )   
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|                                                              |                                                                                            |                                                                                                                               |                                              | Net cash provided by financing activities           |       |      | 2,798  |        |       |      | 6,966  |        |      |      | 2,882  |  
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|Effect of exchange rate changes on cash and cash
	equivalents |                                                                                            |                                                                                                                               | 3                                            |                                                     |       |      | (16    | )      |       |      | (1     | )     
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|Net (decrease) increase in cash and cash equivalents          |                                                                                            |                                                                                                                               | (2,092                                       | )                                                   |       |      | 4,380  |        |       |      | 19     |       
|                                                             
|                                                             
|                                                             
|                                                             
|Cash and cash equivalents, beginning of period                |                                                                                            |                                                                                                                               | 4,701                                        |                                                     |       |      | 321    |        |       |      | 302    |       
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       
|Cash and cash equivalents, end of period                      |                                                                                            | $                                                                                                                             | 2,609                                        |                                                     |       | $    | 4,701  |        |       | $    | 321    |       
|                                                              |                                                                                            |                                                                                                                               |                                              |                                                     |       |      |        |        |       |      |        |       

The accompanying notes are an integral part of these
consolidated financial statements.

F-6



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Operations and Significant
Accounting Policies

Operations. We provide a wide array of digital
wireless communications services throughout the United States.
We offer a differentiated, integrated package of digital
wireless communications services under the Nextel brand name,
primarily to business users. Our digital mobile network
constitutes one of the largest integrated wireless
communications systems utilizing a single transmission
technology in the United States. This digital technology,
developed by Motorola, Inc., is referred to as integrated
Digital Enhanced Network, or iDEN®, technology.

A customer using our digital mobile network is able to access:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service;                                                                                                          
|
| |  | digital two-way radio dispatch service, which is marketed as
	Nextel Direct Connect® service;                                            
|
| |  | the Internet, mobile messaging services, e-mail and advanced
	business applications, which are marketed as Nextel
	Wireless Web services;
|
| |  | advanced calling features, such as three-way calling, voicemail,
	call forwarding and additional line service;                             
|
| |  | international roaming capabilities, which are marketed as
	Nextel WorldwideSM; and                                                       
|
| |  | text and numeric paging.                                                                                                                   

In addition to our domestic operations, we have ownership
interests in international wireless companies through our
substantially wholly owned subsidiary, Nextel International,
Inc. Nextel International, through its subsidiaries, provides
wireless communications services in and around various major
metropolitan market areas in Latin America and the Philippines
and has investments in wireless communications providers in
Canada and Japan and owns analog specialized mobile radio
companies in Chile.

Use of Estimates. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

Principles of Consolidation. The consolidated
financial statements include the accounts of Nextel
Communications, Inc. and its wholly owned and majority owned
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

We use the equity method to account for unconsolidated
investments in companies in which we exercise significant
influence over operating and financial policies but do not have
control. We recognize changes in our proportionate share of the
capital transactions of our equity method investment in Nextel
Partners, Inc. in paid-in capital in our statement of changes in
stockholders equity. See note 4. We use the cost method to
account for equity investments in unconsolidated companies in
which we do not exercise significant influence over operating or
financial policies and do not have a controlling interest.

The accounts of our consolidated non-U.S. subsidiaries and our
non-U.S. affiliates accounted for under the equity method are
presented utilizing accounts as of a date one month earlier than
the accounts of our U.S. subsidiaries on a fiscal year ending
November 30 to ensure timely reporting of consolidated
results.

Foreign Currency. Results of operations for our
non-U.S. subsidiaries and affiliates are translated from
the designated functional currency to the U.S. dollar using
average exchange rates during the period,

F-7



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


while assets and liabilities are translated at the exchange rate
in effect at the reporting date. Resulting gains or losses from
translating foreign currency financial statements are recorded
as other comprehensive income (loss). The financial statements
of the following non-U.S. subsidiaries were prepared using
the U.S. dollar as the functional currency due to the
economic environments in which they operated: our Mexican
operating company during 1998 and our Peruvian operating company
during 2000, 1999 and 1998. As a result, during the specified
years, the transactions of these operations that are denominated
in foreign currencies have been remeasured into U.S. dollars,
and any resulting gains or losses are included in other income
(expense).

During 1999, there was a devaluation and significant
fluctuations in the value of the Brazilian currency relative to
the U.S. dollar. As a result of the devaluation, we
recorded a pre-tax charge of $57 million as other expense
in 1999, related to foreign currency transaction losses
associated with our Brazilian operations. In addition, we
recorded a negative foreign currency translation adjustment in
other comprehensive loss of $127 million based on the
exchange rate for the reporting period ending December 31,
1999.

Cash and Cash Equivalents. Cash equivalents
consist of time deposits and highly liquid short-term
investments with maturities of three months or less at the time
of purchase.

Nextel International and its subsidiaries held cash and cash
equivalents of $474 million at December 31, 2000 and
$100 million at December 31, 1999 that were not
available to fund any of the cash needs of our domestic
operations due to restrictions contained in their financing
agreements. At December 31, 1999, restricted cash also
included $1.27 billion held in an irrevocable trust to
effect the redemption in January 2000 of our 10.125% senior
redeemable discount notes due 2004 and the redemption in
February 2000 of our 9.75% senior redeemable discount notes
due 2004. See note 6.

Supplemental Cash Flow Information.

|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |       | 
|-------------------------- | ------------------------------------------------------------- | ----------------------- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                           |                                                               |                        
|                           |                                                               | Year ended December 31,
|                           |                                                               |                        
|                           |                                                               | 2000                    |       | 1999  |  | 1998
|                           |                                                               |                         |       |       |  |     
|                           |                                                               |                        
|                           |                                                               | (in millions)          
|                          
|                          
|                          
|                          
|Capital expenditures       |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|                          
|                          
|                          
|                          
|                           | Cash paid for capital expenditures                            |                         | $     | 3,518 |  |      | $     | 1,947 |  |   | $     | 2,060 | 
|                          
|                          
|                          
|                          
|                           | Change in capital expenditures accrued and unpaid or financed |                         |       | 25    |  |      |       | 134   |  |   |       | 221   | 
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|                           |                                                               | $                       | 3,543 |       |  | $    | 2,081 |       |  | $ | 2,281 |      
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|Interest costs             |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|                          
|                          
|                          
|                          
|                           | Interest expense                                              |                         | $     | 1,245 |  |      | $     | 878   |  |   | $     | 656   | 
|                          
|                          
|                          
|                          
|                           | Interest capitalized                                          |                         |       | 88    |  |      |       | 46    |  |   |       | 55    | 
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|                           |                                                               | $                       | 1,333 |       |  | $    | 924   |       |  | $ | 711   |      
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|Cash paid for interest     |                                                               | $                       | 816   |       |  | $    | 358   |       |  | $ | 151   |      
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      
|Cash paid for income taxes |                                                               | $                       | 4     |       |  | $    | 7     |       |  | $ | 2     |      
|                           |                                                               |                         |       |       |  |      |       |       |  |   |       |      

Investments. Marketable debt securities with
maturities greater than three months and less than one year at
the time of purchase are classified as short-term investments.
As of December 31, 2000 and 1999, our short-term
investments consist of commercial paper, corporate bonds and
U.S. government securities.

Marketable equity securities intended to be held more than one
year are classified within investments. All of our investments
in debt and marketable equity securities are classified as
available-for-sale as of the balance sheet date and are reported
at fair value. Unrealized gains and losses, net of income tax,
are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


recorded as other comprehensive income (loss). We report
realized gains or losses, as determined on a specific
identification basis, and other than temporary declines in
value, if any, on available-for-sale securities in other income
(expense). Because they do not have readily determinable fair
values, we record restricted investments in publicly traded
companies and investments in privately held companies at cost,
adjusted for other-than-temporary declines in value, if any.

Handset and Accessory Inventory. Handsets are
valued at the lower of cost or market. We determine cost of
handsets by the first-in, first-out, or FIFO, method for
domestic operations and by the weighted average method for
international operations. We determine cost for the related
accessories by the weighted average method.

Property, Plant and Equipment. We record property,
plant and equipment, including improvements that extend useful
lives, at cost, while maintenance and repairs are charged to
operations as incurred. We calculate depreciation using the
straight-line method based on estimated useful lives of up to
31 years for buildings, 3 to 20 years for the digital
mobile network equipment and 3 to 7 years for office equipment,
furniture and fixtures and other. We amortize leasehold
improvements and assets under capital leases over the shorter of
the lease terms or the estimated useful lives of the assets. The
gross amount of assets recorded under capital lease and finance
obligations included in property, plant and equipment is
$688 million as of December 31, 2000 and
$343 million as of December 31, 1999.

During 2000, we changed the estimated useful lives of some of
our digital mobile network and non-network assets which resulted
in additional depreciation expense of $69 million and an
increase in loss per share attributable to common stockholders
of $0.09 for the year ended December 31, 2000.

Construction in progress includes costs of labor, materials,
transmission and related equipment, engineering, site
development, interest and other costs relating to the
construction and development of our digital mobile network.
Assets under construction are not depreciated until placed into
service.

Intangible Assets. We amortize our intangible
assets using the straight-line method. We amortize all of our
domestic Federal Communications Commission, or FCC, licenses and
the excess of purchase price over the fair value of net assets
acquired (goodwill) related to all domestic acquisitions
over 40 years. The FCC licenses are issued on both a
site-specific and wide-area basis, enabling wireless carriers to
provide service either in specific 800 MHz economic areas or 900
MHz metropolitan trading areas in the United States. Currently,
FCC licenses are issued for a period of ten years, and are
subject to construction and operational requirements. The FCC
has routinely granted license renewals providing the licensees
have complied with applicable rules and policies and the
Communications Act of 1934, as amended. We believe that we have
met and will continue to meet all requirements necessary to
retain and secure renewal of our FCC licenses.

We amortize our international licenses over 15 to 20 years
and amortize the excess of purchase price over the fair value of
net assets acquired related to our international acquisitions
over 20 years. In the countries in which we operate,
licenses are customarily issued conditionally for specified
periods of time. The licenses are generally renewable provided
the licensee has complied with applicable rules and policies. We
intend to comply and believe we have complied with these
standards in all material respects.

We amortize our debt financing costs as interest expense over
the terms of the underlying obligation. We amortize customer
lists over their expected useful lives, which is generally 2 to
3 years. Other intangible assets include non-compete
agreements which are amortized over the lives of the related
agreements, generally 2 to 5 years, and trademarks which
are amortized over 20 years.

Valuation of Long-Lived Assets. We review
long-lived assets such as property, plant and equipment and
identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable. If the total of the expected undiscounted
future cash flows is less

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the
asset.

Revenue Recognition and Change in Accounting Principle.We recognize revenue for airtime and other services over
the service period, net of credits and adjustments for service
discounts. We recognize revenues from accessory sales when title
passes, generally upon delivery of the accessory to the
customer. We establish an allowance for doubtful accounts
sufficient to cover probable losses.

In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin, or SAB, No. 101,
Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. Based upon the
new guidance, we changed our revenue recognition method in the
fourth quarter of 2000. We now recognize handset sales as
operating revenues on a straight-line basis over periods of up
to four years, the estimated customer relationship periods.
Costs of handset sales are recognized over the same periods in
amounts equivalent to the revenues recognized from the handset
sales. The direct and incremental handset costs in excess of the
revenues generated from handset sales are expensed immediately
as these amounts exceed our minimum contractual revenues. Under
the prior method of accounting, we recognized revenues from
sales and related costs of handsets sold when title passed to
the customer.

We have accounted for the adoption of SAB No. 101 as a
change in accounting principle effective January 1, 2000,
and therefore have not restated the 1999 or 1998 financial
statements for the change in accounting policies related to our
revenues from handset sales and cost of handset sales. This
accounting change has no impact on loss before extraordinary
item, loss attributable to common stockholders or related per
share amounts for any period. In addition, for all prior periods
presented, we have reclassified revenues from digital handset
and accessory sales to operating revenues and the related costs
of digital handset and accessory sales to cost of revenues. We
had previously classified these amounts within selling, general
and administrative expense.

As of December 31, 2000, we have recorded $782 million
of deferred handset revenues as a liability and an equal amount
of deferred cost of handset sales as an asset. During the year
ended December 31, 2000, we recognized $316 million of
operating revenues and an equal amount of cost of revenues
attributable to handset sales previously reported in periods
prior to 2000. Unaudited quarterly results for 2000 are
presented below to show the effect of the change in accounting
principle.

|                        |                                     |                            |       |               |  |                    |       |             |  |             |       |             |  |   |       |     |  |   |       |     |  |   |       |     | 
|----------------------- | ----------------------------------- | -------------------------- | ----- | ------------- |  | ------------------ | ----- | ----------- |  | ----------- | ----- | ----------- |  | - | ----- | --- |  | - | ----- | --- |  | - | ----- | --- | 
|                        |                                     |                           
|                        |                                     | For the Three Months Ended
|                        |                                     |                           
|                        |                                     |                            |       |               |  |                   
|                        |                                     | March 31, 2000             |       | June 30, 2000 |  | September 30, 2000
|                        |                                     |                            |       |               |  |                   
|                        |                                     | As reported                |       | As restated   |  | As reported        |       | As restated |  | As reported |       | As restated
|                        |                                     |                            |       |               |  |                    |       |             |  |             |       |            
|                        |                                     |                           
|                        |                                     | (in millions)             
|                       
|                       
|                       
|                       
|Operating revenues      |                                     | $                          | 1,079 |               |  | $                  | 1,175 |             |  | $           | 1,260 |             |  | $ | 1,365 |     |  | $ | 1,416 |     |  | $ | 1,528 |    
|                       
|                       
|                       
|                       
|Operating expenses      |                                     |                            |       |               |  |                    |       |             |  |             |       |             |  |   |       |     |  |   |       |     |  |   |       |    
|                       
|                       
|                       
|                       
|                        | Cost of revenues                    |                            |       | 214           |  |                    |       | 436         |  |             |       | 260         |  |   |       | 526 |  |   |       | 286 |  |   |       | 587 | 
|                       
|                       
|                       
|                       
|                        | Selling, general and administrative |                            |       | 637           |  |                    |       | 511         |  |             |       | 710         |  |   |       | 549 |  |   |       | 771 |  |   |       | 582 | 
|                       
|                       
|                       
|                       
|                        | Depreciation and amortization       |                            |       | 280           |  |                    |       | 280         |  |             |       | 303         |  |   |       | 303 |  |   |       | 315 |  |   |       | 315 | 
|                        |                                     |                            |       |               |  |                    |       |             |  |             |       |             |  |   |       |     |  |   |       |     |  |   |       |    
|Operating (loss) income |                                     | $                          | (52   | )             |  | $                  | (52   | )           |  | $           | (13   | )           |  | $ | (13   | )   |  | $ | 44    |     |  | $ | 44    |    
|                        |                                     |                            |       |               |  |                    |       |             |  |             |       |             |  |   |       |     |  |   |       |     |  |   |       |    

Had we adopted SAB No. 101 effective January 1, 1998,
operating revenues would have been $3.66 billion for the
year ended December 31, 1999 and $2.01 billion for the year
ended December 31, 1998. Cost of revenues would have been
$1.45 billion for the year ended December 31, 1999 and
$935 million for the year ended December 31, 1998.

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Some items addressed in SAB No. 101, such as multiple
element revenue arrangements, are currently under discussion and
consensus on the accounting guidance has not been reached.
Accordingly, we will continue to follow the discussions and
evaluate the potential impact of the accounting guidance on our
financial position and results of operations.

In July 2000, the Emerging Issues Task Force, or EITF,
reached a consensus on Issue No. 99-19, Reporting
Revenue Gross as a Principal versus Net as an Agent, which
addresses whether a company should recognize revenue based on
the gross amount billed to the customer because it has earned
revenue from the sale of the goods or services or whether the
company should recognize revenue based on the net amount
retained because, in substance, it has earned a commission. In
September 2000, the EITF reached a consensus on Issue
No. 00-10, Accounting for Shipping and Handling Fees
and Costs, which addresses the statement of operations
classification of shipping and handling fees billed to customers
and shipping and handling costs incurred by companies that sell
goods. The adoption of EITF Issues No. 99-19 and 00-10 in
the fourth quarter of 2000 did not have a material impact on our
financial position or results of operations.

Stock-based Compensation. We account for
stock-based compensation for employees in accordance with
Accounting Principles Board, or APB, Opinion No. 25,
Accounting for Stock Issued to Employees, and comply
with the disclosure provisions of Statement of Financial
Accounting Standards, or SFAS, No. 123, Accounting
for Stock-Based Compensation. Under APB Opinion
No. 25, compensation expense is based on the difference, if
any, on the measurement date, between the fair value of the
class A common stock and the relevant exercise price. We account
for stock-based compensation for non-employees in accordance
with the provisions of SFAS No. 123 and other applicable
accounting principles.

In March 2000, the Financial Accounting Standards Board, or
FASB, issued Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an
Interpretation of the Accounting Principles Board Opinion
No. 25, which clarifies the application of APB
Opinion No. 25 for some issues including:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | the definition of an employee for purposes of applying APB
	Opinion No. 25;                                        
|
| |  | the criteria for determining whether a plan qualifies as a
	noncompensatory plan;                                  
|
| |  | the accounting consequences of various modifications to the
	terms of a previously fixed stock option or award; and
|
| |  | the accounting for an exchange of stock compensation awards in a
	business combination.                            

Interpretation No. 44 became effective July 1, 2000,
but some of the conclusions cover specific events that occurred
before its effectiveness. The adoption of this guidance on
July 1, 2000 did not have a material impact on our
financial position or results of operations.

Advertising Costs. Costs related to advertising
and other promotional expenditures are expensed as incurred.
Advertising costs totaled $221 million during 2000,
$173 million during 1999 and $156 million during 1998.

Income Taxes. Deferred tax assets and liabilities
are determined based on the temporary differences between the
financial reporting and tax bases of assets and liabilities,
applying enacted statutory tax rates in effect for the year in
which the differences are expected to reverse. Future tax
benefits, such as net operating loss carryforwards, are
recognized to the extent that realization of these benefits is
considered to be more likely than not.

Loss per Share Attributable to Common Stockholders, Basic
and Diluted. Basic loss per share includes no dilution
and is computed by dividing the loss attributable to common
stockholders by the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


weighted average number of common shares outstanding for the
period. Diluted loss per share reflects the potential dilution
of securities that could share in our earnings. As presented,
our basic and diluted loss per share attributable to common
stockholders is based on the weighted average number of common
shares outstanding during the period and does not include other
potential common shares, including shares issuable upon exercise
of options, warrants or conversion rights, since their effect
would be antidilutive due to our losses. Our weighted average
number of common shares outstanding reflects the effect of the
June 2000 2-for-1 common stock split described in
note 11.

Reclassifications. We have reclassified some prior
period amounts to conform to our current year presentation.

Concentrations of Risk. We believe that the
geographic and industry diversity of our customer base minimizes
the risk of incurring material losses due to concentrations of
credit risk.

Motorola is currently our sole source for most of the digital
mobile network equipment and all of the handsets used throughout
our markets. If Motorola fails to deliver system infrastructure
and handsets, as well as necessary technology improvements and
enhancements, on a timely, cost-effective basis, we may not be
able to adequately service our existing subscribers or add new
subscribers. We expect to rely principally on Motorola or its
licensees for the manufacture of our handset equipment and a
substantial portion of the equipment necessary to construct,
enhance and maintain our digital mobile network for the next
several years.

New Accounting Pronouncements. In June 1998,
the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which, as
amended by SFAS No. 138, establishes accounting and
reporting standards for derivative instruments, including some
derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 requires that all
derivatives be recognized on our balance sheet as either assets
or liabilities and measured at fair value. Additionally, it
requires that changes in the derivative instruments fair
value be recognized in our statement of operations unless
specific hedge accounting criteria are met. Effective
January 1, 2001, we applied SFAS No. 133 to all
derivative instruments, and with respect to derivative
instruments embedded in other contracts, we applied SFAS
No. 133 to all contracts issued, acquired or substantively
modified after December 31, 1998.

Currently, we hedge the cash flows on some of our long-term debt
using interest rate swaps. These instruments are used to achieve
a desired proportion of fixed rate versus variable rate debt. In
an interest rate swap, we agree to exchange, at specified
intervals, the difference between a variable interest rate and
either a fixed or another variable interest rate, multiplied by
a notional principal amount.

As of December 31, 2000 and 1999, our interest rate swaps
were not recorded on the balance sheet at fair value and the net
quarterly cash settlements were recognized as either an increase
in or reduction to interest expense. Some of our interest rate
swaps do not qualify for hedge accounting under SFAS
No. 133. Upon adoption of SFAS No. 133 on
January 1, 2001, we recorded a transition adjustment of
$20 million to increase the liabilities related to our
interest rate swaps to their fair value of $65 million.
This transition adjustment is reflected in other comprehensive
loss as the cumulative effect of a change in accounting
principle in 2001, and will be reclassified into earnings over
the lives of the respective interest rate swaps. After adoption,
SFAS No. 133 requires the changes in the fair values of
those interest rate swaps that do not qualify for hedge
accounting to be recognized in our statement of operations in
the period of the change. For our interest rate swap that does
qualify for cash flow hedge accounting, the effective portion of
the change in its fair value will be reported as other
comprehensive income (loss) and will be reclassified into
earnings in the same period during which the hedged transaction
affects earnings. The ineffective portion of the change in the
fair value of this interest rate swap will be recognized in our
statement of operations in the period of the change.

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


In May 2000, the EITF reached a consensus on EITF Issue
No. 00-14, Accounting for Certain Sales
Incentives, which addresses the recognition, measurement
and statement of operations classification for sales incentives
offered voluntarily by vendors, without cost to consumers, as a
result of a single exchange transaction. We are required to and
will adopt EITF Issue No. 00-14 in the second quarter of 2001.
Based on our analysis to date, we do not believe that the
implementation of this consensus will have a material impact on
our financial position or results of operations.

2.  Significant Business Combinations

Domestic. During 1998, we acquired several
businesses for a total purchase price of $204 million,
consisting primarily of $81 million in cash and
10.2 million shares of our class A common stock, having an
aggregate value of $119 million on the applicable contract
date.

International. In 1998, Nextel International
acquired a 70% interest in its Peruvian operating company for a
purchase price of $28 million. Motorola International
Development Corporation, an indirect wholly owned subsidiary of
Motorola, held a 20% interest at that time. In
October 1998, Nextel International sold 10% of the
outstanding shares of its Peruvian operating company to Motorola
International for $6 million. Following the closing of that
transaction and giving effect to the dilution of the equity
interest of the other minority stockholder, Nextel International
held 64% of the outstanding shares of its Peruvian operating
company as of December 31, 1999.

In May 2000, Nextel International purchased the remaining
equity interests of its Peruvian operating company from Motorola
International and the other minority stockholder, increasing
Nextel Internationals ownership interest in its Peruvian
operating company to 100%. At the same time, Nextel
International purchased all of Motorola Internationals
equity interests in McCaw International (Brazil), Ltd., the
parent company of Nextel Internationals primary Brazilian
operating company. In May 2000, Nextel International also
purchased three Chilean specialized mobile radio companies from
Motorola International. Nextel International paid Motorola
International an aggregate purchase price of $78 million in
cash for the acquisitions in Peru, Brazil and Chile.

In 1997, Nextel International purchased 81% of the capital stock
of McCaw International (Brazil) Ltd., which entitled it to 90%
of the voting rights. A group represented by Telcom Ventures,
L.L.C. owned 19% of the capital stock at that time, which
entitled it to 10% of the voting rights. Pursuant to a
stockholders agreement, that group had the right so long as it
maintained at least a 10% ownership interest in McCaw
International (Brazil) to designate candidates representing at
least 10% of the directors of McCaw International (Brazil). The
group also was entitled to veto rights with respect to specified
significant corporate actions such as mergers or sales of
substantially all of the assets.

Under the stockholders agreement, the group had the right to
defer making its pro rata share of any capital calls that may
have arisen until Apri1 1999 without suffering any dilution of
its right to receive dividends and other cash or non-cash
distributions. The group ultimately did not make these capital
contributions by April 1999 in accordance with the relevant
terms of the stockholders agreement, which resulted in the
proportionate dilution of its equity interest in McCaw
International (Brazil). Since their share of McCaw International
(Brazil)s capital stock dropped below 10%, the group was
no longer entitled to designate a member of the McCaw
International (Brazil) board of directors. Nextel International
called upon the groups designated director to resign, but
he refused. Nextel International and Telcom Ventures
subsequently filed actions regarding the matter.

In July 2000, Nextel International entered into a purchase,
release and settlement agreement with the group. Under that
agreement, in August 2000, Nextel International made a cash
payment to members of the group totaling $146 million, received
all of the equity interests held by the group in McCaw
International (Brazil) and exchanged mutual releases with all of
the groups members. In addition, all

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


pending court disputes between Nextel International and Telcom
Ventures, a member of the group, were permanently dismissed. As
a result, Nextel International increased its ownership interest
in both its primary Brazilian operating company and McCaw
International (Brazil) to 100%. Additionally, all rights of
Telcom Ventures in McCaw International (Brazil), including its
rights to put its equity interests to Nextel International
beginning in October 2001, were terminated.

During 2000, Nextel International acquired several additional
Latin American businesses for a total cash purchase price of
$163 million. Nextel International also increased its
direct and indirect ownership interests in its Philippine
operating company in 2000 to about 51% by purchasing some of the
minority owners equity interests for $10 million.

Purchase Price Allocation. The total purchase
price and net assets acquired for domestic and international
acquisitions completed during 2000 and 1998 are presented below.
There were no significant acquisitions completed during 1999. As
the purchase price for some of the acquisitions in 2000 has been
allocated on a preliminary basis, further adjustments may be
necessary. The direct cost of acquisitions and net assets
acquired during 2000 include the effect of the consolidation of
our Philippine operating company previously accounted for under
the equity method.

|                            |                                                     |               |     |      |   |   |     |     |  
|--------------------------- | --------------------------------------------------- | ------------- | --- | ---- | - | - | --- | --- | -
|                            |                                                     |              
|                            |                                                     | Year ended   
|                            |                                                     | December 31, 
|                            |                                                     |              
|                            |                                                     | 2000          |     | 1998
|                            |                                                     |               |     |     
|                            |                                                     |              
|                            |                                                     | (in millions)
|                           
|                           
|                           
|                           
|Direct cost of acquisitions |                                                     |               |     |      |   |   |     |    
|                           
|                           
|                           
|                           
|                            | Cash paid, net of cash acquired                     |               | $   | 386  |   |   | $   | 125 |  
|                           
|                           
|                           
|                           
|                            | Common stock, warrants and options                  |               |     |     |   |   |     | 119 |  
|                           
|                           
|                           
|                           
|                            | Investments  carrying value prior to consolidation |               |     | 91   |   |   |     |    |  
|                           
|                           
|                           
|                           
|                            | Accrued acquisition and transaction costs and other |               |     | 27   |   |   |     | 3   |  
|                            |                                                     |               |     |      |   |   |     |    
|                            |                                                     | $             | 504 |      |   | $ | 247 |    
|                            |                                                     |               |     |      |   |   |     |    
|Net assets acquired         |                                                     |               |     |      |   |   |     |    
|                           
|                           
|                           
|                           
|                            | Working capital  net                               |               | $   | 3    |   |   | $   | (7  | )
|                           
|                           
|                           
|                           
|                            | Property, plant and equipment                       |               |     | 68   |   |   |     | 46  |  
|                           
|                           
|                           
|                           
|                            | Intangible assets                                   |               |     | 503  |   |   |     | 233 |  
|                           
|                           
|                           
|                           
|                            | Other assets                                        |               |     | 5    |   |   |     | 6   |  
|                           
|                           
|                           
|                           
|                            | Other liabilities                                   |               |     | 25   |   |   |     |    |  
|                           
|                           
|                           
|                           
|                            | Deferred income taxes                               |               |     | (100 | ) |   |     | (31 | )
|                            |                                                     |               |     |      |   |   |     |    
|                            |                                                     | $             | 504 |      |   | $ | 247 |    
|                            |                                                     |               |     |      |   |   |     |    

Pro Forma Results. Since results of operations for
the years ended December 31, 2000 and 1998 were not
materially affected by the acquisitions consummated in 2000 and
1998, pro forma results are not presented. All of the
acquisitions described above were accounted for by the purchase
method. As a result, assets and liabilities have been reflected
at fair value at the date of acquisition. We include the
operating results of the acquired companies in our consolidated
statements of operations from their acquisition dates.

F-14



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


3.  Balance Sheet Details

|                                          |                                                                 |               |       |        |   |   |       |        |  
|----------------------------------------- | --------------------------------------------------------------- | ------------- | ----- | ------ | - | - | ----- | ------ | -
|                                          |                                                                 |              
|                                          |                                                                 | December 31, 
|                                          |                                                                 |              
|                                          |                                                                 | 2000          |       | 1999  
|                                          |                                                                 |               |       |       
|                                          |                                                                 |              
|                                          |                                                                 | (in millions)
|                                         
|                                         
|                                         
|                                         
|Accounts and notes receivable             |                                                                 |               |       |        |   |   |       |       
|                                         
|                                         
|                                         
|                                         
|                                          | Trade                                                           |               | $     | 915    |   |   | $     | 626    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Notes receivable and other                                      |               |       | 34     |   |   |       | 56     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Due from Motorola                                               |               |       | 19     |   |   |       | 12     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Less allowance for doubtful accounts                            |               |       | (104   | ) |   |       | (75    | )
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 | $             | 864   |        |   | $ | 619   |       
|                                          |                                                                 |               |       |        |   |   |       |       
|Prepaid expenses and other current assets |                                                                 |               |       |        |   |   |       |       
|                                         
|                                         
|                                         
|                                         
|                                          | Deferred costs of handset sales                                 |               | $     | 380    |   |   | $     |       |  
|                                         
|                                         
|                                         
|                                         
|                                          | Refundable FCC auction deposits                                 |               |       | 239    |   |   |       |       |  
|                                         
|                                         
|                                         
|                                         
|                                          | Prepaid expenses                                                |               |       | 118    |   |   |       | 80     |  
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 | $             | 737   |        |   | $ | 80    |       
|                                          |                                                                 |               |       |        |   |   |       |       
|Property, plant and equipment             |                                                                 |               |       |        |   |   |       |       
|                                         
|                                         
|                                         
|                                         
|                                          | Land                                                            |               | $     | 4      |   |   | $     | 4      |  
|                                         
|                                         
|                                         
|                                         
|                                          | Buildings and improvements                                      |               |       | 146    |   |   |       | 99     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Digital mobile network equipment                                |               |       | 8,555  |   |   |       | 5,825  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Office equipment, furniture and fixtures and other              |               |       | 1,017  |   |   |       | 653    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Less accumulated depreciation and amortization                  |               |       | (2,482 | ) |   |       | (1,687 | )
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 |               | 7,240 |        |   |   | 4,894 |       
|                                         
|                                         
|                                         
|                                         
|                                          | Construction in progress                                        |               |       | 1,551  |   |   |       | 1,258  |  
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 | $             | 8,791 |        |   | $ | 6,152 |       
|                                          |                                                                 |               |       |        |   |   |       |       
|Intangible assets                         |                                                                 |               |       |        |   |   |       |       
|                                         
|                                         
|                                         
|                                         
|                                          | Licenses                                                        |               | $     | 5,282  |   |   | $     | 4,139  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Excess of purchase price over fair value of net assets acquired |               |       | 1,360  |   |   |       | 1,262  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Debt financing costs, net                                       |               |       | 311    |   |   |       | 338    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Customer lists                                                  |               |       | 116    |   |   |       | 146    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Other                                                           |               |       | 14     |   |   |       | 11     |  
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 |               | 7,083 |        |   |   | 5,896 |       
|                                         
|                                         
|                                         
|                                         
|                                          | Less accumulated amortization                                   |               |       | (1,101 | ) |   |       | (1,007 | )
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 | $             | 5,982 |        |   | $ | 4,889 |       
|                                          |                                                                 |               |       |        |   |   |       |       
|Accrued expenses and other                |                                                                 |               |       |        |   |   |       |       
|                                         
|                                         
|                                         
|                                         
|                                          | Deferred revenues                                               |               | $     | 515    |   |   | $     | 91     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Accrued interest                                                |               |       | 171    |   |   |       | 131    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Wages, commissions and other payroll related items              |               |       | 145    |   |   |       | 130    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Other                                                           |               |       | 413    |   |   |       | 291    |  
|                                          |                                                                 |               |       |        |   |   |       |       
|                                          |                                                                 | $             | 1,244 |        |   | $ | 643   |       
|                                          |                                                                 |               |       |        |   |   |       |       

F-15



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


4.  Investments

|                                                                                                            |  |               |     |      |  |   |     | 
|----------------------------------------------------------------------------------------------------------- |  | ------------- | --- | ---- |  | - | --- | 
|                                                                                                            |  |              
|                                                                                                            |  | December 31, 
|                                                                                                            |  |              
|                                                                                                            |  | 2000          |     | 1999
|                                                                                                            |  |               |     |     
|                                                                                                            |  |              
|                                                                                                            |  | (in millions)
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Investments in affiliates  equity method, at cost
	less equity in net losses of $176 and $80               |  | $             | 177 |      |  | $ | 249 | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Investment in affiliate  mandatorily redeemable
	preferred stock, at accreted liquidation preference value |  |               | 28  |      |  |   |    | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Marketable equity securities and warrant available-for-sale                                                 |  |               | 542 |      |  |   | 288 | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Nonmarketable equity securities, at cost                                                                    |  |               | 9   |      |  |   | 54  | 
|                                                                                                            |  |               |     |      |  |   |     | 
|                                                                                                            |  | $             | 756 |      |  | $ | 591 | 
|                                                                                                            |  |               |     |      |  |   |     | 

Our percentage ownership for each of our material investments is
as follows. For equity method investments, the percentage
ownership below represents the percentage of the investees
earnings or losses recognized.

|                                |                                                         |              |  |      |   |  |  |    |  
|------------------------------- | ------------------------------------------------------- | ------------ |  | ---- | - |  |  | -- | -
|                                |                                                         |             
|                                |                                                         | Percentage  
|                                |                                                         | Ownership   
|                                |                                                         | December 31,
|                                |                                                         |             
|                                |                                                         | 2000         |  | 1999
|                                |                                                         |              |  |     
|Equity Method Investments       |                                                         |              |  |      |   |  |  |   
|                               
|                               
|                               
|                               
|                                | Nextel Partners, Inc.                                   |              |  | 32   | % |  |  | 38 | %
|                               
|                               
|                               
|                               
|                                | Nextel Communications Philippines, Inc.                 |              |  |     |   |  |  | 38 | %
|                               
|                               
|                               
|                               
|                                | Nexnet Co., Ltd. (Japan)                                |              |  | 32   | % |  |  | 21 | %
|                               
|                               
|                               
|                               
|Marketable Equity Securities    |                                                         |              |  |      |   |  |  |   
|                               
|                               
|                               
|                               
|                                | SpectraSite Holdings, Inc.                              |              |  | 10   | % |  |  |   |  
|                               
|                               
|                               
|                               
|                                | Clearnet Communications, Inc. (Canada)                  |              |  |     |   |  |  | 14 | %
|                               
|                               
|                               
|                               
|                                | TELUS Corporation (Canada)                              |              |  | 5    | % |  |  |   |  
|                               
|                               
|                               
|                               
|Nonmarketable Equity Securities |                                                         |              |  |      |   |  |  |   
|                               
|                               
|                               
|                               
|                                | SpectraSite Holdings, Inc.                              |              |  |     |   |  |  | 15 | %
|                               
|                               
|                               
|                               
|                                | Shanghai CCT-McCaw Telecommunications Systems Co., Ltd. |              |  |     |   |  |  | 12 | %

Nextel Partners. In January 1999, we entered
into agreements with Nextel Partners, Inc. and other parties,
including Motorola and Eagle River Investments, L.L.C., an
affiliate of Mr. Craig O. McCaw, one of our principal
stockholders, relating to the capitalization, governance,
financing and operation of Nextel Partners. Nextel Partners is
constructing and operating a digital mobile network utilizing
the iDEN technology used in our digital mobile network. In
connection with this transaction, we sold assets and transferred
specified FCC licenses to Nextel Partners. In exchange, at the
date of transfer, Nextel Partners issued to us equity having an
agreed value of $131 million and paid us $132 million in
cash related to the assets sold and the reimbursement of costs
and net operating expenses. In addition, these agreements
establish circumstances in which we will have the right or the
obligation to purchase the remaining equity interests in Nextel
Partners at specified prices. In September 1999, as
permitted by the agreements, Nextel Partners exercised its
option to acquire from us specified additional territories,
assets and related FCC licenses, and we received an aggregate
consideration of $19 million, consisting of
$10 million in cash and $9 million in equity.
Additionally, we made a $13 million cash equity investment
in Nextel Partners to avoid dilution of our voting interest.

F-16



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


As a result of Nextel Partners initial public offering in
2000, our total ownership interest was diluted. Our investment
in Nextel Partners preferred stock converted to a combination of
voting class B common stock and nonvoting preferred stock that
is subject to mandatory cash redemption by February 2010.

In September 2000, pursuant to binding agreements, Nextel
Partners exercised its option to acquire from us specified
additional territories and assets, including related FCC
licenses. In exchange, we received $31 million in equity
for the licenses and $3 million in cash for the other
assets. This transaction resulted in a gain of $22 million,
of which we recorded $15 million in other income. We
deferred $7 million of the gain which we will recognize
over the life of the FCC licenses.

Under a roaming agreement between one of our wholly owned
subsidiaries and a wholly owned subsidiary of Nextel Partners,
we were charged $19 million during 2000 and $8 million
during 1999 for our customers roaming on Nextel Partners
digital mobile network, net of roaming revenues earned. Our
wholly owned subsidiary provides specified telecommunications
switching services to Nextel Partners under a switch sharing
agreement. For these services, we earned $15 million in
2000 and $2 million in 1999, which we recorded as a
reduction to cost of revenues. We charged Nextel Partners
$4 million in 2000 and $3 million in 1999 for
administrative services provided under a transition services
agreement. We recorded these amounts as a reduction to selling,
general and administrative expenses. We have a net receivable
due from Nextel Partners of $2 million as of
December 31, 2000 and a net payable due to Nextel Partners
of $2 million as of December 31, 1999.

Summarized financial information reported by Nextel Partners is
presented below.

|                                       |  |               |       |      |  |   |     | 
|-------------------------------------- |  | ------------- | ----- | ---- |  | - | --- | 
|                                       |  |              
|                                       |  | December 31, 
|                                       |  |              
|                                       |  | 2000          |       | 1999
|                                       |  |               |       |     
|                                       |  |              
|                                       |  | (in millions)
|                                      
|                                      
|                                      
|                                      
|Current assets                         |  | $             | 984   |      |  | $ | 587 | 
|                                      
|                                      
|                                      
|                                      
|Noncurrent assets                      |  |               | 809   |      |  |   | 428 | 
|                                      
|                                      
|                                      
|                                      
|Current liabilities                    |  |               | 120   |      |  |   | 59  | 
|                                      
|                                      
|                                      
|                                      
|Noncurrent liabilities                 |  |               | 1,075 |      |  |   | 786 | 
|                                      
|                                      
|                                      
|                                      
|Mandatorily redeemable preferred stock |  |               | 28    |      |  |   |    | 

|                                         |  |                         |     |      |  |      |     |  |  |   |    | 
|---------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- |  |  | - | -- | 
|                                         |  |                        
|                                         |  | Year ended December 31,
|                                         |  |                        
|                                         |  | 2000                    |     | 1999 |  | 1998
|                                         |  |                         |     |      |  |     
|                                         |  |                        
|                                         |  | (in millions)          
|                                        
|                                        
|                                        
|                                        
|Operating revenues                       |  | $                       | 136 |      |  | $    | 33  |  |  | $ | 5  | 
|                                        
|                                        
|                                        
|                                        
|Cost of revenues                         |  |                         | 112 |      |  |      | 30  |  |  |   | 9  | 
|                                        
|                                        
|                                        
|                                        
|Loss before extraordinary item           |  |                         | 242 |      |  |      | 112 |  |  |   | 22 | 
|                                        
|                                        
|                                        
|                                        
|Loss attributable to common stockholders |  |                         | 271 |      |  |      | 112 |  |  |   | 22 | 

SpectraSite. In April 1999, we and some of
our subsidiaries transferred specified telecommunications towers
and related assets to SpectraSite Holdings, Inc. and some of its
subsidiaries, which we then leased back. In this transaction, we
received $560 million in cash, which we reflected as a
finance obligation on our balance sheet, and we received an
ownership interest in SpectraSite. We also entered into a
commitment agreement with SpectraSite to lease 1,700 additional
towers in the United States by April 2004 to support the
expansion of our digital mobile network and the compatible
digital mobile network of Nextel Partners. We will be subject to
penalty payments if we do not lease the agreed upon number of
towers as of particular dates within the 5-year period. Based on
the number of towers leased through December 31, 2000, we
believe we will meet our obligation under this commitment. We
received $27 million during the second half of 1999 and an
additional $92 million during 2000 for the transfer of
additional towers, which we then leased back, resulting in a
corresponding increase in the finance

F-17



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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


obligation. Due to our continuing involvement related to our
ownership interest in SpectraSite, these sale-leaseback
transactions are accounted for by the financing method.

Acquisition of Clearnet Communications, Inc. by TELUS
Corporation. In October 2000, TELUS Corporation
acquired Clearnet Communications, Inc., a publicly traded
Canadian company in which Nextel International owned an equity
interest, for cash and stock. TELUS is a telecommunications
company that, before its acquisition of Clearnet, provided
wireline, wireless data and Internet communications services
primarily in Western Canada. Under agreements among Nextel
International, TELUS and Clearnet, Nextel International
exchanged all of its Clearnet stock for nonvoting shares of
TELUS. Nextel International also entered into a lock-up
agreement with TELUS under which it has agreed not to dispose of
any TELUS shares prior to October 2001, subject to
specified exceptions. In exchange for 8.4 million shares of
Clearnet stock, Nextel International received 13.7 million
shares of TELUS stock, representing slightly less than 5% of the
ownership interest in TELUS. We recorded a pre-tax gain of
$275 million in the fourth quarter of 2000 related to this
transaction. In accordance with SFAS No. 115, the shares of
TELUS stock were recorded at their then current market value in
our financial statements.

Japan. As a result of an inability to effect
timely regulatory changes, and a determination that a network
build-out under existing specialized mobile radio technology
would be costly and inefficient, Nextel International reached
the conclusion that the value of its existing investment in its
Japanese affiliate was not recoverable. In light of this
conclusion, Nextel International recorded a one-time non-cash
charge to equity in losses of unconsolidated affiliates of
$21 million in the fourth quarter of 2000 that represents a
write-off of the entire carrying amount of this investment.

5.  Fair Value of Financial Instruments

The estimated fair values of financial instruments have been
determined by us, using available market information and
appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the
estimates of fair value. As a result, the estimates presented
below are not necessarily indicative of the amounts that we
could realize or be required to pay in a current market
exchange. The use of different market assumptions as well as
estimation methodologies may have a material effect on the
estimated fair value amounts.

|                                                                         |  |               |        |            |  |          |        |            |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------ |  | ------------- | ------ | ---------- |  | -------- | ------ | ---------- |  | - | ------ | - |  | - | ------ | -
|                                                                         |  |              
|                                                                         |  | December 31, 
|                                                                         |  |              
|                                                                         |  |               |        |           
|                                                                         |  | 2000          |        | 1999      
|                                                                         |  |               |        |           
|                                                                         |  | Carrying      |        | Estimated  |  | Carrying |        | Estimated 
|                                                                         |  | Amount        |        | Fair Value |  | Amount   |        | Fair Value
|                                                                         |  |               |        |            |  |          |        |           
|                                                                         |  |              
|                                                                         |  | (in millions)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Marketable equity securities and warrant                                 |  | $             | 542    |            |  | $        | 542    |            |  | $ | 288    |   |  | $ | 288    |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Nonmarketable mandatorily redeemable preferred stock of Nextel
	Partners |  |               | 28     |            |  |          | 17     |            |  |   |       |   |  |   |       |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Long-term debt, including current portion                                |  |               | 13,797 |            |  |          | 12,654 |            |  |   | 10,925 |   |  |   | 11,469 |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Interest rate risk management agreements                                 |  |               | (45    | )          |  |          | (65    | )          |  |   | (55    | ) |  |   | (35    | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Mandatorily redeemable preferred stock                                   |  |               | 1,881  |            |  |          | 1,639  |            |  |   | 1,770  |   |  |   | 3,275  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Finance obligation                                                       |  |               | 674    |            |  |          | 510    |            |  |   | 578    |   |  |   | 488    |  

Cash and Cash Equivalents, Short-term Investments,
Accounts and Notes Receivable, Escrow Deposits, Accounts
Payable, Accrued Expenses and Due to Related Parties.
The carrying amounts of these items are a reasonable estimate of
their fair value.

Marketable Equity Securities and Warrant. We
estimate the fair value of these securities based on quoted
market prices. The fair value of Nextel Internationals
warrant to purchase shares of stock of China

F-18



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


United Telecommunications Corporation that we received in
connection with the termination of our Chinese joint venture is
estimated using the Black-Scholes option-pricing model. At
December 31, 2000 and 1999, marketable equity securities
and warrant included within investments consist of the following:

|                                                 |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|------------------------------------------------ |  | ------------- | --- | ---------- |  | ---------- | --- | ---------- |  | - | - |  |  | - | --- | 
|                                                 |  |               |     | Gross      |  | Gross      |     |           
|                                                 |  |               |     | Unrealized |  | Unrealized |     |           
|                                                 |  | Cost          |     | Gain       |  | Loss       |     | Fair Value
|                                                 |  |               |     |            |  |            |     |           
|                                                 |  |              
|                                                 |  | (in millions)
|                                                
|                                                
|                                                
|                                                
|2000                                             |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|                                                
|                                                
|                                                
|                                                
|Available-for-sale equity securities and warrant |  | $             | 392 |            |  | $          | 152 |            |  | $ | 2 |  |  | $ | 542 | 
|                                                
|                                                
|                                                
|                                                
|1999                                             |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|                                                
|                                                
|                                                
|                                                
|Available-for-sale equity securities             |  |               | 69  |            |  |            | 219 |            |  |   |  |  |  |   | 288 | 

Nonmarketable Equity Securities. It is not
practicable to value our restricted investments in publicly
traded companies and our investments in privately held companies
because quoted market prices were not available or were not
relevant. As of December 31, 1999, if our investment in
SpectraSite had not contained effective restrictions on our
ability to sell, the value based on quoted market prices would
have been $152 million with a carrying value of
$38 million.

Nonmarketable Mandatorily Redeemable Preferred Stock of
Nextel Partners. We estimate the fair value of this
investment based on the present value of future cash flows,
using a discount rate available for similar investments,
adjusted for this investments non-marketability and credit
rating.

Long-term Debt. We estimate the fair value of
these securities based on quoted market prices of our senior
notes. Carrying value approximates fair value for our bank and
vendor credit facilities, as interest rates are reset
periodically. See note 6.

Interest Rate Risk Management Agreements. The fair
value of these agreements is based on estimates obtained from
dealers to settle the interest rate swap agreements.

Mandatorily Redeemable Preferred Stock. We
estimate the fair value of these securities based on quoted
market prices.

Finance Obligation. We estimate the fair value of
our finance obligation based on interest rates available for
similar term loan borrowings.

Letters of Credit. We use letters of credit to
back some lease guarantees. Outstanding letters of credit
totaled $31 million at December 31, 2000 and
$32 million at December 31, 1999. The letters of
credit reflect fair value as a condition of their underlying
purpose and are subject to fees competitively determined in the
market place.

F-19



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


6.  Long-term Debt, Capital Lease and Finance
Obligations

|                                                                                                                                                                                                                    |  |                       |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ------ | ---- |  | - | ------ | -
|                                                                                                                                                                                                                    |  |                      
|                                                                                                                                                                                                                    |  | December 31,         
|                                                                                                                                                                                                                    |  |                      
|                                                                                                                                                                                                                    |  | 2000                  |        | 1999
|                                                                                                                                                                                                                    |  |                       |        |     
|                                                                                                                                                                                                                    |  |                      
|                                                                                                                                                                                                                    |  | (dollars in millions)
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|9.75% senior redeemable discount notes due 2004                                                                                                                                                                     |  | $                     |       |      |  | $ | 876    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|10.125% senior redeemable discount notes due 2004,net of
	unamortized discount of $40                                                                                                                               |  |                       |       |      |  |   | 254    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|13% senior redeemable discount notes due 2007,issued by
	Nextel International, net of unamortized discount of $156
	and $252                                                                                        |  |                       | 795    |      |  |   | 699    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|10.65% senior redeemable discount notes due 2007,net of
	unamortized discount of $136 and $205                                                                                                                      |  |                       | 704    |      |  |   | 635    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|9.75% senior serial redeemable discount notes due 2007,net of unamortized discount of $180 and $267                                                                                                                 |  |                       | 949    |      |  |   | 862    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|4.75% convertible senior notes due 2007                                                                                                                                                                             |  |                       | 354    |      |  |   | 600    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|9.95% senior serial redeemable discount notes due 2008,net of unamortized discount of $303 and $425                                                                                                                 |  |                       | 1,324  |      |  |   | 1,202  |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|12.125% senior serial redeemable discount notes due 2008,issued by Nextel International, net of unamortized discount
	of $172 and $234                                                                              |  |                       | 558    |      |  |   | 496    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|12% senior serial redeemable notes due 2008,net of
	unamortized discount of $4 and $4                                                                                                                               |  |                       | 296    |      |  |   | 296    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|9.375% senior serial redeemable notes due 2009                                                                                                                                                                      |  |                       | 2,000  |      |  |   | 2,000  |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|5.25% convertible senior notes due 2010                                                                                                                                                                             |  |                       | 1,150  |      |  |   |       |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|12.75% senior serial redeemable notes due 2010,issued by
	Nextel International, net of unamortized discount of $9                                                                                                   |  |                       | 641    |      |  |   |       |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Bank credit facility,interest payable quarterly at an
	adjusted rate calculated based either on the U.S. prime rate or
	London Interbank Offered Rate, or LIBOR, (8.63% to
	10.44%  2000; 8.63% to 9.75%  1999)   |  |                       | 4,500  |      |  |   | 2,650  |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Nextel International vendor credit facilities,interest
	payable quarterly or semiannually at an adjusted rate calculated
	based either on the U.S. prime rate or LIBOR (10.8% to
	12%  2000; 10.28% to 11%  1999) |  |                       | 382    |      |  |   | 243    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Nextel Argentina credit facilities,interest payable
	quarterly at an adjusted rate calculated based either on the
	Adjusted Base Rate or the Eurodollar rate (11.69% 
	2000; 8.13% to 12.25%  1999)               |  |                       | 142    |      |  |   | 108    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Capital lease obligation                                                                                                                                                                                            |  |                       | 260    |      |  |   |       |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Finance obligation                                                                                                                                                                                                  |  |                       | 674    |      |  |   | 578    |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Other long-term debt                                                                                                                                                                                                |  |                       | 2      |      |  |   | 4      |  
|                                                                                                                                                                                                                    |  |                       |        |      |  |   |        |  
|                                                                                                                                                                                                                    |  |                       | 14,731 |      |  |   | 11,503 |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Less current portion, including $1,130 in 1999 associated with
	the 9.75% senior notes due 2004 and the 10.125% senior notes due
	2004 called for redemption                                                        |  |                       | (102   | )    |  |   | (1,191 | )
|                                                                                                                                                                                                                    |  |                       |        |      |  |   |        |  
|                                                                                                                                                                                                                    |  | $                     | 14,629 |      |  | $ | 10,312 |  
|                                                                                                                                                                                                                    |  |                       |        |      |  |   |        |  

Senior Redeemable Notes Issued Before 1997

The 9.75% senior redeemable discount notes due 2004 were
callable beginning February 15, 1999. Accrual of cash
interest on these notes commenced on February 15, 1999 and
was payable semiannually beginning August 15, 1999. As described
below, all of these outstanding notes were redeemed on February
15, 2000 and are classified in the current portion of long-term
debt as of December 31, 1999.

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The 10.125% senior redeemable discount notes due 2004 were
callable beginning January 15, 1999. Accrual of cash
interest on these notes commenced on January 15, 1999 and
was payable semiannually beginning July 15, 1999. As
described below, all of these outstanding notes were redeemed on
January 15, 2000 and are classified in the current portion
of long-term debt as of December 31, 1999.

Debt Extinguishment. In April 1998, we
utilized $741 million, representing both the purchase price
of the tendered notes and related consent fees, of the proceeds
from the issuance of the 9.95% senior notes to conclude a cash
tender offer and consent solicitation with respect to some
senior notes which are no longer outstanding. As a result of the
early retirement of the tendered notes, we recognized an
extraordinary loss of $133 million, representing the excess
of the purchase price over the carrying values of the tendered
notes and the write-off of $19 million of unamortized debt
financing costs.

During the fourth quarter of 1999, we utilized a portion of the
proceeds from the 9.375% senior notes to repurchase and redeem
prior to final maturity $546 million of our outstanding
notes issued prior to 1997. As a result of the early retirement
of these senior notes, we recognized an extraordinary loss of
$68 million, representing the excess of the purchase price
over the carrying values of the repurchased and redeemed notes
and the write-off of $11 million of unamortized debt
financing costs.

In December 1999, we issued notices to redeem prior to
final maturity all of our outstanding 10.125% senior notes due
2004 and all of our outstanding 9.75% senior notes due 2004, and
were released as primary obligor on January 15, 2000 for the
10.125% senior notes and on February 15, 2000 for the 9.75%
senior notes. On December 30, 1999, utilizing a portion of
the proceeds from our 9.375% senior notes due 2009, we placed
funds in an irrevocable trust to effect these redemptions.
During the first quarter of 2000, we utilized $1.21 billion
of cash to redeem prior to final maturity all of these
outstanding notes. As a result of these transactions, we
recognized an extraordinary loss of $104 million in the first
quarter of 2000, representing the excess of the purchase price
over the carrying values of the redeemed notes and the write-off
of $26 million of unamortized debt financing costs.

Senior Redeemable Notes

13% Senior Redeemable Discount Notes. Cash
interest on the 13% senior redeemable discount notes due 2007
issued by Nextel International does not accrue prior to
April 15, 2002 and is payable semiannually beginning
October 15, 2002 at a rate of 13% per year. Nextel International
may choose to redeem some or all of these notes starting
April 15, 2002 at an initial redemption price of 106.5% of
the aggregate principal amount of these notes, plus accrued and
unpaid interest. These notes are senior unsecured indebtedness
of Nextel International and rank equal in right of payment with
all other unsubordinated, unsecured indebtedness of Nextel
International.

10.65% Senior Redeemable Discount Notes. Cash
interest on the 10.65% senior redeemable discount notes due 2007
does not accrue prior to September 15, 2002 and is payable
semiannually beginning March 15, 2003 at a rate of 10.65%
per year. We may choose to redeem some or all of these notes
starting September 15, 2002 at an initial redemption price
of 105.325% of the aggregate principal amount of these notes,
plus accrued and unpaid interest. These notes are senior
unsecured indebtedness of ours and rank equal in right of
payment with all our other unsubordinated, unsecured
indebtedness.

9.75% Senior Serial Redeemable Discount Notes.
Cash interest on the 9.75% senior serial redeemable discount
notes due 2007 does not accrue prior to October 31, 2002
and is payable semiannually beginning April 30, 2003, at a
rate of 9.75% per year. We may choose to redeem some of all of
these notes starting October 31, 2002 at an initial
redemption price of 104.875% of the aggregate principal amount
of these notes, plus accrued and unpaid interest. These notes
are senior unsecured indebtedness of ours and rank equal in
right of payment with all our other unsubordinated, unsecured
indebtedness.

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


9.95% Senior Serial Redeemable Discount Notes. In
1998, we completed the sale of $1.63 billion in principal
amount at maturity of 9.95% senior serial redeemable discount
notes due 2008, generating $976 million in net cash
proceeds. Cash interest does not accrue prior to
February 15, 2003, and is payable semiannually beginning
August 15, 2003 at a rate of 9.95% per year. We may choose
to redeem some or all of these notes starting February 15,
2003 at an initial redemption price of 105.5625% of the
aggregate principal amount of these notes, plus accrued and
unpaid interest. These notes are senior unsecured indebtedness
of ours and rank equal in right of payment with all our other
unsubordinated, unsecured indebtedness.

12.125% Senior Serial Redeemable Discount Notes.
In 1998, Nextel International completed the sale of
$730 million in principal amount at maturity of 12.125%
senior serial redeemable discount notes due 2008, generating
$387 million in net cash proceeds. Cash interest does not
accrue prior to April 15, 2003, and is payable semiannually
beginning October 15, 2003 at a rate of 12.125% per year.
Nextel International may choose to redeem some or all of these
notes starting April 15, 2003 at an initial redemption
price of 106.063% of the aggregate principal amount of these
notes, plus accrued and unpaid interest. Before April 15,
2001, Nextel International may choose to redeem up to 35% of the
aggregate accreted value of the notes using the proceeds of one
or more sales of qualified Nextel International equity
securities at 112.125% of their accreted value on the date of
redemption. These notes are senior unsecured indebtedness of
Nextel International and rank equal in right of payment with all
other unsubordinated, unsecured indebtedness of Nextel
International.

12% Senior Serial Redeemable Notes. In 1998, we
completed the sale of $300 million in principal amount of
12% senior serial redeemable notes due 2008, generating
$289 million in net cash proceeds. Cash interest is payable
semiannually beginning May 1, 1999 at a rate of 12% per
year. We may choose to redeem some or all of these notes
starting November 1, 2003 at an initial redemption price of
106% of the aggregate principal amount of these notes, plus
accrued and unpaid interest. On or before November 1, 2001,
we may choose to redeem up to 35% of the original principal
amount of the notes using the proceeds of one or more sales of
qualified equity securities at 112% of their principal amount,
plus accrued and unpaid interest to the date of redemption.
These notes are senior unsecured indebtedness of ours and rank
equal in right of payment with all our other unsubordinated,
unsecured indebtedness.

9.375% Senior Serial Redeemable Notes. In
November 1999, we completed the sale of $2.0 billion
in principal amount of 9.375% senior serial redeemable notes due
2009, generating $1.96 billion in net cash proceeds. Cash
interest is payable semiannually beginning May 15, 2000 at
a rate of 9.375% per year. We may choose to redeem some or all
of these notes starting November 15, 2004 at an initial
redemption price of 104.688% of the aggregate principal amount
of these notes, plus accrued and unpaid interest. On or before
November 15, 2002, we may choose to redeem up to 35% of the
original principal amount of the notes using the proceeds of one
or more sales of qualified equity securities at 109.375% of
their principal amount, plus accrued and unpaid interest to the
date of redemption. These notes are senior unsecured
indebtedness of ours and rank equal in right of payment with all
our other unsubordinated, unsecured indebtedness.

12.75% Senior Serial Redeemable Notes.In
August 2000, Nextel International completed the sale of
$650 million in principal amount of 12.75% senior serial
redeemable notes due 2010, generating $624 million in net
cash proceeds. Cash interest is payable semiannually beginning
February 1, 2001 at a rate of 12.75% per year. Nextel
International may choose to redeem some or all of these notes
starting August 1, 2005 at an initial redemption price of
106.375% of the aggregate principal amount of these notes, plus
accrued and unpaid interest. Before August 1, 2003, Nextel
International may choose to redeem up to 35% of the aggregate
principal amount of the notes using the proceeds of one or more
sales of qualified equity securities at 112.75% of their
principal amount, plus accrued and unpaid interest to the

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


date of redemption. These notes are senior unsecured
indebtedness of Nextel International and rank equal in right of
payment with all other unsubordinated, unsecured indebtedness of
Nextel International.

Convertible Senior Notes

4.75% Convertible Senior Notes. In June 1999,
we completed the issuance and sale in a private placement of
$600 million in principal amount of 4.75% convertible
senior notes due 2007, generating $588 million in net cash
proceeds. Cash interest is payable semiannually beginning
January 1, 2000 at a rate of 4.75% per year. We may choose
to redeem some or all of these notes starting July 6, 2002
at an initial redemption price of 102.714% plus accrued and
unpaid interest. These notes are convertible at the option of
the holders into our class A common stock at any time prior to
redemption, repurchase or maturity at a conversion price of
$23.654 per share, subject to adjustment. These notes are senior
unsecured indebtedness of ours and rank equal in right of
payment with all our other unsubordinated, unsecured
indebtedness.

In March 2000, we issued 10.4 million shares of our
class A common stock upon the conversion of $246 million of
our 4.75% convertible senior notes, representing a conversion
price of $23.654 per share. In order to induce conversion of
these notes prior to redemption, we paid the converting note
holders $26 million in cash, representing $3 million
of accrued interest and $23 million of debt conversion
expense which is included in other expense.

5.25% Convertible Senior Notes. In the first
quarter of 2000, we completed the sale of $1.15 billion in
principal amount of 5.25% convertible senior notes due 2010,
generating $1.13 billion in net cash proceeds. Cash
interest is payable semiannually beginning July 15, 2000 at
a rate of 5.25% per year. We may choose to redeem some or all of
these notes starting January 18, 2003 at an initial
redemption price of 103.5% of the aggregate principal amount of
these notes plus accrued and unpaid interest. These notes are
convertible at the option of the holders into our class A common
stock at any time prior to redemption, repurchase or maturity at
a conversion price of $74.40 per share, subject to adjustment.
These notes are senior unsecured indebtedness of ours and rank
equal in right of payment with all our other unsubordinated,
unsecured indebtedness.

Bank and Vendor Credit Facilities

Domestic Bank Credit Facility. Our amended and
restated bank credit facility provides for up to
$6.0 billion of secured financing, consisting of a
$1.5 billion revolving loan and $4.5 billion in term
loans. The maturity date of the $1.5 billion revolving loan
and a $1.7 billion portion of the term loans is
December 31, 2007. Of the remaining $2.8 billion in
term loans, $1.8 billion matures in equal $900 million
portions on June 30, 2008 and December 31, 2008, and the
remaining $1.0 billion term loan matures March 31,
2009. Commitment fees of 0.375% to 1% per year, depending on the
ratio of our total indebtedness outstanding to annualized cash
flow, are charged on the average unused balance and recorded in
interest expense as incurred. The maturity dates of the loans
can accelerate if our credit ratings are below specified levels
and the aggregate amount of specified debt obligations that
mature before June 30, 2009, and the redemption price of
redeemable stock that is mandatorily redeemable before
June 30, 2009, exceed specific amounts. Borrowings under
the amended and restated bank credit facility are secured by
liens on assets of substantially all of our domestic
subsidiaries. All of our outstanding notes contain provisions
that may limit the amount of borrowings available under the
amended and restated bank credit facility in specified
circumstances. The availability of borrowings under this
facility is subject to the satisfaction or waiver of specified
applicable borrowing conditions. At December 31, 2000, we
were able to access the entire $6.0 billion available under
the bank credit facility.

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The bank credit facility contains covenants which limit our
ability and some of our subsidiaries ability to incur
additional indebtedness; create liens; pay dividends or make
distributions in respect of our or their capital stock or make
specified other restricted payments; consolidate, merge or sell
all or substantially all of our or their assets; guarantee
obligations of other entities; enter into hedging agreements;
enter into transactions with affiliates or related persons or
engage in any business other than the telecommunications
business. Except for distributions for specified limited
purposes, these covenants impose limitations which restrict the
distribution of substantially all of our subsidiaries net
assets. Additionally, the agreements require compliance with
financial ratio tests. In March 2001, we amended this bank
credit facility to modify certain financial covenants to better
reflect our anticipated financial performance and to permit
ongoing compliance with the financial covenants during 2001. As
of December 31, 2000, we were in full compliance with all
financial covenants under this facility as in effect on that
date.

International Facilities. McCaw International
(Brazil), Ltd. has an equipment financing agreement with
Motorola Credit Corporation, a subsidiary of Motorola, which
provided $125 million in multi-draw term loans to McCaw
International (Brazil). Loans made were used to acquire digital
mobile network equipment and related services from Motorola. The
financing advanced under this agreement was originally repayable
in U.S. dollars in semiannual installments over 42 months
beginning June 30, 2000. McCaw International (Brazil) and
Motorola Credit entered into an amendment to this agreement in
February 2001, which permits installments due after that
date to be repaid beginning December 31, 2002, with final
payment due June 30, 2005. The loans made under this agreement
are secured by a first priority lien on substantially all of
McCaw International (Brazil)s assets, a pledge of all of
the stock of McCaw International (Brazil) and its subsidiaries
and Nextel Internationals guarantee of the obligations.
This facility also requires McCaw International (Brazil) to meet
and maintain specified financial and operating covenants.

Nextel International has an equipment financing facility with
Motorola Credit which provided for $225 million of secured
term loans primarily used to finance the cost of qualifying
purchases of digital mobile network equipment and related
services and to repay all of the previously outstanding
long-term debt of our Philippine operating company. Amounts
borrowed under this facility were originally repayable in eight
equal semiannual installments beginning June 30, 2001 and
maturing December 31, 2004. Nextel International and
Motorola Credit entered into an amendment to this facility in
February 2001 which defers the first installment payment to
December 31, 2002 and extends the maturity to June 30,
2006. This facility is secured by, among other things, a pledge
of Nextel Internationals equity interests in its Mexican,
Peruvian and Philippine operating companies and its Japanese
affiliate, as well as a pledge by some of the minority
stockholders of their equity interests in Nextel
Internationals Philippine operating company and Japanese
affiliate.

Nextel International has an agreement with Motorola Credit under
which Motorola Credit provided $57 million in incremental
term loans to Nextel International. In January 2000, Nextel
International borrowed the full $57 million available under this
facility to acquire digital mobile network equipment and related
services from Motorola. Nextel International and Motorola Credit
entered into an amendment to this facility in February 2001
under which amounts borrowed under this facility now mature
June 30, 2003. Before this amendment, loans under this
facility were to mature December 31, 2001. Loans under this
facility are secured by a pledge of all of Nextel
Internationals shares of TELUS stock.

Nextel Internationals Argentine operating company has
credit facilities with Chase Manhattan Bank and Motorola Credit
which provided $100 million in term loans for general
corporate purposes and $50 million in incremental term
loans for purchasing qualifying digital mobile network equipment
and related services from Motorola. Loans under this facility
are repayable in quarterly installments beginning
September 30, 2000 through March 31, 2003. Each of the
first nine installments is equal to 1/18 of the outstanding
balance at September 30, 2000, and the final installment is
an amount equal to the remaining

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


balance. Borrowings under this facility are secured by a pledge
of stock of, and a first priority lien on the assets of Nextel
Internationals Argentine operating company. This facility
also requires Nextel Internationals Argentine operating
company to meet financial and operating ratios. In
June 2000, in conformity with its business plan, Nextel
Internationals Argentine operating company and the lenders
under the credit facility amended the facility to modify several
financial covenants. As a condition to the effectiveness of
those amendments, Nextel International amended the capital
subscription agreement under which it must contribute minimum
amounts of equity to its Argentine operating company.

As of December 31, 2000, there were no amounts available
for borrowing under our international credit facilities.

Capital Lease Obligation

In August 2000, we completed a sale-leaseback transaction
involving some of our owned switch equipment that is being
accounted for as a capital lease. We received total net proceeds
of $280 million, resulting in a gain of $19 million. The
gain, which has been deferred, is being amortized into
depreciation expense on a straight-line basis over the
seven-year lease term.

Future Maturities of Long-term Debt, Capital Lease and
Finance Obligations

For the years subsequent to December 31, 2000, scheduled
annual maturities of long-term debt, capital lease and finance
obligations outstanding as of December 31, 2000 under
existing long-term debt, capital lease and finance obligation
agreements are as follows:

|                          |  |               |        |               |  |       |       |   |  |   |        |  
|------------------------- |  | ------------- | ------ | ------------- |  | ----- | ----- | - |  | - | ------ | -
|                          |  |               |        | Capital Lease |  |      
|                          |  | Long-term     |        | and Finance   |  |      
|                          |  | Debt          |        | Obligations   |  | Total
|                          |  |               |        |               |  |      
|                          |  |              
|                          |  | (in millions)
|                         
|                         
|                         
|                         
|2001                      |  | $             | 34     |               |  | $     | 108   |   |  | $ | 142    |  
|                         
|                         
|                         
|                         
|2002                      |  |               | 122    |               |  |       | 110   |   |  |   | 232    |  
|                         
|                         
|                         
|                         
|2003                      |  |               | 417    |               |  |       | 112   |   |  |   | 529    |  
|                         
|                         
|                         
|                         
|2004                      |  |               | 419    |               |  |       | 104   |   |  |   | 523    |  
|                         
|                         
|                         
|                         
|2005                      |  |               | 507    |               |  |       | 86    |   |  |   | 593    |  
|                         
|                         
|                         
|                         
|Thereafter                |  |               | 13,258 |               |  |       | 560   |   |  |   | 13,818 |  
|                          |  |               |        |               |  |       |       |   |  |   |        |  
|                          |  |               | 14,757 |               |  |       | 1,080 |   |  |   | 15,837 |  
|                         
|                         
|                         
|                         
|Less unamortized discount |  |               | (960   | )             |  |       |      |   |  |   | (960   | )
|                         
|                         
|                         
|                         
|Less imputed interest     |  |               |       |               |  |       | (146  | ) |  |   | (146   | )
|                          |  |               |        |               |  |       |       |   |  |   |        |  
|                          |  | $             | 13,797 |               |  | $     | 934   |   |  | $ | 14,731 |  
|                          |  |               |        |               |  |       |       |   |  |   |        |  

7.  Interest Rate Risk Management Agreements

We use derivative financial instruments consisting of interest
rate swap and collar agreements to manage our exposure to
adverse movements in interest rates. We currently do not hedge
foreign currency translation of assets or liabilities or foreign
currency transactions. We do not use financial instruments for
trading or other speculative purposes. While these instruments
are subject to fluctuations in value, these fluctuations are
generally offset by fluctuations in value of the underlying
hedged instrument or anticipated transaction. The use of
derivative financial instruments is monitored through regular
communication with senior management. The counterparty exposes
us to credit loss in the event of nonperformance; however, this
credit risk is minimized by dealing only with counterparties
that have at least an A rating from either
Moodys or Standard & Poors. Therefore, we do not
anticipate nonperformance by the counterparty.

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


We attempt to achieve a desired proportion of fixed rate versus
variable rate debt by using interest rate swap and collar
agreements to change the interest rate characteristics of some
of our debt obligations. Interest rate swap agreements have the
effect of converting some of our variable rate obligations to
fixed or other variable rate obligations. In an interest rate
swap, we agree to exchange, at specified intervals, the
difference between a variable interest rate and either a fixed
or another variable interest rate multiplied by a notional
principal amount. Interest rate collar agreements consist of
both an interest rate cap and floor and enable us to lock in a
predetermined interest rate range. Through December 31,
2000, the resulting amount to be paid or received is accrued as
interest rates change and is reflected as an adjustment to
interest expense over the life of the interest rate swap or
collar. The incremental effect on interest expense for the years
ended December 31, 2000, 1999 and 1998 was not material.
Some of our interest rate swaps and all of our collar agreements
were terminated during 2000. The notional amounts of our
agreements total $1.07 billion at December 31, 2000
and $1.57 billion at December 31, 1999. At
December 31, 2000, based on estimates obtained from the
counterparty, we would be obligated to pay an aggregate of
$65 million to settle these contracts, which is an estimate
of fair value. However, we do not currently intend to terminate
any of these agreements prior to their maturity or settlement
date.

In 1997, we entered into an interest rate protection agreement
to hedge interest rates on 10-year U.S. Treasury notes in
anticipation of a future debt issuance with terms identical to
the 10.65% senior notes due 2007 and 9.75% senior notes due
2007. The interest rate protection agreement was terminated in
1998 since management determined that this anticipated
transaction was not likely to occur before the interest rate
protection agreement expired. As a result, we recognized a loss
of $47 million that was included in other expense. The
obligation resulting from the termination of this agreement was
incorporated into a new $570 million interest rate swap
agreement. This swap, with a fair value based on its maturity in
April 2006, requires a cash settlement in
October 2003. We have accrued $45 million as of
December 31, 2000 and $55 million as of
December 31, 1999 in liabilities, including accrued
interest, related to this interest rate swap.

The following table summarizes our interest rate swap agreements
at December 31, 2000:

|                                         |  |               |     |       |  |                  |     |      |  |         |           |  |  |  |     |   |  |  |     |  
|---------------------------------------- |  | ------------- | --- | ----- |  | ---------------- | --- | ---- |  | ------- | --------- |  |  |  | --- | - |  |  | --- | -
|                                         |  |               |     |       |  |                 
|                                         |  |               |     |       |  | Weighted Average
|                                         |  |               |     |       |  |                 
|                                         |  | Notional      |     | Fair  |  |                  |     | Pay  |  | Receive
|                                         |  | Amount        |     | Value |  | Maturity         |     | Rate |  | Rate   
|                                         |  |               |     |       |  |                  |     |      |  |        
|                                         |  |               |     |       |  |                  |     |     
|                                         |  | (in millions) |     |       |  |                  |     |     
|                                        
|                                        
|                                        
|                                        
|Pay fixed rate, receive variable rate    |  | $             | 570 |       |  | $                | (60 | )    |  |         | 5.3 years |  |  |  | 8.1 | % |  |  | 6.8 | %
|                                        
|                                        
|                                        
|                                        
|Pay variable rate, receive variable rate |  |               | 500 |       |  |                  | (5  | )    |  |         | 1.8 years |  |  |  | 6.8 | % |  |  | 6.7 | %

8.  Income Taxes

The components of the income tax benefit were as follows:

|                   |         |                         |    |      |   |      |    |    |   |   |     |     | 
|------------------ | ------- | ----------------------- | -- | ---- | - | ---- | -- | -- | - | - | --- | --- | 
|                   |         |                        
|                   |         | Year Ended December 31,
|                   |         |                        
|                   |         | 2000                    |    | 1999 |   | 1998
|                   |         |                         |    |      |   |     
|                   |         |                        
|                   |         | (in millions)          
|                  
|                  
|                  
|                  
|Current            |         |                         |    |      |   |      |    |    |   |   |     |    
|                  
|                  
|                  
|                  
|                   | Foreign |                         | $  | (2   | ) |      | $  | (3 | ) |   | $   |    | 
|                   |         |                         |    |      |   |      |    |    |   |   |     |    
|Deferred           |         |                         |    |      |   |      |    |    |   |   |     |    
|                  
|                  
|                  
|                  
|                   | Federal |                         |    | 30   |   |      |    | 28 |   |   |     | 170 | 
|                  
|                  
|                  
|                  
|                   | State   |                         |    |     |   |      |    |   |   |   |     |    | 
|                  
|                  
|                  
|                  
|                   | Foreign |                         |    | 5    |   |      |    | 3  |   |   |     | 22  | 
|                   |         |                         |    |      |   |      |    |    |   |   |     |    
|                   |         |                         | 35 |      |   |      | 31 |    |   |   | 192 |    
|                   |         |                         |    |      |   |      |    |    |   |   |     |    
|Income tax benefit |         | $                       | 33 |      |   | $    | 28 |    |   | $ | 192 |    
|                   |         |                         |    |      |   |      |    |    |   |   |     |    

F-26



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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Our income tax benefit reconciles to the amount computed by
applying the U.S. statutory rate to loss before extraordinary
item as follows:

|                                              |  |                         |      |      |  |      |      |   |  |   |      |  
|--------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                              |  |                        
|                                              |  | Year Ended December 31,
|                                              |  |                        
|                                              |  | 2000                    |      | 1999 |  | 1998
|                                              |  |                         |      |      |  |     
|                                              |  |                        
|                                              |  | (in millions)          
|                                             
|                                             
|                                             
|                                             
|Income tax benefit at statutory rate          |  | $                       | 261  |      |  | $    | 454  |   |  | $ | 599  |  
|                                             
|                                             
|                                             
|                                             
|State tax benefit, net                        |  |                         | 57   |      |  |      | 49   |   |  |   | 50   |  
|                                             
|                                             
|                                             
|                                             
|Amortization of goodwill                      |  |                         | (10  | )    |  |      | (10  | ) |  |   | (10  | )
|                                             
|                                             
|                                             
|                                             
|Increase in valuation allowance               |  |                         | (131 | )    |  |      | (423 | ) |  |   | (439 | )
|                                             
|                                             
|                                             
|                                             
|Equity in losses of unconsolidated affiliates |  |                         | (53  | )    |  |      | (28  | ) |  |   | (3   | )
|                                             
|                                             
|                                             
|                                             
|Other                                         |  |                         | (91  | )    |  |      | (14  | ) |  |   | (5   | )
|                                              |  |                         |      |      |  |      |      |   |  |   |      |  
|                                              |  | $                       | 33   |      |  | $    | 28   |   |  | $ | 192  |  
|                                              |  |                         |      |      |  |      |      |   |  |   |      |  

Deferred tax assets and liabilities consist of the following:

|                         |                                  |               |        |       |  |  |        |       | 
|------------------------ | -------------------------------- | ------------- | ------ | ----- |  |  | ------ | ----- | 
|                         |                                  |              
|                         |                                  | December 31, 
|                         |                                  |              
|                         |                                  | 2000          |        | 1999 
|                         |                                  |               |        |      
|                         |                                  |              
|                         |                                  | (in millions)
|                        
|                        
|                        
|                        
|Deferred tax assets      |                                  |               |        |       |  |  |        |      
|                        
|                        
|                        
|                        
|                         | Net operating loss carryforwards |               | $      | 2,256 |  |  | $      | 2,126 | 
|                        
|                        
|                        
|                        
|                         | Deferred interest                |               |        | 153   |  |  |        | 98    | 
|                        
|                        
|                        
|                        
|                         | Foreign affiliates               |               |        | 11    |  |  |        | 29    | 
|                        
|                        
|                        
|                        
|                         | Other                            |               |        | 104   |  |  |        | 57    | 
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 2,524  |       |  |  | 2,310  |      
|                        
|                        
|                        
|                        
|Valuation allowance      |                                  |               | (1,933 | )     |  |  | (1,766 | )    
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 591    |       |  |  | 544    |      
|                         |                                  |               |        |       |  |  |        |      
|Deferred tax liabilities |                                  |               |        |       |  |  |        |      
|                        
|                        
|                        
|                        
|                         | Property, plant and equipment    |               |        | 125   |  |  |        | 83    | 
|                        
|                        
|                        
|                        
|                         | Intangibles                      |               |        | 1,257 |  |  |        | 1,127 | 
|                        
|                        
|                        
|                        
|                         | Other                            |               |        | 121   |  |  |        | 133   | 
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 1,503  |       |  |  | 1,343  |      
|                         |                                  |               |        |       |  |  |        |      
|                         | Net deferred tax liability       |               | $      | 912   |  |  | $      | 799   | 
|                         |                                  |               |        |       |  |  |        |      

At December 31, 2000, we had $5.48 billion of
consolidated net operating loss carryforwards for federal income
tax purposes which expire through 2020, and $368 million of
separate return net operating loss carryforwards which expire
through 2017. The utilization of tax net operating losses may be
subject to specified limitations.

At December 31, 2000, our foreign subsidiaries had net
operating loss carryforwards for income tax purposes in the
following countries which expire through 2010: $128 million
for Mexico, $192 million for Argentina, $45 million
for Peru and $35 million for the Philippines. Additionally,
our foreign subsidiaries had $249 million of net operating
loss carryforwards for Brazilian income tax purposes that have
no expiration date and that can only be utilized up to the limit
of 30% of taxable income for the year. Our foreign subsidiaries
may be limited in their ability to use foreign tax net operating
losses in any single year depending on their ability to generate
sufficient taxable income.

F-27



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


A significant portion of our deferred tax liabilities will
reverse after current net operating losses expire. After
considering this and other factors, including recent operating
results, we increased our valuation allowance by
$167 million in 2000, $448 million in 1999 and
$486 million in 1998.

9.  Commitments and Contingencies

Operating Lease Commitments. We lease various
equipment and office facilities under capital and operating
leases. Leases for transmitter and receiver sites generally
range from month-to-month to 20 years or are cancelable
after a short notice period. Office facilities and equipment are
leased under agreements with terms ranging from 1 to
15 years. The leases normally provide for the payment of
minimum annual rentals and some leases include provisions for
renewal options of up to 10 years.

During December 1998, we completed a sale-leaseback
transaction involving some switch equipment, which is accounted
for as an operating lease. We received net proceeds of
$110 million, resulting in a gain of $5 million. The
gain, which has been deferred, is being amortized into rent
expense on a straight-line basis over the initial seven-year
lease term.

For years subsequent to December 31, 2000, future minimum
payments for all operating lease obligations that have initial
noncancelable lease terms exceeding one year, net of rental
income, are as follows (in millions):

|           |  |   |       | 
|---------- |  | - | ----- | 
|          
|          
|          
|          
|2001       |  | $ | 336   | 
|          
|          
|          
|          
|2002       |  |   | 318   | 
|          
|          
|          
|          
|2003       |  |   | 278   | 
|          
|          
|          
|          
|2004       |  |   | 227   | 
|          
|          
|          
|          
|2005       |  |   | 144   | 
|          
|          
|          
|          
|Thereafter |  |   | 233   | 
|           |  |   |       | 
|           |  | $ | 1,536 | 
|           |  |   |       | 

Total rental expense, net of rental income, was
$302 million during 2000, $231 million during 1999 and
$182 million during 1998.

Other Commitments. In September 2000, we
entered into a purchase agreement with Mobex Communications,
Inc. to purchase 800 MHz and 900 MHz specialized mobile
radio licenses and related assets located throughout the United
States for a purchase price of $105 million in cash. The
purchase price is subject to adjustments depending on the number
of channels delivered at closing. We made refundable deposits in
2000 totaling $16 million of the purchase price, with the
remaining $89 million payable at closing. The closing of
this transaction is contingent upon various conditions including
regulatory approval and the release of preexisting liens.

Contingencies. Beginning in the second quarter of
2000, allegations of employment discrimination and harassment
were leveled against us in the press, and some related
complaints subsequently were filed with the Equal Employment
Opportunity Commission. Those complaints have since been
withdrawn. Together with the law firm that represents our
current and former employees who have asserted these
allegations, we have structured mutually acceptable arrangements
for processing and resolving these claims. Substantially all of
the claimants have agreed to have their claims addressed
exclusively under these arrangements. Based on the specific
claim details and our related investigative results to date, we
do not believe that the claims that have come to our attention
are likely to result in a material liability to us.

F-28



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


10.  Mandatorily Redeemable Preferred Stock

|                                                                      |                                                                                                                                                                                                                             |                       |       |       |  |   |       |     | 
|--------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ----- | ----- |  | - | ----- | --- | 
|                                                                      |                                                                                                                                                                                                                             |                      
|                                                                      |                                                                                                                                                                                                                             | December 31,         
|                                                                      |                                                                                                                                                                                                                             |                      
|                                                                      |                                                                                                                                                                                                                             | 2000                  |       | 1999 
|                                                                      |                                                                                                                                                                                                                             |                       |       |      
|                                                                      |                                                                                                                                                                                                                             |                      
|                                                                      |                                                                                                                                                                                                                             | (dollars in millions)
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Series D exchangeable preferred stock mandatorily
	redeemable 2009,   |                                                                                                                                                                                                                             |                       |       |       |  |   |       |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | 13% cumulative annual dividend; 756,185 and 665,376  shares
	issued; 756,174 and 665,365 shares outstanding, stated at
	liquidation value                                                                                   |                       | $     | 777   |  |   | $     | 683 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Series E exchangeable preferred stock mandatorily
	redeemable 2010,   |                                                                                                                                                                                                                             |                       |       |       |  |   |       |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | 11.125% cumulative annual dividend; 1,015,397 and 909,871 shares
	issued; 1,015,383 and 909,857 shares outstanding; stated at
	liquidation value                                                                            |                       |       | 1,029 |  |   |       | 922 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Zero coupon convertible preferred stock mandatorily
	redeemable 2013, |                                                                                                                                                                                                                             |                       |       |       |  |   |       |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | no dividend; convertible into 4,779,386 and 11,523,529 
	shares of class A common stock; 245,245 and
	591,308 shares issued and outstanding; stated at accreted
	liquidation preference value at 9.25% compounded quarterly |                       |       | 75    |  |   |       | 165 | 
|                                                                      |                                                                                                                                                                                                                             |                       |       |       |  |   |       |    
|                                                                      |                                                                                                                                                                                                                             | $                     | 1,881 |       |  | $ | 1,770 |    
|                                                                      |                                                                                                                                                                                                                             |                       |       |       |  |   |       |    

Series D Preferred Stock. In 1997, we issued
0.5 million shares of our series D exchangeable preferred
stock due 2009, liquidation preference of $1,000 per share,
generating $482 million in net cash 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 our option in additional shares of
series D preferred stock. Accrued but unpaid dividends were
$21 million at December 31, 2000 and $18 million at
December 31, 1999. The series D preferred stock is
mandatorily redeemable on July 15, 2009 at the liquidation
preference plus accrued and unpaid dividends. We may choose to
redeem some or all of the preferred stock after July 15,
2002 at specified redemption prices. We may also choose to
exchange the series D preferred stock, in whole but not in part,
after July 15, 2002 into our subordinated debentures.

Series E Preferred Stock. In 1998, we issued
0.8 million shares of our series E exchangeable preferred
stock due 2010, liquidation preference of $1,000 per share,
generating $728 million in net cash proceeds. Dividends on
the series E preferred stock accrue at an annual rate of
11.125% of the liquidation preference, are cumulative from the
date of issuance and are payable quarterly in cash or, on or
prior to February 15, 2003 at our option, in additional
shares of series E preferred stock. Accrued but unpaid
dividends were $14 million at December 31, 2000 and
$12 million at December 31, 1999. The series E
preferred stock is mandatorily redeemable on February 15,
2010 at the liquidation preference plus accrued and unpaid
dividends. We may choose to redeem some or all of the preferred
stock after February 15, 2003 at specified redemption
prices. We may also choose to exchange the series E preferred
stock, in whole but not in part, after February 15, 2003
into our subordinated debentures.

Zero Coupon Preferred Stock. In 1998, we issued
0.6 million shares of our zero coupon convertible preferred
stock due 2013, liquidation preference of $1,000 per share at
maturity, generating $145 million in net cash proceeds. The
zero coupon preferred stock had an initial liquidation
preference of $253.675 per share. No dividends will be payable
with respect to the zero coupon preferred stock; however, the
liquidation preference will accrete from the issuance date at an
annual rate of 9.25% compounded quarterly. The zero coupon
preferred stock is convertible at the option of the holders
prior to redemption or maturity into our class A common
stock at a conversion rate of 19.4882 shares of our class A
common stock for each share of zero coupon preferred stock,
subject to adjustment upon the occurrence of specified events.
We may choose to redeem some or all of the preferred stock
starting December 23, 2005, and the preferred stock may be
tendered by the holders for acquisition by us on
December 23, 2005 and 2008. The zero coupon preferred stock
is mandatorily redeemable on December 23, 2013 at the fully
accreted

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


liquidation preference of $1,000 per share. We may elect,
subject to the satisfaction of specified requirements, to pay
any redemption or tender price with our class A common
stock. During the first half of 2000, we issued 6.7 million
shares of our class A common stock upon the conversion of
$98 million in total accreted value of our zero coupon
convertible preferred stock mandatorily redeemable in 2013,
representing the original stated conversion rate adjusted for
the effect of the stock split.

11.  Capital Stock and Stock Rights

Under our certificate of incorporation, we have the authority to
issue 2,233,883,948 shares of capital stock as follows:



| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 2,060,000,000 shares of class A voting common stock, par value
	$0.001 per share;                   
|
| |  | 100,000,000 shares of class B nonvoting common stock, par value
	$0.001 per share;                  
|
| |  | 26,941,933 shares of class A convertible redeemable preferred
	stock, stated value $36.75 per share;
|
| |  | 82 shares of class B convertible preferred stock, stated value
	$1.00 per share;                    
|
| |  | 26,941,933 shares of class C convertible redeemable preferred
	stock, stated value $36.75 per share;
|
| |  | 1,600,000 shares of series D preferred stock, described in note
	10;                                
|
| |  | 2,200,000 shares of series E preferred stock described in note
	10;                                 
|
| |  | 800,000 shares of zero coupon preferred stock described in note
	10; and                            
|
| |  | 15,400,000 shares of undesignated preferred stock, par value
	$0.01 per share.                      

The following is a summary description of our capital stock.

Common Stock

Holders of common stock are entitled to share equally, share for
share, if dividends are declared on the common stock, whether
payable in cash, property or securities. There is no provision
for cumulative voting with respect to the election of directors.

Class A Common Stock. The holders of our
class A common stock are entitled to one vote per share on all
matters submitted for action by the stockholders.

Class B Common Stock. The holders of our
nonvoting class B common stock have no right to vote on any
matters submitted for action by the stockholders. However, the
holders of the nonvoting class B common stock do have the right
to vote as a separate class, with each share having one vote, on:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | any merger, consolidation, reorganization or reclassification of
	our company or our shares of capital stock;
|
| |  | any amendment to the certificate of incorporation; or                                                        
|
| |  | any liquidation, dissolution or winding up of our company.                                                   

Shares of class B common stock are convertible at any time at
the option of the holder into an equal number of shares of class
A common stock upon the actual or expected occurrence of any
voting conversion event as defined in our
certificate of incorporation.

Microsoft Transaction. In May 1999, Microsoft
Corporation purchased 33.3 million shares of our class A common
stock for a cash investment of $600 million, representing a per
share price of $18.00. The agreements related to the transaction
establish transfer restrictions that apply to the shares
purchased by Microsoft and include an investor standstill
provision. Additionally, we agreed to provide specified
registration rights that apply to those shares. In connection
with this transaction, we entered into agreements under which
Microsoft provides specified Internet portal services and
related assistance in connection with our Nextel Wireless Web
service offering.

F-30



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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Equity Offering. In November 1999, we
completed the public offering and sale of 67.6 million
shares of our class A common stock at a price of $41.9063 per
share. All of the shares sold were offered by us, and we
received net proceeds of $2.75 billion from this offering.

Stock Split. The financial information throughout
these financial statements and related footnotes reflects the
effect of a 2-for-1 stock split in the form of a stock dividend
paid on June 6, 2000 to stockholders of record as of
May 26, 2000.

Preferred Stock

All outstanding shares of preferred stock described below are
held by Digital Radio, L.L.C., an affiliate of Mr. Craig O.
McCaw. As of December 31, 2000. Mr. McCaw and his
affiliates beneficially owned 13% of our common equity, assuming
the conversion of the preferred stock described below and the
exercise of all presently exercisable options held by
Mr. McCaws affiliates. See note 13.

Class A Convertible Redeemable Preferred
Stock. Each share of class A preferred stock is
convertible at the election of the holder into six shares of
class A common stock. Upon the occurrence of specified events,
the shares of class A preferred stock automatically convert into
shares of class A common stock on a six-for-one basis or into
shares of class C preferred stock on a one-for-one basis. We may
choose to redeem shares of class A preferred stock at a
redemption price equal to the stated value of class A preferred
stock plus the amount of any accrued or declared but unpaid
dividends, upon the occurrence of specified events. The class A
preferred stock only pays dividends under limited circumstances.
Holders of class A preferred stock are entitled to six votes per
share on all matters submitted for action by the stockholders
except for the election of directors. The holders of class A
preferred stock, voting separately as a class, are entitled to
elect three class A directors or 25% of the members of our board
of directors. Such directors will comprise the majority of the
members of the operations committee.

In December 2000, Digital Radio exercised its right to
convert 0.2 million shares of class A preferred stock into
1.2 million shares of class A common stock.

Class B Convertible Preferred Stock. Each
share of nonvoting class B preferred stock is automatically
converted on a one-for-one basis into shares of class A common
stock if Digital Radios equity interest in us falls below
specified levels or if specified transfers of class B preferred
stock occur.

Class C Convertible Redeemable Preferred
Stock. Shares of class C preferred stock are issuable
upon conversion of class A preferred stock upon specified
events, on a share for share basis. The terms of the class C
preferred stock are substantially the same as the terms of the
class A preferred stock except that holders of class C preferred
stock have no special voting rights in the election of
directors, including the appointment of directors to the
operations committee.

Ranking

In the event of any liquidation, dissolution or winding up of
our company or upon the distribution of our assets, all assets
and funds remaining after payment in full of our debts and
liabilities, and after the payment to the holders of the then
outstanding preferred stock of the full preferential amounts to
which they were entitled, would be divided and distributed among
the holders of the class A common stock and nonvoting class B
common stock ratably.

F-31



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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Common Stock Reserved for Issuance

As of December 31, 2000, we had reserved class A common
stock for future issuance as detailed below (in millions).

|                                                    |  |      
|--------------------------------------------------- |  | -----
|                                                   
|                                                   
|                                                   
|                                                   
|4.75% convertible debt conversion rights            |  | 15.0 
|                                                   
|                                                   
|                                                   
|                                                   
|5.25% convertible debt conversion rights            |  | 15.5 
|                                                   
|                                                   
|                                                   
|                                                   
|Zero coupon preferred stock conversion rights       |  | 4.8  
|                                                   
|                                                   
|                                                   
|                                                   
|Class A preferred stock conversion rights           |  | 46.2 
|                                                   
|                                                   
|                                                   
|                                                   
|Class B common stock conversion rights              |  | 35.7 
|                                                   
|                                                   
|                                                   
|                                                   
|Incentive equity plan                               |  | 155.7
|                                                   
|                                                   
|                                                   
|                                                   
|Options held by affiliates and warrants outstanding |  | 12.0 
|                                                   
|                                                   
|                                                   
|                                                   
|Employee stock purchase plan                        |  | 7.2  
|                                                   
|                                                   
|                                                   
|                                                   
|Acquisitions                                        |  | 12.6 
|                                                    |  |      
|                                                    |  | 304.7
|                                                    |  |      

12.  Stock and Employee Benefit Plans

Employee Stock Option Plan. Our Incentive Equity
Plan provides for the issuance of up to 180.0 million
shares of class A common stock to officers and employees.
Generally, nonqualified stock options outstanding under our
stock option plan:



| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | are granted at prices equal to the market value of the stock on
	the grant date;
|
| |  | vest ratably over a four year service period; and                               
|
| |  | expire ten years subsequent to award.                                           

If an option holders employment is involuntarily
terminated within one year after the effective date of a change
of control of Nextel, then that holders unvested options
will immediately vest or otherwise become exercisable, subject
to some limits.

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


A summary of the Incentive Equity Plan stock option activity is
as follows (shares in millions):

|                               |           |        |      |                  |   |   |       |       | 
|------------------------------ | --------- | ------ | ---- | ---------------- | - | - | ----- | ----- | 
|                               |           |        |      | Weighted Average
|                               |           | Shares |      | Exercise Price  
|                               |           |        |      |                 
|Outstanding, December 31, 1997 |           |        | 30.4 |                  |   | $ | 8.66  |      
|                              
|                              
|                              
|                              
|                               | Granted   |        |      | 16.6             |   |   |       | 13.15 | 
|                              
|                              
|                              
|                              
|                               | Exercised |        |      | (3.1             | ) |   |       | 5.90  | 
|                              
|                              
|                              
|                              
|                               | Canceled  |        |      | (3.3             | ) |   |       | 10.73 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 1998 |           |        | 40.6 |                  |   |   | 10.32 |      
|                              
|                              
|                              
|                              
|                               | Granted   |        |      | 18.2             |   |   |       | 17.20 | 
|                              
|                              
|                              
|                              
|                               | Exercised |        |      | (12.0            | ) |   |       | 9.18  | 
|                              
|                              
|                              
|                              
|                               | Canceled  |        |      | (5.1             | ) |   |       | 13.17 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 1999 |           |        | 41.7 |                  |   |   | 13.19 |      
|                              
|                              
|                              
|                              
|                               | Granted   |        |      | 24.1             |   |   |       | 61.19 | 
|                              
|                              
|                              
|                              
|                               | Exercised |        |      | (7.0             | ) |   |       | 10.58 | 
|                              
|                              
|                              
|                              
|                               | Canceled  |        |      | (4.4             | ) |   |       | 34.88 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 2000 |           |        | 54.4 |                  |   |   | 32.89 |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 1998 |           |        | 11.0 |                  |   |   | 9.07  |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 1999 |           |        | 9.2  |                  |   |   | 9.98  |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 2000 |           |        | 13.2 |                  |   |   | 12.05 |      
|                               |           |        |      |                  |   |   |       |      

Following is a summary of the status of stock options
outstanding and exercisable at December 31, 2000 (shares in
millions):

|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 
|--------------- |  | ------------------- | ---- | ------------------- |  | -------- | ---------- | ------ |  | -------- | ----- |  |  |  | ---- |  |  | - | ----- | 
|                |  |                     |      |                    
|                |  | Options Outstanding |      | Options Exercisable
|                |  |                     |      |                    
|                |  |                     |      | Weighted            |  | Weighted |            |        |  | Weighted
|                |  |                     |      | Average             |  | Average  |            |        |  | Average 
|Exercise        |  |                     |      | Life                |  | Exercise |            |        |  | Exercise
|Price Range     |  | Shares              |      | Remaining           |  | Price    |            | Shares |  | Price   
|                |  |                     |      |                     |  |          |            |        |  |         
|$ 2.08  $13.16 |  |                     | 9.9  |                     |  |          | 5.25 years |        |  | $        | 8.11  |  |  |  | 6.6  |  |  | $ | 7.98  | 
|               
|               
|               
|               
|13.28   15.14  |  |                     | 8.7  |                     |  |          | 7.12 years |        |  |          | 13.32 |  |  |  | 3.4  |  |  |   | 13.30 | 
|               
|               
|               
|               
|15.28           |  |                     | 10.8 |                     |  |          | 8.13 years |        |  |          | 15.28 |  |  |  | 1.9  |  |  |   | 15.28 | 
|               
|               
|               
|               
|15.38   39.94  |  |                     | 2.9  |                     |  |          | 7.54 years |        |  |          | 25.53 |  |  |  | 1.1  |  |  |   | 22.28 | 
|               
|               
|               
|               
|41.00   61.19  |  |                     | 2.0  |                     |  |          | 9.31 years |        |  |          | 53.99 |  |  |  | 0.1  |  |  |   | 45.32 | 
|               
|               
|               
|               
|61.94   79.59  |  |                     | 20.1 |                     |  |          | 9.13 years |        |  |          | 61.97 |  |  |  | 0.1  |  |  |   | 61.94 | 
|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 
|                |  |                     | 54.4 |                     |  |          |            |        |  |          |       |  |  |  | 13.2 |  |  |   |       | 
|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 

The Incentive Equity Plan also provides for the grant of
deferred shares at no cost to selected employees generally in
consideration of future services. These deferred shares
generally vest over a two to four year service period. An
accelerated vesting schedule may be triggered in the event of a
change in control of our company. During the year ended
December 31, 2000, we granted 0.2 million deferred
shares having a weighted average fair value at grant date of
$52.59. During the year ended December 31, 1999, we granted
1.0 million deferred shares having a weighted average fair
value at grant date of $25.49. We did not grant any deferred
shares in 1998.

Employee Stock Purchase Plan. Under the 1996
Employee Stock Purchase Plan, eligible employees may subscribe
to purchase shares of class A common stock through payroll
deductions of up to 10% of eligible compensation. The purchase
price is the lower of 85% of market value on the first or last
day of each quarter. The aggregate number of shares purchased by
an employee may not exceed $25,000 of fair

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


market value annually, subject to limitations imposed by
Section 423 of the Internal Revenue Code. A total of
10.0 million shares are authorized for purchase under the
plan. The Employee Stock Purchase Plan will terminate on the
tenth anniversary of its adoption. Employees purchased shares
under this plan during the following years at the weighted
average prices per share as indicated: 2000 
0.5 million shares at $35.32; 1999  0.9 million
shares at $12.70; and 1998  0.8 million shares at
$10.19.

Options Held by Affiliates and Warrants
Outstanding. The following is a summary of outstanding
options held by affiliates (see note 13) and warrants for the
purchase of class A common stock (shares in millions):

|                               |           |        |       |                  |   |   |       |       | 
|------------------------------ | --------- | ------ | ----- | ---------------- | - | - | ----- | ----- | 
|                               |           |        |       | Weighted Average
|                               |           | Shares |       | Exercise Price  
|                               |           |        |       |                 
|Outstanding, December 31, 1997 |           |        | 111.6 |                  |   | $ | 8.53  |      
|                              
|                              
|                              
|                              
|                               | Exercised |        |       | (55.0            | ) |   |       | 8.13  | 
|                              
|                              
|                              
|                              
|                               | Expired   |        |       | (0.4             | ) |   |       | 21.58 | 
|                               |           |        |       |                  |   |   |       |      
|Outstanding, December 31, 1998 |           |        | 56.2  |                  |   |   | 8.85  |      
|                              
|                              
|                              
|                              
|                               | Exercised |        |       | (44.0            | ) |   |       | 8.51  | 
|                               |           |        |       |                  |   |   |       |      
|Outstanding, December 31, 1999 |           |        | 12.2  |                  |   |   | 10.04 |      
|                              
|                              
|                              
|                              
|                               | Exercised |        |       | (0.2             | ) |   |       | 11.81 | 
|                               |           |        |       |                  |   |   |       |      
|Outstanding, December 31, 2000 |           |        | 12.0  |                  |   |   | 10.02 |      
|                               |           |        |       |                  |   |   |       |      
|Exercisable, December 31, 1998 |           |        | 55.5  |                  |   |   | 8.89  |      
|                               |           |        |       |                  |   |   |       |      
|Exercisable, December 31, 1999 |           |        | 11.8  |                  |   |   | 10.18 |      
|                               |           |        |       |                  |   |   |       |      
|Exercisable, December 31, 2000 |           |        | 12.0  |                  |   |   | 10.02 |      
|                               |           |        |       |                  |   |   |       |      

Fair Value Disclosures. The fair value of each
option, deferred share and employee stock purchase plan grant is
estimated on the measurement date using the Black-Scholes
option-pricing model as prescribed by SFAS No. 123 using
the following assumptions:

|                                                           |  |             |  |             |  |            
|---------------------------------------------------------- |  | ----------- |  | ----------- |  | -----------
|                                                           |  | 2000        |  | 1999        |  | 1998       
|                                                           |  |             |  |             |  |            
|Expected stock price volatility                            |  | 51%  59%   |  | 51%         |  | 51%        
|                                                          
|                                                          
|                                                          
|                                                          
|Risk-free interest rates                                   |  | 4.9%  6.9% |  | 4.7%  6.5% |  | 4.6%  6.7%
|                                                          
|                                                          
|                                                          
|                                                          
|Expected life of option and deferred share grants in years |  | 3  5       |  | 2  5       |  | 8          
|                                                          
|                                                          
|                                                          
|                                                          
|Expected life of stock purchase plan grants in years       |  | 0.25        |  | 0.25        |  | 0.25       
|                                                          
|                                                          
|                                                          
|                                                          
|Expected dividend yield                                    |  | 0%          |  | 0%          |  | 0%         

The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition,
option-pricing models require the input of highly subjective
assumptions including the expected stock price volatility.
Because our stock options have characteristics significantly
different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair
value estimate, we believe that the existing models do not
necessarily provide a reliable single measure of the fair value
of our stock options. The weighted average estimated fair value
of our stock options granted during 2000 was $32.39, during 1999
was $8.69 and during 1998 was $8.30.

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Consistent with the provisions of SFAS No. 123, had
compensation costs been determined based on the fair value of
the awards granted since 1995, our loss and loss per common
share attributable to common stockholders would have been as
follows:

|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |        |  
|---------------------------------------------------------------------- | ----------- | ----------------------- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                                                       |             |                        
|                                                                       |             | Year Ended December 31,
|                                                                       |             |                        
|                                                                       |             | 2000                    |   | 1999   |   | 1998
|                                                                       |             |                         |   |        |   |     
|Loss attributable to common stockholders (in millions)                 |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | As reported |                         | $ | (1,024 | ) |      | $ | (1,530 | ) |  | $ | (1,801 | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | Pro forma   |                         | $ | (1,290 | ) |      | $ | (1,631 | ) |  | $ | (1,883 | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|Loss per share attributable to common stockholders, basic and
	diluted |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | As reported |                         | $ | (1.35  | ) |      | $ | (2.39  | ) |  | $ | (3.23  | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | Pro forma   |                         | $ | (1.71  | ) |      | $ | (2.55  | ) |  | $ | (3.38  | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       

Our stock options are nontransferable, except to family members
or by will, as provided for in the Incentive Equity Plan, and
the actual value of the stock options that an employee may
realize, if any, will depend on the excess of the market price
on the date of exercise over the exercise price.

Nextel International Stock Option Plans.
Generally, options outstanding under the Nextel International
1997 Employee Stock Option Plan:



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | are granted at fair value, based on periodic valuations of
	Nextel International in accordance with the terms of the plan;
|
| |  | vest ratably over a four-year service period; and                                                                         
|
| |  | expire ten years subsequent to the award date.                                                                            

In June 2000, Nextel Internationals board of
directors ratified the Nextel International Incentive Equity
Plan that was adopted by the plan administration committee in
May 2000. The plan provides for awards of option rights,
appreciation rights, restricted shares, deferred shares and
performance shares to Nextel Internationals nonaffiliate
directors, its officers, including officers who are members of
its board of directors, and other key employees, consultants and
advisors. Options to purchase shares of Nextel
Internationals common stock may be at prices equal to or
greater than market price on the date of grant. Generally,
options outstanding under this plan vest over a four year
service period and expire ten years subsequent to the award
date. If an option holders employment is involuntarily
terminated within one year after the effective date of a change
of control of Nextel International, then that holders
unvested options and other equity awards will immediately vest
or otherwise become exercisable, subject to some limitations.

Employee Benefit Plans. We maintain a defined
contribution plan pursuant to Section 401(k) of the
Internal Revenue Code covering all eligible officers and
employees. Participants may contribute up to 15% of their
compensation and be fully vested over five years of employment.
Through December 31, 2000, we provided a matching
contribution of 50% of the first 4% of salary contributed by the
employee. Our contributions were $6 million during 2000,
$5 million during 1999 and $4 million during 1998.

Under our Cash Compensation Deferral Plan, we provide specified
eligible employees and directors the opportunity to defer cash
compensation in excess of amounts permitted under our 401(k)
defined contribution plan. Eligible employees may defer up to
90% of base salary and 100% of annual bonus. We may, but are not
obligated to, make discretionary contributions. Distribution
payments are made at retirement, death, disability or
termination of employment. The Cash Compensation Deferral Plan
is unfunded and all benefits will be paid from our general
assets. Deferred revenue and other liabilities include
$7 million as of December 31, 2000 and $4 million
as of December 31, 1999, representing

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


deferrals made by participating employees and investment
earnings based on hypothetical investment elections.

13.  Related Party Transactions

One of our directors is chairman of the board and chief
executive officer of CommScope, Inc. We paid $14 million
during both 2000 and 1999 and $8 million during 1998 to
CommScope for coaxial cables and related equipment for our
transmitter and receiver sites. We had amounts payable to
CommScope outstanding of $1 million at both
December 31, 2000 and at December 31, 1999.

A member of our board of directors is the chairman of the board
and chief executive officer of XO Communications, Inc. Two other
members of our board of directors also serve on the board of
directors of XO Communications. Additionally, Mr. McCaw
holds rights to shares representing a majority of the voting
interest of XO Communications. In February 1998, the FCC
commenced an auction of Local Multipoint Distribution Service
spectrum. In connection with this auction, we entered into a
joint venture through NEXTBAND Communications, L.L.C. with XO
Communications. We had a 50% interest in NEXTBAND. At the
conclusion of the spectrum auction, NEXTBAND had submitted
$135 million in winning bids. Under the terms of the joint
venture, we made $68 million in payments to the FCC
representing our share of the bid amount. In June 1999, we
sold our 50% interest in NEXTBAND to XO Communications for
$138 million in cash and recognized a gain of
$70 million, which is included in other income.

Motorola. As of December 31, 2000, Motorola
beneficially owned 14% of our common equity, assuming the
conversion of its investment in shares of our class B
common stock. We purchase handsets and accessories and a
substantial portion of our digital mobile network equipment from
Motorola. Our equipment purchase agreements with Motorola govern
our rights and obligations regarding purchases of digital mobile
network equipment manufactured by Motorola. We have minimum
purchase commitments under these agreements that if not met
subject us to penalties based on a percentage of the commitment
shortfall. As described in note 6, we have various
equipment financing agreements with Motorola. We and Motorola
have also agreed to warranty and maintenance programs and
specified indemnity arrangements. We also pay Motorola for
handset service and repair, transmitter and receiver site rent
and training and are reimbursed for costs we incur under various
marketing and promotional arrangements. We paid
$2.65 billion during 2000, $1.72 billion during 1999
and $1.54 billion during 1998 for these goods and services. Net
amounts payable to Motorola were $401 million at
December 31, 2000 and $426 million at
December 31, 1999.

In December 2000, we entered into a purchase agreement with
Motorola under which we will purchase substantially all of the
assets used in Motorolas 900 MHz specialized mobile radio
business for a purchase price of $58 million in cash. We
made a deposit in December 2000 for $5 million, with
the remaining purchase price payable at closing. The purchase
price is subject to adjustments depending on the number of
channels and customers delivered at closing. The closing of the
transaction is contingent upon various conditions including
regulatory approval.

McCaw Affiliates. In July 1999, Digital Radio
exercised in full the outstanding option that was scheduled to
expire on that date to purchase 30.0 million shares of
class A common stock for an aggregate purchase price of
$278 million. As of December 31, 2000, Digital Radio holds
an outstanding exercisable option, expiring in July 2001,
to purchase 10.0 million shares of class A common
stock at an exercise price of $10.75 per share.

Under the terms of a management support agreement, Eagle River,
Inc., an affiliate of Mr. Craig O. McCaw, provides
management and consulting services from time to time as
requested for about $0.2 million per year. Also in
consideration for these services, we entered into an incentive
option

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


agreement in 1995 granting Eagle River an option to purchase an
aggregate of up to 2.0 million shares of class A common
stock at an exercise price of $6.13 per share. This option
expires in April 2005 and is presently exercisable with
respect to all 2.0 million shares. We recorded compensation
expense in connection with these agreements of $7 million
in 1999 and $1 million in 1998.

In July 1998, Option Acquisition, L.L.C., an affiliate of
Mr. Craig O. McCaw, exercised its options to purchase
30.0 million shares of class A common stock at $8.00
per share and a second option to purchase 20.0 million
shares of class A common stock at $9.00 per share in a
cashless transaction, resulting in the issuance of
19.9 million shares of class A common stock.

In 1998, an affiliate of Digital Radio sold an aircraft to a
subsidiary of ours for $8 million in cash and
0.1 million shares of our class A common stock.

14.  Segment Information

SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, established standards
for reporting information about operating segments in financial
statements. Operating segments are defined as components of an
enterprise engaging in business activities about which separate
financial information is available that is evaluated regularly
by the chief operating decision maker or group in deciding how
to allocate resources and in assessing performance. We operate
in two business segments: domestic and international. These
reportable segments are strategic business units that are in
different phases of development that we manage and finance
separately based on the fundamental differences in their
operations. We evaluate performance based on earnings
(losses) before interest, taxes, depreciation and
amortization and other nonoperating charges, referred to as
segment earnings (losses).

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|----------------------------------------------------- |  | ------------- | ------ | ------------- |  | ------------ | ----- | ------------ |  | - | ---- | - |  | - | ------ | -
|                                                      |  |               |        |               |  | Intercompany |       |             
|                                                      |  | Domestic      |        | International |  | Eliminations |       | Consolidated
|                                                      |  |               |        |               |  |              |       |             
|                                                      |  |              
|                                                      |  | (in millions)
|                                                     
|                                                     
|                                                     
|                                                     
|2000                                                  |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|Operating revenues                                    |  | $             | 5,385  |               |  | $            | 330   |              |  | $ | (1   | ) |  | $ | 5,714  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Segment earnings (losses)                             |  |               | 1,395  |               |  |              | (133  | )            |  |   | 2    |   |  |   | 1,264  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Depreciation and amortization                         |  |               | (1,104 | )             |  |              | (161  | )            |  |   |     |   |  |   | (1,265 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |  |               | (996   | )             |  |              | (249  | )            |  |   |     |   |  |   | (1,245 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |  |               | 374    |               |  |              | 22    |              |  |   |     |   |  |   | 396    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Realized gain on exchange of investment               |  |               | 35     |               |  |              | 240   |              |  |   |     |   |  |   | 275    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in losses of unconsolidated affiliates         |  |               | (98    | )             |  |              | (54   | )            |  |   |     |   |  |   | (152   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Other expense, net                                    |  |               | (3     | )             |  |              | (14   | )            |  |   |     |   |  |   | (17    | )
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Loss before income tax benefit and extraordinary item |  | $             | (397   | )             |  | $            | (349  | )            |  | $ | 2    |   |  | $ | (744   | )
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Property, plant and equipment, net                    |  | $             | 7,721  |               |  | $            | 1,070 |              |  | $ |     |   |  | $ | 8,791  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Identifiable assets                                   |  | $             | 19,687 |               |  | $            | 3,193 |              |  | $ | (194 | ) |  | $ | 22,686 |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Capital expenditures                                  |  | $             | 2,976  |               |  | $            | 567   |              |  | $ |     |   |  | $ | 3,543  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|1999                                                  |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|Operating revenues                                    |  | $             | 3,662  |               |  | $            | 124   |              |  | $ |     |   |  | $ | 3,786  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Segment earnings (losses)                             |  |               | 698    |               |  |              | (163  | )            |  |   |     |   |  |   | 535    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Depreciation and amortization                         |  |               | (896   | )             |  |              | (108  | )            |  |   |     |   |  |   | (1,004 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |  |               | (698   | )             |  |              | (180  | )            |  |   |     |   |  |   | (878   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |  |               | 87     |               |  |              | 9     |              |  |   |     |   |  |   | 96     |  
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in losses of unconsolidated affiliates         |  |               | (42    | )             |  |              | (31   | )            |  |   |     |   |  |   | (73    | )
|                                                     
|                                                     
|                                                     
|                                                     
|Other income (expense), net                           |  |               | 73     |               |  |              | (47   | )            |  |   |     |   |  |   | 26     |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Loss before income tax benefit and extraordinary item |  | $             | (778   | )             |  | $            | (520  | )            |  | $ |     |   |  | $ | (1,298 | )
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Property, plant and equipment, net                    |  | $             | 5,613  |               |  | $            | 539   |              |  | $ |     |   |  | $ | 6,152  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Identifiable assets                                   |  | $             | 16,695 |               |  | $            | 1,682 |              |  | $ | 33   |   |  | $ | 18,410 |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Capital expenditures                                  |  | $             | 1,908  |               |  | $            | 173   |              |  | $ |     |   |  | $ | 2,081  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|1998                                                  |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|Operating revenues                                    |  | $             | 2,228  |               |  | $            | 67    |              |  | $ |     |   |  | $ | 2,295  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Segment losses                                        |  |               | (99    | )             |  |              | (121  | )            |  |   |     |   |  |   | (220   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Depreciation and amortization                         |  |               | (776   | )             |  |              | (56   | )            |  |   |     |   |  |   | (832   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |  |               | (549   | )             |  |              | (107  | )            |  |   |     |   |  |   | (656   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |  |               | 17     |               |  |              | 17    |              |  |   |     |   |  |   | 34     |  
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in losses of unconsolidated affiliates         |  |               |       |               |  |              | (12   | )            |  |   |     |   |  |   | (12    | )
|                                                     
|                                                     
|                                                     
|                                                     
|Other (expense) income, net                           |  |               | (44    | )             |  |              | 19    |              |  |   |     |   |  |   | (25    | )
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Loss before income tax benefit and extraordinary item |  | $             | (1,451 | )             |  | $            | (260  | )            |  | $ |     |   |  | $ | (1,711 | )
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Property, plant and equipment, net                    |  | $             | 4,384  |               |  | $            | 531   |              |  | $ |     |   |  | $ | 4,915  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Identifiable assets                                   |  | $             | 10,099 |               |  | $            | 1,601 |              |  | $ | (127 | ) |  | $ | 11,573 |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  
|Capital expenditures                                  |  | $             | 1,905  |               |  | $            | 376   |              |  | $ |     |   |  | $ | 2,281  |  
|                                                      |  |               |        |               |  |              |       |              |  |   |      |   |  |   |        |  

F-38



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


15.  Quarterly Financial Data (Unaudited)

|                                                                               |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|------------------------------------------------------------------------------ |  | --------------------------------------- | ----- | ------ |  | ----- | ----- | ------ |  | - | ----- | - |  | - | ----- | -
|                                                                               |  | First                                   |       | Second |  | Third |       | Fourth
|                                                                               |  |                                         |       |        |  |       |       |       
|                                                                               |  |                                        
|                                                                               |  | (in millions, except per share amounts)
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|2000                                                                           |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Operating revenues (note 1)                                                    |  | $                                       | 1,175 |        |  | $     | 1,365 |        |  | $ | 1,528 |   |  | $ | 1,646 |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Operating (loss) income                                                        |  |                                         | (52   | )      |  |       | (13   | )      |  |   | 44    |   |  |   | 20    |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Income tax benefit                                                             |  |                                         | 8     |        |  |       | 8     |        |  |   | 8     |   |  |   | 9     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss before extraordinary item                                                 |  |                                         | (279  | )      |  |       | (241  | )      |  |   | (184  | ) |  |   | (7    | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss attributable to common stockholders                                       |  |                                         | (435  | )      |  |       | (292  | )      |  |   | (236  | ) |  |   | (61   | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss per share before extraordinary item attributable to
	common
	stockholders |  | $                                       | (0.45 | )      |  | $     | (0.38 | )      |  | $ | (0.31 | ) |  | $ | (0.08 | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Extraordinary item (note 6)                                                    |  |                                         | (0.14 | )      |  |       |      |        |  |   |      |   |  |   |      |  
|                                                                               |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|Basic and diluted loss per share attributable to common
	stockholders          |  | $                                       | (0.59 | )      |  | $     | (0.38 | )      |  | $ | (0.31 | ) |  | $ | (0.08 | )
|                                                                               |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|1999                                                                           |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Operating revenues                                                             |  | $                                       | 774   |        |  | $     | 911   |        |  | $ | 1,010 |   |  | $ | 1,091 |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Operating loss                                                                 |  |                                         | (193  | )      |  |       | (134  | )      |  |   | (86   | ) |  |   | (56   | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Income tax benefit                                                             |  |                                         | 10    |        |  |       | 7     |        |  |   | 8     |   |  |   | 3     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss before extraordinary item                                                 |  |                                         | (439  | )      |  |       | (268  | )      |  |   | (312  | ) |  |   | (251  | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss attributable to common stockholders                                       |  |                                         | (485  | )      |  |       | (315  | )      |  |   | (361  | ) |  |   | (369  | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss per share before extraordinary item attributable to common
	stockholders  |  | $                                       | (0.83 | )      |  | $     | (0.52 | )      |  | $ | (0.55 | ) |  | $ | (0.42 | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Extraordinary item (note 6)                                                    |  |                                         |      |        |  |       |      |        |  |   |      |   |  |   | (0.10 | )
|                                                                               |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|Basic and diluted loss per share attributable to common
	stockholders          |  | $                                       | (0.83 | )      |  | $     | (0.52 | )      |  | $ | (0.55 | ) |  | $ | (0.52 | )
|                                                                               |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |       |  




Operating income for the fourth quarter of 2000
includes adjustments related to changes in accounting estimates
which resulted in additional depreciation expense of
$17 million and a decrease in cost of revenues of
$13 million. The net effect of these adjustments had no
impact on loss per share attributable to common stockholders for
the quarter ended December 31, 2000. As described in note
4, we recorded a $275 million realized gain on the exchange
of an investment in the fourth quarter of 2000.


The sum of the quarterly loss per share amounts
may not equal the annual amounts because of the changes in the
weighted-average number of shares outstanding during the
year.

16.  Subsequent Events

9.5% Senior Serial Redeemable Notes. In
January 2001, we completed the issuance and sale in a
private placement of $1.25 billion in principal amount of
9.5% senior serial redeemable notes due 2011, generating
$1.245 billion in net cash proceeds. Cash interest is
payable semiannually beginning August 1, 2001 at a rate of
9.5% per year. We may choose to redeem some or all of these
notes starting February 1, 2006 at an initial redemption
price of 104.75% of the aggregate principal amount of these
notes, plus accrued and unpaid interest. On or before
February 1, 2004, we may choose to redeem up to 35% of the
original principal amount of the notes using the proceeds of one
or more sales of qualified equity securities at 109.5% of their
principal amount, plus accrued and unpaid interest to the date
of redemption. These notes are senior unsecured indebtedness of
ours and rank equal in right of payment with all our other

F-39



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


unsubordinated, unsecured indebtedness. We have agreed to
specific registration rights with respect to these notes. If
these notes are not registered with the Securities and Exchange
Commission by August 1, 2001, the interest rate on the
notes will increase by 0.5% per year until the notes are
registered or until other specific conditions are satisfied.

Arch Wireless. In January 2001, we agreed to
purchase specified 900 MHz specialized mobile radio licenses
from Arch Wireless, Inc. for an aggregate purchase price of
$175 million and an investment of $75 million in a new
Arch Wireless equity issue of redeemable cumulative preferred
stock. In February 2001, we advanced to Arch Wireless the
$175 million purchase price and the $75 million
investment in the form of two loans which accrue interest until
the necessary regulatory approvals to permit transfer of the
900 MHz licenses to us are obtained. Upon transfer of the
licenses to us, Arch Wireless obligation to repay the $175
million loan obligation will be satisfied, and the
$75 million of loans will be converted into the new series
of preferred stock of Arch Wireless. Arch Wireless will pay
accrued interest on the two loans by issuing us shares of its
common stock at closing. The closing of this purchase is subject
to customary conditions.

F-40



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION
OF REGISTRANT

Condensed Balance Sheets


As of December 31, 2000 and 1999


(in millions)


|                                       |                                                                  |                           |        |       |       |   |        |       |       | 
|-------------------------------------- | ---------------------------------------------------------------- | ------------------------- | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                                       |                                                                  | 2000                      |        | 1999 
|                                       |                                                                  |                           |        |      
|                                      
|                                      
|                                      
|                                      
|ASSETS                                
|                                      
|                                      
|                                      
|                                      
|Current assets                         |                                                                  |                           |        |       |       |   |        |      
|                                      
|                                      
|                                      
|                                      
|                                       | Cash and cash equivalents, of which $1,265 in 1999 is restricted |                           | $      | 1,824 |       |   | $      | 3,964 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Short-term investments                                           |                           |        | 2,015 |       |   |        | 1,067 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Prepaids expenses and other                                      |                           |        | 8     |       |   |        | 27    |      
|                                       |                                                                  |                           |        |       |       |   |        |      
|                                       |                                                                  | Total current assets      |        |       | 3,847 |   |        |       | 5,058 | 
|                                      
|                                      
|                                      
|                                      
|Investments in subsidiaries            |                                                                  |                           | 8,468  |       |       |   | 8,598  |      
|                                      
|                                      
|                                      
|                                      
|Property, plant and equipment, net     |                                                                  |                           | 221    |       |       |   | 92     |      
|                                      
|                                      
|                                      
|                                      
|Intangible assets, net                 |                                                                  |                           | 151    |       |       |   | 181    |      
|                                      
|                                      
|                                      
|                                      
|Deferred income taxes                  |                                                                  |                           | 70     |       |       |   | 122    |      
|                                       |                                                                  |                           |        |       |       |   |        |      
|                                       |                                                                  | $                         | 12,757 |       |       | $ | 14,051 |      
|                                       |                                                                  |                           |        |       |       |   |        |      
|                                      
|                                      
|                                      
|                                      
|LIABILITIES AND STOCKHOLDERS EQUITY  
|                                      
|                                      
|                                      
|                                      
|Current liabilities                    |                                                                  |                           |        |       |       |   |        |      
|                                      
|                                      
|                                      
|                                      
|                                       | Accounts payable, accrued expenses and other                     |                           | $      | 202   |       |   | $      | 225   |      
|                                      
|                                      
|                                      
|                                      
|                                       | Current portion of long-term debt                                |                           |        |      |       |   |        | 1,130 |      
|                                       |                                                                  |                           |        |       |       |   |        |      
|                                       |                                                                  | Total current liabilities |        |       | 202   |   |        |       | 1,355 | 
|                                      
|                                      
|                                      
|                                      
|Due to subsidiaries                    |                                                                  |                           | 1,869  |       |       |   | 2,757  |      
|                                      
|                                      
|                                      
|                                      
|Long-term debt                         |                                                                  |                           | 6,777  |       |       |   | 5,595  |      
|                                      
|                                      
|                                      
|                                      
|Mandatorily redeemable preferred stock |                                                                  |                           | 1,881  |       |       |   | 1,770  |      
|                                      
|                                      
|                                      
|                                      
|Stockholders equity                   |                                                                  |                           | 2,028  |       |       |   | 2,574  |      
|                                       |                                                                  |                           |        |       |       |   |        |      
|                                       |                                                                  | $                         | 12,757 |       |       | $ | 14,051 |      
|                                       |                                                                  |                           |        |       |       |   |        |      

F-41



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (continued)

Condensed Statements of Operations and Comprehensive Loss


For the Years Ended December 31, 2000, 1999 and 1998


(in millions)


|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |        |     |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------------------------- | ------ | ---- | ---- | ---- | ------ | ------ | --- | - | ------ | ------ | --- | -
|                                                                                |                                                              | 2000                                                        |        | 1999 |      | 1998
|                                                                                |                                                              |                                                             |        |      |      |     
|Operating expenses                                                              |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Selling, general and administrative                          |                                                             | $      | 91   |      |      | $      | 71     |     |   | $      | 183    |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation and amortization                                |                                                             |        | 63   |      |      |        | 25     |     |   |        | 7      |    
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|                                                                                |                                                              |                                                             | 154    |      |      |      | 96     |        |     |   | 190    |       
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Other income (expense)                                                          |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest expense                                             |                                                             |        | (608 | )    |      |        | (512   | )   |   |        | (411   | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest income                                              |                                                             |        | 302  |      |      |        | 62     |     |   |        | 10     |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Intercompany income (expense)                                |                                                             |        | 608  |      |      |        | (124   | )   |   |        |       |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Intercompany management fee (note 3)                         |                                                             |        | 91   |      |      |        | 71     |     |   |        | 183    |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Equity in net losses of subsidiaries                         |                                                             |        | (961 | )    |      |        | (675   | )   |   |        | (1,168 | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other, net                                                   |                                                             |        | 11   |      |      |        | (7     | )   |   |        | (1     | )  
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|                                                                                |                                                              |                                                             | (557   | )    |      |      | (1,185 | )      |     |   | (1,387 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Loss before income tax benefit and extraordinary item                           |                                                              |                                                             | (711   | )    |      |      | (1,281 | )      |     |   | (1,577 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Income tax benefit                                                              |                                                              |                                                             |       |      |      |      | 11     |        |     |   | 58     |       
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Loss before extraordinary item                                                  |                                                              |                                                             | (711   | )    |      |      | (1,270 | )      |     |   | (1,519 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Extraordinary item  loss on early retirement of
	debt, net of income tax of $0 |                                                              |                                                             | (104   | )    |      |      | (68    | )      |     |   | (133   | )     
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Net loss                                                                        |                                                              |                                                             | (815   | )    |      |      | (1,338 | )      |     |   | (1,652 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Mandatorily redeemable preferred stock dividends                                |                                                              |                                                             | (209   | )    |      |      | (192   | )      |     |   | (149   | )     
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Loss attributable to common stockholders                                        |                                                              | $                                                           | (1,024 | )    |      | $    | (1,530 | )      |     | $ | (1,801 | )     
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Comprehensive loss, net of income tax                                           |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Net loss                                                     |                                                             | $      | (815 | )    |      | $      | (1,338 | )   |   | $      | (1,652 | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Net unrealized gain (loss) on available-for-sale securities: |                                                             |        |      |      |      |        |        |     |   |        |        |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                              | Unrealized holding gains (losses) arising during the period |        |      | 225  |      |        |        | 142 |   |        |        | (23 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                              | Reclassification adjustment for gain included in net loss   |        |      | (275 | )    |        |        |    |   |        |        |    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Foreign currency translation adjustment                      |                                                             |        | 4    |      |      |        | (114   | )   |   |        | (24    | )  
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       
|Comprehensive loss                                                              |                                                              | $                                                           | (861   | )    |      | $    | (1,310 | )      |     | $ | (1,699 | )     
|                                                                                |                                                              |                                                             |        |      |      |      |        |        |     |   |        |       

F-42



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT  (continued)

Condensed Statement of Cash Flows


For the Years ended December 31, 2000, 1999 and 1998


(in millions)


|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |        |        |  
|---------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ------ | ------ | ---- | ----- | ------ | ------ | - | -- | ------ | ------ | -
|                                                     |                                                                            | 2000                                                |        | 1999   |        | 1998
|                                                     |                                                                            |                                                     |        |        |        |     
|Cash flows from operating activities                 |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                                                   |                                                     | $      | (815   | )      |      | $     | (1,338 | )      |   | $  | (1,652 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustment to reconcile net loss to net cash used in operating
	activities |                                                     |        | 366    |        |      |       | 508    |        |   |    | 530    |       
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                     |                                                                            | Net cash used in operating activities               |        |        | (449   | )    |       |        | (830   | ) |    |        | (1,122 | )
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|Cash flows from investing activities                 |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of short-term investments                                        |                                                     |        | (5,123 | )      |      |       | (1,059 | )      |   |    |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from maturities and sales of short-term investments               |                                                     |        | 4,272  |        |      |       |       |        |   |    |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other investments and advances (to) from affiliates                        |                                                     |        | (634   | )      |      |       | 55     |        |   |    | (190   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                       |                                                     |        | (176   | )      |      |       | (24    | )      |   |    | (75    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments for acquisitions, net of cash acquired                            |                                                     |        |       |        |      |       |       |        |   |    | (42    | )     
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                     |                                                                            | Net cash used in investing activities               |        |        | (1,661 | )    |       |        | (1,028 | ) |    |        | (307   | )
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|Cash flows from financing activities                 |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of debt securities                                                |                                                     |        | 1,150  |        |      |       | 2,600  |        |   |    | 1,296  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of debt securities                                              |                                                     |        | (1,208 | )      |      |       | (546   | )      |   |    | (741   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of common stock and exercise of stock options, warrants and
	other    |                                                     |        | 74     |        |      |       | 3,819  |        |   |    | 30     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of redeemable preferred stock                                     |                                                     |        |       |        |      |       |       |        |   |    | 900    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Debt financing costs and other                                             |                                                     |        | (46    | )      |      |       | (52    | )      |   |    | (59    | )     
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|                                                     |                                                                            | Net cash (used in) provided by financing activities |        |        | (30    | )    |       |        | 5,821  |   |    |        | 1,426  |  
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|Net (decrease) increase in cash and cash equivalents |                                                                            |                                                     | (2,140 | )      |        |      | 3,963 |        |        |   | (3 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                                                            |                                                     | 3,964  |        |        |      | 1     |        |        |   | 4  |       
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       
|Cash and cash equivalents, end of period             |                                                                            | $                                                   | 1,824  |        |        | $    | 3,964 |        |        | $ | 1  |       
|                                                     |                                                                            |                                                     |        |        |        |      |       |        |        |   |    |       

F-43



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT  (continued)

Notes to Condensed Financial Statements




| |    |                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | For accounting policies and other information, see the Notes to
	the Consolidated Financial Statements of Nextel Communications
	Inc. and Subsidiaries, included elsewhere herein.                                                                                                            
|
| | 2. | The parent company accounts for its investments in subsidiaries
	by the equity method of accounting.                                                                                                                                                                                          
|
| | 3. | The parent company has an agreement with each of its wholly
	owned subsidiaries whereby the parent company provides
	administrative services for each of its subsidiaries and charges
	the subsidiaries a fee equal to the actual costs incurred in
	performing these administrative services.
|
| | 4. | In 2000, the parent company allocated its interest expense to
	its domestic subsidiaries in the amount of $608 million.                                                                                                                                                                       
|
| | 5. | We have reclassified some prior period amounts to conform to our
	current year presentation.                                                                                                                                                                                                  

F-44



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

(in millions)


|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |       | 
|---------------------------- | ------------------------------------------- | ---------- | - | ---------- |  | -------- | - | ---------- |  | --------- | - | - |  |  | - | ---- | - |  | - | ----- | 
|                             |                                             |            |   |            |  | (1)      |   |            |  |          
|                             |                                             | Balance at |   | Charged to |  | Charged  |   |            |  | Balance  
|                             |                                             | Beginning  |   | Costs and  |  | to Other |   |            |  | at End of
|                             |                                             | of Period  |   | Expenses   |  | Accounts |   | Deductions |  | Period   
|                             |                                             |            |   |            |  |          |   |            |  |          
|Year Ended December 31, 2000 |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts             |            | $ | 75         |  |          | $ | 179        |  |           | $ | 6 |  |  | $ | (156 | ) |  | $ | 104   | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 19         |  |          | $ | 11         |  |           | $ |  |  |  | $ | (8   | ) |  | $ | 22    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 1,766      |  |          | $ | 167        |  |           | $ |  |  |  | $ |     |   |  | $ | 1,933 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|Year Ended December 31, 1999 |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts             |            | $ | 63         |  |          | $ | 152        |  |           | $ |  |  |  | $ | (140 | ) |  | $ | 75    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 13         |  |          | $ | 12         |  |           | $ |  |  |  | $ | (6   | ) |  | $ | 19    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 1,318      |  |          | $ | 448        |  |           | $ |  |  |  | $ |     |   |  | $ | 1,766 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|Year Ended December 31, 1998 |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts             |            | $ | 57         |  |          | $ | 82         |  |           | $ | 1 |  |  | $ | (77  | ) |  | $ | 63    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 11         |  |          | $ | 22         |  |           | $ |  |  |  | $ | (20  | ) |  | $ | 13    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 832        |  |          | $ | 486        |  |           | $ |  |  |  | $ |     |   |  | $ | 1,318 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |   |  |  |   |      |   |  |   |      




|    |                                            
|--- | -------------------------------------------
|(1) | Primarily allowances of acquired companies.

F-45