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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2004                                                 
|          
|OR        
|          
|o          |  | 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.


(Exact name of registrant as specified in its charter)


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


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE












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EXPLANATORY NOTE






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TABLE OF CONTENTS


|         |  |                                                                                                                  |  |      |    | 
|-------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Item     |  |                                                                                                                  |  | Page |   
|         |  |                                                                                                                  |  |      |   
|PART I  
|1.       |  | Business                                                                                                         |  |      | 1  | 
|2.       |  | Properties                                                                                                       |  |      | 34 | 
|3.       |  | Legal Proceedings                                                                                                |  |      | 34 | 
|4.       |  | Submission of Matters to a Vote of Security Holders                                                              |  |      | 35 | 
|        
|PART II 
|5.       |  | Market for Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities |  |      | 37 | 
|6.       |  | Selected Financial Data                                                                                          |  |      | 38 | 
|7.       |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                        |  |      | 41 | 
|7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                                                       |  |      | 75 | 
|8.       |  | Financial Statements and Supplementary Data                                                                      |  |      | 76 | 
|9.       |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                         |  |      | 76 | 
|9A.      |  | Controls and Procedures                                                                                          |  |      | 76 | 
|9B.      |  | Other Information                                                                                                |  |      | 77 | 
|        
|PART III
|10.      |  | Directors and Executive Officers of the Registrant                                                               |  |      | 77 | 
|11.      |  | Executive Compensation                                                                                           |  |      | 77 | 
|12.      |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters               |  |      | 77 | 
|13.      |  | Certain Relationships and Related Transactions                                                                   |  |      | 78 | 
|14.      |  | Principal Accountant Fees and Services                                                                           |  |      | 78 | 
|        
|PART IV 
|15.      |  | Exhibits and Financial Statement Schedules                                                                       |  |      | 79 | 





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PART I




|        |         
|------- | --------
|Item 1. | Business



|   |         
|-- | --------
|A. | Overview

sm sm tm










|   |                  
|-- | -----------------
|B. | Business Strategy



1. Provide Differentiated Products and
Services. tm


1



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sm sm


sm




2. Acquire and Retain the Most Valuable Customers in
the Wireless Industry. tm




3. Seek Greater Operating Efficiencies.


4. Optimize the Performance of Our Nationwide Network
at a Minimum Cost.


2



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|   |                                                    
|-- | ---------------------------------------------------
|C. | 2004 and Year-to-Date 2005 Significant Developments



1. Proposed Merger with Sprint.








2. 800 MHz Band Spectrum
Reconfiguration.


3



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3. Introduction of New Direct Connect
Applications. sm


4. New Handsets. tm


5. Brand Strategy and NASCAR Sponsorship.


6. Expanded Retail Distribution Channels.


4



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7. Boost Mobile.


8. New Data Applications. SM


9. Debt Retirements and Financing Activities.


10. Spectrum Acquisitions.




|   |                       
|-- | ----------------------
|D. | Products and Solutions



1. Nextel Direct Connect®




5



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sm




2. Wireless Business Solutions and Nextel
Online®






3. Handsets.


6



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tm






tm




4. Digital Media Services.




|   |                           
|-- | --------------------------
|E. | Our Network and Technology

1. Our iDEN Network Technology.


7



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









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | First, each channel on our network is capable of carrying up to
    six voice and/or control paths, by employing six-time slot TDMA
    digital technology, or 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, our walkie-talkie service
    achieves about six times improvement over analog specialized
    mobile radio, or SMR, in channel utilization capacity.
    Historically, we achieved about three times improvement over
    analog SMR in channel utilization capacity for channels used for
    mobile telephone service. We have implemented enhancements to
    the voice coder and related technology used in our

8



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| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | iDEN-based network that are designed to significantly increase
    the overall capacity of our network by increasing the capacity
    for channels used for mobile telephone service. See
     3. Our technology plans.
|
| |  | Second, our 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.                          





2. Network Enhancement.








9



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3. Our Technology Plans.










10



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4. Broadband Wireless Data Initiative.


5. 800 MHz Band Spectrum
Reconfiguration.








|   |                       
|-- | ----------------------
|F. | Sales and Distribution



11



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tm




|   |          
|-- | ---------
|G. | Marketing





| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | identifying and targeting high-value customers that will benefit
    from the unique features offered by our full line of integrated
    voice and data mobile communications services;
|
| |  | developing and bringing to market innovative products and
    services that differentiate us from other wireless
    communications service providers; and                             
|
| |  | focusing our advertising efforts on communicating the benefits
    of those services to our targeted groups of potential customers.                                                    

12



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|   |              
|-- | -------------
|H. | Customer Care









|   |            
|-- | -----------
|I. | Competition





13



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|   |                            
|-- | ---------------------------
|J. | Our Strategic Relationships



1. Motorola.


14



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2. Nextel Partners.








15



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3. NII Holdings.








|   |           
|-- | ----------
|K. | Regulation





16



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1. Licensing.






17



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2. 800 MHz band spectrum
reconfiguration.










18



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3. New spectrum opportunities, spectrum auctions, and
next generation wireless services.








19



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4. Spectrum caps and secondary spectrum
markets.






5. 911 services.




20



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6. Truth in Billing and consumer protection.




21



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7. Accessibility.




8. Motor vehicle restrictions.


9. Local number portability.


10. Electronic surveillance.




11. Voice over Internet protocol.


22



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12. Health concerns.


13. Universal Service.






14. Intercarrier Compensation.




| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | access charges that are levied on interstate and intrastate toll
    calls originated and terminated between carrier networks,

23



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| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | reciprocal compensation payments paid by originating carriers
    for the transport and termination of their local traffic onto
    other carrier networks, and
|
| |  | universal service subsidies that are currently funded by
    assessments on all carriers providing interstate
    telecommunications services.                 





15. Privacy-related regulations.


16. Tower siting.


17. Outage reporting.




|   |          
|-- | ---------
|L. | Employees



24



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|   |             
|-- | ------------
|M. | Risk Factors



|   |                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | If we are not able to compete effectively in the highly
    competitive wireless communications industry, our future growth
    and operating results will suffer.





|   |                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.





| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | 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. | We may be limited in our ability to grow unless we expand
    network capacity and coverage and address increased demands on
    our business systems and processes as needed.





| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | expand the capacity and coverage of our network;                                                                                   
|
| |  | obtain additional spectrum in some or all of our markets, if and
    when necessary;                                               
|
| |  | secure sufficient transmitter and receiver sites at appropriate
    locations to meet planned system coverage and capacity targets;
|
| |  | obtain adequate quantities of base radios and other system
    infrastructure equipment; and                                       
|
| |  | obtain an adequate volume and mix of handsets and related
    accessories to meet subscriber demand.                               







|   |                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------
|c. | Some of our competitors are able to offer bundles of
    services that are not available to us, which may limit our
    ability to compete.



25



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





| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to migrate existing customers to lower priced service
    offering packages;                                                                                             
|
| |  | restructure our service offering packages to offer more value;                                                                                                                    
|
| |  | reduce our service offering prices; or                                                                                                                                            
|
| |  | respond to particular short-term, market specific situations,
    such as special introductory pricing or particular new product
    or service offerings, in a particular market.



|   |                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|e. | Several of our competitors now provide or plan to provide
    two-way walkie-talkie features, and if those services become
    comparable to ours, we would lose a competitive
    advantage.





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





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



26



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| |   |                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | further segment the user markets, which could reduce the demand
    for, and competitiveness of, our technology; and                                                                            
|
| |  | reduce the resources devoted by third party suppliers, including
    Motorola, which supplies all of our current iDEN technology, to
    developing or improving the technology for our systems.



|   |                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------
|h. | If our wireless data and Internet services do not perform
    satisfactorily, our operations and growth could be adversely
    affected.







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





|   |                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------
|i. | Costs and other aspects of a future deployment of advanced
    digital technology could adversely affect our operations and
    growth.



27



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|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|j. | If our roaming partners experience financial or
    operational difficulties, our customers ability to roam
    onto their networks may be impaired, which could adversely
    affect our ability to attract and retain customers who roam on
    those networks.





|   |                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | We have substantial indebtedness, which may limit how we
    conduct our business or limit our growth, which in turn could be
    a competitive disadvantage.









| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur or guarantee additional indebtedness, including amounts
    available under our bank credit facility, or assume the
    indebtedness of parties that we may wish to acquire;
|
| |  | make investments in or acquire other companies or businesses;                                                                                                                     
|
| |  | pre-pay or redeem any of our indebtedness;                                                                                                                                        

28



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| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | sell assets other than in the ordinary course of our
    business; and
|
| |  | pay dividends and make other distributions.                           





|   |                                                                                               
|-- | ----------------------------------------------------------------------------------------------
|3. | Our business could be adversely impacted by uncertainty
    related to the merger with Sprint.





|   |                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | The reconfiguration process contemplated by the Report and
    Order may adversely affect our business and operations, which
    could adversely affect our future growth and operating
    results.







|   |                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------
|5. | Government regulations determine how we operate, which
    could increase our costs and limit our growth and strategy
    plans.



29



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|   |                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | If Motorola is unable or unwilling to provide us with
    equipment and handsets, as well as anticipated handset and
    infrastructure improvements, our operations will be adversely
    affected.



30



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|   |                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------
|7. | Agreements with Motorola reduce our operational
    flexibility and may adversely affect our growth or operating
    results.





|   |                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------
|8. | Concerns about health risks associated with wireless
    equipment may reduce the demand for our services.



31



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|   |                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------
|9. | Our equity investment in Nextel Partners is subject to
    numerous limitations, conditions and covenants.





|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | Our issuance of additional shares of common stock and
    general conditions in the wireless communications industry may
    affect the price of our common stock.





|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|11. | 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:


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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the uncertainties related to our proposed merger with Sprint;                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | the success of efforts to improve, and satisfactorily address
    any issues relating to, our network performance, including any
    performance issues resulting from the reconfiguration of the
    800 MHz band that is contemplated by the FCCs Report
    and Order;                                                                                                                                                                                                      
|
| |  | the timely development and availability of new handsets with
    expanded applications and features,;                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | market acceptance of our data service offerings, including our
    Nextel Online services;                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | the timely delivery and successful implementation of new
    technologies deployed in connection with any future enhanced
    iDEN or next generation or other advanced services we may offer;                                                                                                                                                                                                                                                                                  
|
| |  | no significant adverse change in Motorolas ability or
    willingness to provide handsets and related equipment and
    software applications or to develop new technologies or features
    for us, or to reimburse us for our costs related to the A-GPS
    software design defect, or in our relationship with Motorola;                                                                                                                                                   
|
| |  | the ability to achieve and maintain market penetration and
    average subscriber revenue levels sufficient to provide
    financial viability to our network business;                                                                                                                                                                                                                                                                                                         
|
| |  | our ability to successfully scale our business and support
    operations in order to meet our goals for subscriber and revenue
    growth, in some circumstances in conjunction with third parties
    under our outsourcing arrangements, 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 our customers;
|
| |  | 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 including, for example, two-way
    walkie-talkie features that have been introduced by several of
    our competitors;                                                                                                                                            
|
| |  | future legislation or regulatory actions relating to specialized
    mobile radio services, other wireless communications services or
    telecommunications generally;                                                                                                                                                                                                                                                                                                         
|
| |  | the costs of compliance with regulatory mandates, particularly
    requirements related to the FCCs Report and Order and to
    deploy Phase II location-based E911 capabilities; and                                                                                                                                                                                                                                                                                          
|
| |  | access to sufficient debt or equity capital to meet any
    operating and financing needs.                                                                                                                                                                                                                                                                                                                                                                                      

N.     Available Information




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|        |            
|------- | -----------
|Item 2. | Properties.



|                           |  |             |         |  |                    |  |                     | 
|-------------------------- |  | ----------- | ------- |  | ------------------ |  | ------------------- | 
|Locations                  |  | Square feet |         |  | Year of Expiration | 
|                           |  |             |         |  |                    | 
|Reston, Virginia           |  |             | 801,000 |  |                    |  | 2009, 2010 and 2014 | 
|Herndon, Virginia          |  |             | 286,000 |  |                    |  | 2008 and 2013       | 
|McLean, Virginia           |  |             | 179,000 |  |                    |  | 2006 and 2007       | 
|Irvine, California         |  |             | 178,000 |  |                    |  | 2005 and 2010       | 
|Norcross, Georgia          |  |             | 178,000 |  |                    |  | 2010 and 2016       | 
|Grand Prairie, Texas       |  |             | 161,000 |  |                    |  | 2010                | 
|Hampton, Virginia          |  |             | 157,000 |  |                    |  | 2009 and 2010       | 
|Englewood, Colorado        |  |             | 140,000 |  |                    |  | 2008                | 
|Rutherford, New Jersey     |  |             | 115,000 |  |                    |  | 2008                | 
|Temple, Texas              |  |             | 109,000 |  |                    |  | 2016                | 
|Farmington Hills, Michigan |  |             | 108,000 |  |                    |  | 2008                | 
|Abilene, Texas             |  |             | 104,000 |  |                    |  | 2006                | 
|Lone Tree, Colorado        |  |             | 100,000 |  |                    |  | 2010                | 









|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.





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



Executive Officers of the Registrant




Timothy M. Donahue.


Paul N. Saleh.


Thomas N. Kelly, Jr.


Barry J. West.


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Leonard J. Kennedy.


William G. Arendt.


Richard S. Lindahl.


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PART II




|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.



|   |                        
|-- | -----------------------
|A. | Market for Common Stock



|              |  |                                     |       |  |      |   |       |      |  |   |       |  |  |   |       | 
|------------- |  | ----------------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|              |  | Quarterly Common Stock Price Ranges |      
|              |  | Year Ended December 31,             |      
|              |  |                                     |      
|              |  | 2004                                |       |  | 2003 |  
|              |  |                                     |       |  |      |  
|Quarter Ended |  | High                                |       |  | Low  |   |       | High |  |   | Low   | 
|              |  |                                     |       |  |      |   |       |      |  |   |       | 
|March 31      |  | $                                   | 29.18 |  |      | $ | 24.26 |      |  | $ | 14.66 |  |  | $ | 10.89 | 
|June 30       |  |                                     | 26.85 |  |      |   | 22.21 |      |  |   | 19.09 |  |  |   | 11.75 | 
|September 30  |  |                                     | 26.40 |  |      |   | 21.42 |      |  |   | 20.83 |  |  |   | 16.86 | 
|December 31   |  |                                     | 30.19 |  |      |   | 24.32 |      |  |   | 28.17 |  |  |   | 18.80 | 



|   |                                 
|-- | --------------------------------
|B. | Number of Stockholders of Record





|   |          
|-- | ---------
|C. | Dividends





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|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.



|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |        |       |   |   |        |       |  
|----------------------------------------------------------------------- | ------- | --------------------------------------- | ------ | ------------- | ---- | - | ------------- | ----- |  | ------------- | ----- | ---- | ------------- | ---- | ------ | ----- | - | - | ------ | ----- | -
|                                                                        |         | Year Ended December 31,                 |       
|                                                                        |         |                                         |       
|                                                                        |         | 2004                                    |        |               | 2003 |   |               | 2002  |  |               | 2001  |      |               | 2000 |       
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|                                                                        |         |                                         |        | (as restated) |      |   | (as restated) |       |  | (as restated) |       |      | (as restated) |     
|                                                                        |         | (in millions, except per share amounts) |       
|STATEMENT OF OPERATIONS DATA                                            |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |        |       |   |   |        |      
|Operating revenues                                                      |         | $                                       | 13,368 |               |      | $ | 10,820        |       |  | $             | 8,721 |      |               | $    | 7,689  |       |   | $ | 5,714  |      
|Cost of revenues (exclusive of depreciation included below)             |         |                                         | 4,003  |               |      |   | 3,169         |       |  |               | 2,535 |      |               |      | 2,888  |       |   |   | 2,188  |      
|Selling, general and administrative                                     |         |                                         | 4,241  |               |      |   | 3,453         |       |  |               | 3,039 |      |               |      | 3,020  |       |   |   | 2,278  |      
|Restructuring and impairment charges                                    |         |                                         |       |               |      |   |              |       |  |               | 35    |      |               |      | 1,769  |       |   |   |       |      
|Depreciation and amortization                                           |         |                                         | 1,841  |               |      |   | 1,694         |       |  |               | 1,595 |      |               |      | 1,746  |       |   |   | 1,265  |      
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|Operating income (loss)                                                 |         |                                         | 3,283  |               |      |   | 2,504         |       |  |               | 1,517 |      |               |      | (1,734 | )     |   |   | (17    | )    
|Interest expense, net                                                   |         |                                         | (565   | )             |      |   | (802          | )     |  |               | (990  | )    |               |      | (1,196 | )     |   |   | (849   | )    
|(Loss) gain on retirement of debt, net of debt conversion costs         |         |                                         | (117   | )             |      |   | (245          | )     |  |               | 354   |      |               |      | 469    |       |   |   | (127   | )    
|Gain on deconsolidation of NII Holdings                                 |         |                                         |       |               |      |   |              |       |  |               | 1,218 |      |               |      |       |       |   |   |       |      
|Equity in earnings (losses) of unconsolidated affiliates, net           |         |                                         | 15     |               |      |   | (58           | )     |  |               | (309  | )    |               |      | (95    | )     |   |   | (152   | )    
|Other (expense) income, net                                             |         |                                         | 29     |               |      |   | 225           |       |  |               | (39   | )    |               |      | (223   | )     |   |   | 281    |      
|Income tax benefit (provision)                                          |         |                                         | 355    |               |      |   | (113          | )     |  |               | (391  | )    |               |      | 135    |       |   |   | 33     |      
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|Net income (loss)                                                       |         |                                         | 3,000  |               |      |   | 1,511         |       |  |               | 1,360 |      |               |      | (2,644 | )     |   |   | (831   | )    
|(Loss) gain on retirement of mandatorily redeemable preferred
    stock |         |                                         |       |               |      |   | (7            | )     |  |               | 485   |      |               |      |       |       |   |   |       |      
|Mandatorily redeemable preferred stock dividends and accretion          |         |                                         | (9     | )             |      |   | (58           | )     |  |               | (211  | )    |               |      | (233   | )     |   |   | (209   | )    
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|Income (loss) available to common stockholders                          |         | $                                       | 2,991  |               |      | $ | 1,446         |       |  | $             | 1,634 |      |               | $    | (2,877 | )     |   | $ | (1,040 | )    
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|Earnings (loss) per common share                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |        |       |   |   |        |      
|                                                                        | Basic   |                                         | $      | 2.69          |      |   | $             | 1.38  |  |               | $     | 1.85 |               |      | $      | (3.70 | ) |   | $      | (1.38 | )
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|                                                                        | Diluted |                                         | $      | 2.62          |      |   | $             | 1.34  |  |               | $     | 1.75 |               |      | $      | (3.70 | ) |   | $      | (1.38 | )
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|Weighted average number of common shares outstanding                    |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |        |       |   |   |        |      
|                                                                        | Basic   |                                         |        | 1,111         |      |   |               | 1,047 |  |               |       | 884  |               |      |        | 778   |   |   |        | 756   |  
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       
|                                                                        | Diluted |                                         |        | 1,152         |      |   |               | 1,089 |  |               |       | 966  |               |      |        | 778   |   |   |        | 756   |  
|                                                                        |         |                                         |        |               |      |   |               |       |  |               |       |      |               |      |       

38



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##### 



|                                                                                              |  |               |        |               |      |   |               |      |  |               |        |  |               |      |        |   |  |   |        | 
|--------------------------------------------------------------------------------------------- |  | ------------- | ------ | ------------- | ---- | - | ------------- | ---- |  | ------------- | ------ |  | ------------- | ---- | ------ | - |  | - | ------ | 
|                                                                                              |  | December 31,  |       
|                                                                                              |  |               |       
|                                                                                              |  | 2004          |        |               | 2003 |   |               | 2002 |  |               | 2001   |  |               | 2000 |       
|                                                                                              |  |               |        |               |      |   |               |      |  |               |        |  |               |      |       
|                                                                                              |  |               |        | (as restated) |      |   | (as restated) |      |  | (as restated) |        |  | (as restated) |     
|                                                                                              |  | (in millions) |       
|BALANCE SHEET DATA                                                                            |  |               |        |               |      |   |               |      |  |               |        |  |               |      |        |   |  |   |        | 
|Cash, cash equivalents and short-term investments, including
    restricted portion           |  | $             | 1,814  |               |      | $ | 1,971         |      |  | $             | 2,686  |  |               | $    | 3,801  |   |  | $ | 4,674  | 
|Property, plant and equipment, net                                                            |  |               | 9,613  |               |      |   | 9,093         |      |  |               | 8,918  |  |               |      | 9,274  |   |  |   | 8,791  | 
|Intangible assets, net                                                                        |  |               | 7,223  |               |      |   | 7,038         |      |  |               | 6,607  |  |               |      | 5,778  |   |  |   | 5,671  | 
|Total assets                                                                                  |  |               | 22,744 |               |      |   | 20,510        |      |  |               | 21,477 |  |               |      | 22,064 |   |  |   | 22,686 | 
|Domestic long-term debt, capital lease and finance obligations,
    including current portion |  |               | 8,549  |               |      |   | 10,212        |      |  |               | 12,550 |  |               |      | 14,865 |   |  |   | 12,212 | 
|Debt of NII Holdings, nonrecourse to and not held by parent                                   |  |               |       |               |      |   |              |      |  |               |       |  |               |      | 1,865  |   |  |   | 2,519  | 
|Mandatorily redeemable preferred stock                                                        |  |               | 108    |               |      |   | 99            |      |  |               | 1,015  |  |               |      | 2,114  |   |  |   | 1,881  | 
|Stockholders equity (deficit)                                                                |  |               | 9,408  |               |      |   | 5,738         |      |  |               | 2,765  |  |               |      | (637   | ) |  |   | 1,992  | 



NII Holdings.




|                   |  |               |       |  |      |   |     | 
|------------------ |  | ------------- | ----- |  | ---- | - | --- | 
|                   |  | 2001          |       |  | 2000 |  
|                   |  |               |       |  |      |  
|                   |  | (in millions) |      
|Operating revenues |  | $             | 680   |  |      | $ | 330 | 
|Net loss           |  |               | 2,497 |  |      |   | 417 | 



39



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##### 







Operating Revenues and Cost of Revenues.




Adoption of SFAS No. 142.


Long-Term Debt, Preferred Stock and Finance
Obligation.


Income Tax Benefit (Provision).


40



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##### 







Other Income (Expense), Net.




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



|   |         
|-- | --------
|A. | Overview



| |                                                 
| | ------------------------------------------------
| | Restatement of Consolidated Financial Statements





41



---



##### 









| |                  
| | -----------------
| | Company Overview.



sm sm tm










42



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##### 











| |                      
| | ---------------------
| | Managements Summary.





| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct Connect long-range walkie-talkie features that allow
    communication at the touch of one button, including our
    Nationwide Direct Connect and International Direct Connect
    services;                                                                                  
|
| |  | mobile telephone services, including advanced digital features
    such as speakerphones, additional line service, conference
    calling, voice-activated dialing for hands-free operation, a
    voice recorder for calls and memos, advanced phonebook and date
    book tools; and
|
| |  | data services, including email, mobile messaging,
    location-based, Nextel Online® and Multimedia Messaging
    services, that allow Nextel subscribers to exchange images and
    audio memos.                                                                                     





43



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##### 







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we extended the reach of our Direct Connect walkie-talkie
    features into Canada, Latin America and Mexico, through
    agreements with TELUS Mobility, Inc., which provides wireless
    communications services in Canada, and NII Holdings in 2004;                                                                                                                                                                              
|
| |  | we introduced several new handsets, including the i830, the
    smallest handset that we have ever offered, the i730, a compact
    handset that delivers powerful performance at a moderate cost,
    the i860, a camera phone with multimedia messaging capabilities,
    and the i315 and i325, two handset models with off-network
    walkie-talkie capabilities designed for industrial, government
    and public safety users;
|
| |  | we placed 2,300 transmitter and receiver sites in service in
    2004 to improve both the geographic coverage of our network and
    to meet the capacity needs of our growing customer base, and
    plan to place a significant number of additional sites in
    service in 2005 both to meet these goals and to accommodate the
    800MHz band spectrum reconfiguration;                                                         
|
| |  | we have begun to introduce handsets that, together with software
    that has been installed in our network infrastructure, are
    designed to more efficiently utilize radio spectrum to
    significantly increase our network capacity once these handsets
    are in use;                                                                                                                                                        
|
| |  | we have developed an enhancement to our existing iDEN
    technology, known as
    WiDENsm,
    designed to increase the data speeds of our network by up to
    four times the current speeds, and plan to begin offering this
    service in 2005; and                                                                                                                                                                              
|
| |  | we continue to develop customized solutions that support a broad
    range of applications that allow business users to more
    effectively and efficiently manage their business.                                                                                                                                                                                                                                                   

tm tm




44



---



##### 













45



---



##### 











| |                                                         
| | --------------------------------------------------------
| | Global Positioning System and Enhanced 911
    Services.







46



---



##### 





| |                                            
| | -------------------------------------------
| | Critical Accounting Policies and Estimates.



Revenue Recognition.


Cost of Handsets.


Allowance for Doubtful Accounts.


Valuation and Recoverability of Long-lived Assets.


|                                                                         |  |             |                | 
|------------------------------------------------------------------------ |  | ----------- | -------------- | 
|                                                                         |  | Estimated   |               
|Long-Lived Assets                                                        |  | Useful Life |               
|                                                                         |  |             |               
|Buildings                                                                |  |             | Up to 31 years | 
|Network equipment and internal-use software                              |  |             | 3 to 20 years  | 
|Non-network internal-use software, office equipment and other
    assets |  |             | 3 to 12 years  | 

47



---



##### 









Valuation and Recoverability of Intangible Assets.


48



---



##### 







Recoverability of Capitalized Software.


Income Tax Valuation Allowance.










| |                                           
| | ------------------------------------------
| | Significant New Accounting Pronouncements.

SFAS No. 123R.


49



---



##### 







|   |                      
|-- | ---------------------
|B. | Results of Operations









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | costs to operate and maintain our network, primarily including
    direct switch and transmitter and receiver site costs, such as
    rent, utilities, property taxes and maintenance for the network
    switches and sites, payroll and facilities costs associated with
    our network engineering employees, frequency leasing costs and
    roaming fees paid to other carriers;                                                                                                                                                                                                               
|
| |  | fixed and variable interconnection costs, the fixed component of
    which consists of monthly flat-rate fees for facilities leased
    from local exchange carriers based on the number of transmitter
    and receiver sites and switches in service in a particular
    period and the related equipment installed at each site, and the
    variable component of which generally consists of per-minute use
    fees charged by wireline and wireless providers for wireless
    calls terminating on their networks and fluctuates in relation
    to the level and duration of wireless calls;
|
| |  | costs to operate our handset service and repair program; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | the costs to activate service for new subscribers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   





50



---



##### 







| |                                                
| | -----------------------------------------------
| | Selected Domestic Financial and Operating Data.

|                                                               |  |                    |        |  |      |  |        |      |  |  |        | 
|-------------------------------------------------------------- |  | ------------------ | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                               |  | For the Year Ended |       
|                                                               |  | December 31,       |       
|                                                               |  |                    |       
|                                                               |  | 2004               |        |  | 2003 |  |        | 2002 | 
|                                                               |  |                    |        |  |      |  |        |      | 
|Handsets in service, end of period (in thousands)(1)           |  |                    | 15,047 |  |      |  | 12,882 |      |  |  | 10,612 | 
|Net handset additions (in thousands)(1)                        |  |                    | 2,165  |  |      |  | 2,270  |      |  |  | 1,956  | 
|Average monthly minutes of use per handset(1)                  |  |                    | 780    |  |      |  | 710    |      |  |  | 630    | 
|System minutes of use (in billions)(1)                         |  |                    | 130.2  |  |      |  | 100.6  |      |  |  | 73.5   | 
|Boost Mobile handsets in service, end of period (in thousands) |  |                    | 1,160  |  |      |  | 405    |      |  |  | 20     | 
|Boost Mobile net handset additions (in thousands)              |  |                    | 755    |  |      |  | 385    |      |  |  | 20     | 
|Net transmitter and receiver sites placed in service           |  |                    | 2,300  |  |      |  | 1,200  |      |  |  | 800    | 
|Transmitter and receiver sites in service, end of period       |  |                    | 19,800 |  |      |  | 17,500 |      |  |  | 16,300 | 
|Nextel stores in service, end of period                        |  |                    | 777    |  |      |  | 636    |      |  |  | 417    | 






|    |                                                                       
|--- | ----------------------------------------------------------------------
|(1) | Excludes amounts attributable to the Boost Mobile-branded
    service.







51



---



##### 





|   |                                                                   
|-- | ------------------------------------------------------------------
|1. | Year Ended December 31, 2004 vs. Year Ended
    December 31, 2003.



| |                                      
| | -------------------------------------
| | Service Revenues and Cost of Service.

|                                            |                                 |                       |        |       |           |  |    |              |  |             |           |       |   |               |    |   |         |   |       |       |  |  |    |    |  
|------------------------------------------- | ------------------------------- | --------------------- | ------ | ----- | --------- |  | -- | ------------ |  | ----------- | --------- | ----- | - | ------------- | -- | - | ------- | - | ----- | ----- |  |  | -- | -- | -
|                                            |                                 |                       |        |       |           |  |    |              |  | Change from |          
|                                            |                                 | Year Ended            |        |       | % of      |  |    | Year Ended   |  |             | % of      |       |   | Previous Year |   
|                                            |                                 | December 31,          |        |       | Operating |  |    | December 31, |  |             | Operating |       |   |               |   
|                                            |                                 | 2004                  |        |       | Revenues  |  |    | 2003         |  |             | Revenues  |       |   | Dollars       |    |   | Percent |  
|                                            |                                 |                       |        |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            |                                 | (dollars in millions) |       
|Service revenues                            |                                 | $                     | 11,925 |       |           |  | 89 | %            |  | $           | 9,892     |       |   |               | 91 | % |         | $ | 2,033 |       |  |  | 21 | % 
|Cost of service (exclusive of depreciation) |                                 |                       | 1,926  |       |           |  | 14 | %            |  |             | 1,674     |       |   |               | 15 | % |         |   | 252   |       |  |  | 15 | % 
|                                            |                                 |                       |        |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            | Service gross margin            |                       | $      | 9,999 |           |  |    |              |  |             | $         | 8,218 |   |               |    |   |         |   | $     | 1,781 |  |  |    | 22 | %
|                                            |                                 |                       |        |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            | Service gross margin percentage |                       |        | 84    | %         |  |    |              |  |             |           | 83    | % |               |    |   |         |   |       |       |  |  |    |    |  
|                                            |                                 |                       |        |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  

Service revenues.






| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased brand name recognition as a result of increased
    advertising and marketing campaigns, including advertising and
    marketing related to our sponsorship of NASCAR;                                                             
|
| |  | our differentiated products and services, including our Direct
    Connect walkie-talkie features, including the impact of the
    launch of our Nationwide Direct Connect service in July 2003,
    and our Nextel Online services;         
|
| |  | the market expansion of our Boost Mobile-branded service in 2004;                                                                                                                                                                            
|
| |  | increased market penetration as a result of the opening of
    additional Nextel stores during 2004 and selling efforts
    targeted at specific vertical markets;                                                                           
|
| |  | 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;
|
| |  | selected handset pricing promotions and improved handset choices;                                                                                                                                                                            
|
| |  | the high quality of our network; and                                                                                                                                                                                                         
|
| |  | add-on subscribers from existing customer accounts.                                                                                                                                                                                          

Cost of service.




| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | a 19% net increase in costs incurred in the operation and
    maintenance of our network and fixed interconnection costs;
|
| |  | a 21% increase in costs incurred to operate our handset service
    and repair program; partially offset by              
|
| |  | a 9% decrease in variable interconnection fees.                                                                          





| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in transmitter and receiver and switch related
    operational costs due to a 13% increase in transmitter and
    receiver sites placed into service during 2004;

52



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in roaming fees due to the increase in our customer
    base and the launch of Nationwide Direct Connect service in July
    2003;                                                                                                                                                                  
|
| |  | an increase in headcount and related employee costs to support
    our expanding network and customer base; and                                                                                                                                                                                                 
|
| |  | an increase in royalties paid to online service providers as we
    increase the data services available to subscribers, such as
    wireless email, ring-tones and wallpaper applications; partially
    offset by                                                                                             
|
| |  | a decrease in fixed interconnection costs as a result of
    initiatives implemented to gain efficiencies in our network by
    taking advantage of lower facilities fees and more
    technologically advanced network equipment that provides for
    additional capacity but requires less leased facilities.







Service gross margin.


53



---



##### 





| |                                                                               
| | ------------------------------------------------------------------------------
| | Handset and Accessory Revenues and Cost of Handset and
    Accessory Revenues.



|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |     |  |  |     |    |  
|------------------------------------------------------------------------------------ | -------------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | --- |  |  | --- | -- | -
|                                                                                     |                                        |                       |       |       |           |  |    |              |   | Change from |          
|                                                                                     |                                        | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|                                                                                     |                                        | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|                                                                                     |                                        | 2004                  |       |       | Revenues  |  |    | 2003         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                                                     |                                        | (dollars in millions) |      
|Current period handset and accessory sales                                           |                                        | $                     | 1,443 |       |           |  | 11 | %            |   | $           | 1,098     |       |  |               | 10 | %  |         | $ | 345 |     |  |  | 31  | % 
|SAB No. 101                                                                          |                                        |                       |      |       |           |  |   | %            |   |             | (170      | )     |  |               | (1 | )% |         |   | 170 |     |  |  | 100 | % 
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                                                     | Handset and accessory revenues         |                       |       | 1,443 |           |  |    | 11           | % |             |           | 928   |  |               |    | 9  | %       |   |     | 515 |  |  |     | 55 | %
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|Current period cost of handset and accessory sales                                   |                                        |                       | 2,077 |       |           |  | 16 | %            |   |             | 1,665     |       |  |               | 15 | %  |         |   | 412 |     |  |  | 25  | % 
|SAB No. 101                                                                          |                                        |                       |      |       |           |  |   | %            |   |             | (170      | )     |  |               | (1 | )% |         |   | 170 |     |  |  | 100 | % 
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                                                     | Cost of handset and accessory revenues |                       |       | 2,077 |           |  |    | 16           | % |             |           | 1,495 |  |               |    | 14 | %       |   |     | 582 |  |  |     | 39 | %
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|Handset and accessory net subsidy                                                    |                                        | $                     | (634  | )     |           |  |    |              |   | $           | (567      | )     |  |               |    |    |         | $ | (67 | )   |  |  | (12 | )%
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|Handset and accessory net subsidy percentage,excluding
    the impact of SAB No. 101 |                                        |                       | (44   | )%    |           |  |    |              |   |             | (52       | )%    |  |               |    |    |         |   |     |     |  |  |     |   
|                                                                                     |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  

Handset and accessory revenues.


Cost of handset and accessory revenues.


Handset and accessory net subsidy.






54



---



##### 







| |                                              
| | ---------------------------------------------
| | Selling, General and Administrative Expenses.

|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |       |       |           |  |    |              |   | Change from |          
|                           |                                     | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|                           |                                     | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|                           |                                     | 2004                  |       |       | Revenues  |  |    | 2003         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                           |                                     | (dollars in millions) |      
|Selling and marketing      |                                     | $                     | 2,134 |       |           |  | 16 | %            |   | $           | 1,814     |       |  |               | 17 | %  |         | $ | 320 |     |  |  | 18 | % 
|General and administrative |                                     |                       | 2,107 |       |           |  | 16 | %            |   |             | 1,639     |       |  |               | 15 | %  |         |   | 468 |     |  |  | 29 | % 
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                           | Selling, general and administrative |                       | $     | 4,241 |           |  |    | 32           | % |             | $         | 3,453 |  |               |    | 32 | %       |   | $   | 788 |  |  |    | 23 | %
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  

Selling and marketing.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $139 million increase in advertising expenses as a result
    of general marketing campaigns directed at increasing brand
    awareness and promoting our differentiated services, such as our
    affiliation with NASCAR beginning in 2004, our new branding
    campaign launched in the third quarter 2003 that continued in
    2004, the promotion of Nationwide Direct Connect services and
    advertising and promotional costs related to our expansion of
    the areas in which we offer Boost Mobile-branded service that
    began in the first quarter 2004;
|
| |  | a $125 million increase in marketing payroll and related
    expenses primarily associated with the increase in the number of
    Nextel stores in operation during 2004; and                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | a $56 million increase in dealer compensation, which
    primarily reflects an increase in the rate of commissions and
    residuals earned by indirect dealers and distributors due to
    improved subscriber retention for subscribers added through
    indirect channels, partially offset by the decrease in volume of
    indirect sales and the decrease in commissions paid with respect
    to handset sales as more handsets were delivered through our
    direct handset fulfillment system in 2004.                                                            

General and administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $240 million increase in personnel, facilities and
    general corporate expenses due to increases in headcount and
    related facility costs, professional fees, information
    technology initiatives, and research and development costs,
    including those related to our wireless broadband
    initiatives and                                                                                                                            
|
| |  | a $228 million increase in expenses related to billing,
    collection, customer retention and customer care activities
    primarily due to the costs to support a larger customer base,
    including those of our Boost Mobile-branded service, and the
    focus on our customer Touch Point strategy in addition to
    increased costs in 2004 associated with the implementation of
    wireless number portability in the fourth quarter 2003.







| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased costs to support a growing customer base, including
    costs associated with billing, collection, customer retention
    and customer care activities;                                                                
|
| |  | increased marketing and advertising expenses in connection with
    sponsorships and branding and promotional initiatives that are
    designed to increase brand awareness in our markets, including
    our NASCAR sponsorship;
|
| |  | increased costs relating to the expansion of distribution of our
    Boost Mobile-branded service into new markets;                                                                                                              

55



---



##### 





| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | costs relating to the proposed merger of Sprint and
    Nextel; and                                                                                                                   
|
| |  | increased costs associated with opening additional Nextel
    stores; partially offset by                                                                                             
|
| |  | additional savings expected from obtaining an increasing
    percentage of sales from our lower-cost customer-convenient
    channels, such as web sales, telesales and Nextel stores.



| |                               
| | ------------------------------
| | Depreciation and Amortization.

|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |     |  |  |     |    |  
|------------ | ----------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | --- |  |  | --- | -- | -
|             |                               |                       |       |       |           |  |    |              |   | Change from |          
|             |                               | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|             |                               | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|             |                               | 2004                  |       |       | Revenues  |  |    | 2003         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|             |                               | (dollars in millions) |      
|Depreciation |                               | $                     | 1,807 |       |           |  | 13 | %            |   | $           | 1,643     |       |  |               | 15 | %  |         | $ | 164 |     |  |  | 10  | % 
|Amortization |                               |                       | 34    |       |           |  | 1  | %            |   |             | 51        |       |  |               | 1  | %  |         |   | (17 | )   |  |  | (33 | )%
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|             | Depreciation and amortization |                       | $     | 1,841 |           |  |    | 14           | % |             | $         | 1,694 |  |               |    | 16 | %       |   | $   | 147 |  |  |     | 9  | %
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  







| |                    
| | -------------------
| | Interest and Other.

|                                                                               |  |                       |       |   |               |   |       |         |  |   |         |   |  |  |     |   
|------------------------------------------------------------------------------ |  | --------------------- | ----- | - | ------------- | - | ----- | ------- |  | - | ------- | - |  |  | --- | --
|                                                                               |  | Year Ended            |       |   | Change from   |  
|                                                                               |  | December 31,          |       |   | Previous Year |  
|                                                                               |  |                       |       |   |               |  
|                                                                               |  | 2004                  |       |   | 2003          |   |       | Dollars |  |   | Percent |  
|                                                                               |  |                       |       |   |               |   |       |         |  |   |         |  
|                                                                               |  | (dollars in millions) |      
|Interest expense                                                               |  | $                     | (594  | ) |               | $ | (844  | )       |  | $ | 250     |   |  |  | 30  | % 
|Interest income                                                                |  |                       | 29    |   |               |   | 42    |         |  |   | (13     | ) |  |  | (31 | )%
|Loss on retirement of debt and mandatorily redeemable preferred
    stock, net |  |                       | (117  | ) |               |   | (252  | )       |  |   | 135     |   |  |  | 54  | % 
|Equity in earnings (losses) of unconsolidated affiliates, net                  |  |                       | 15    |   |               |   | (58   | )       |  |   | 73      |   |  |  | 126 | % 
|Realized gain on investments                                                   |  |                       | 26    |   |               |   | 223   |         |  |   | (197    | ) |  |  | (88 | )%
|Other, net                                                                     |  |                       | 3     |   |               |   | 2     |         |  |   | 1       |   |  |  | 50  | % 
|Income tax benefit (provision)                                                 |  |                       | 355   |   |               |   | (113  | )       |  |   | 468     |   |  |  | NM  |   
|Income available to common stockholders                                        |  |                       | 2,991 |   |               |   | 1,446 |         |  |   | 1,545   |   |  |  | 107 | % 




NM  Not Meaningful


Interest Expense.




| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | a $358 million decrease in interest expense attributable to
    the retirements of our senior notes, discussed below;

56



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $57 million decrease in interest expense resulting from
    the combined effect of the lower average principal amount
    outstanding under our bank credit facility in 2004 and
    maintaining a weighted average interest rate related to our bank
    credit facility of 3.9% during 2003 and during 2004; and
|
| |  | a $22 million decrease resulting from interest expense
    recorded in 2003 related to the derivatives that were settled in
    the third quarter 2003 and other; partially offset by                                                                                                                               
|
| |  | a $187 million increase in interest expense attributable to
    our new senior notes issued since the third quarter 2003.                                                                                                                                                                                           



Interest Income.


Loss on Retirement of Debt and Mandatorily Redeemable
Preferred Stock.


Equity in Earnings (Losses) of Unconsolidated
Affiliates.






Realized Gain on Investments.


57



---



##### 





Income tax provision.




|   |                                                                   
|-- | ------------------------------------------------------------------
|2. | Year Ended December 31, 2003 vs. Year Ended
    December 31, 2002.



| |                                      
| | -------------------------------------
| | Service Revenues and Cost of Service.

|                                            |                                 |                       |       |       |           |  |    |              |  |             |           |       |   |               |    |   |         |   |       |       |  |  |    |    |  
|------------------------------------------- | ------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ |  | ----------- | --------- | ----- | - | ------------- | -- | - | ------- | - | ----- | ----- |  |  | -- | -- | -
|                                            |                                 |                       |       |       |           |  |    |              |  | Change from |          
|                                            |                                 | Year Ended            |       |       | % of      |  |    | Year Ended   |  |             | % of      |       |   | Previous Year |   
|                                            |                                 | December 31,          |       |       | Operating |  |    | December 31, |  |             | Operating |       |   |               |   
|                                            |                                 | 2003                  |       |       | Revenues  |  |    | 2002         |  |             | Revenues  |       |   | Dollars       |    |   | Percent |  
|                                            |                                 |                       |       |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            |                                 | (dollars in millions) |      
|Service revenues                            |                                 | $                     | 9,892 |       |           |  | 91 | %            |  | $           | 8,186     |       |   |               | 94 | % |         | $ | 1,706 |       |  |  | 21 | % 
|Cost of service (exclusive of depreciation) |                                 |                       | 1,674 |       |           |  | 15 | %            |  |             | 1,488     |       |   |               | 17 | % |         |   | 186   |       |  |  | 13 | % 
|                                            |                                 |                       |       |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            | Service gross margin            |                       | $     | 8,218 |           |  |    |              |  |             | $         | 6,698 |   |               |    |   |         |   | $     | 1,520 |  |  |    | 23 | %
|                                            |                                 |                       |       |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  
|                                            | Service gross margin percentage |                       |       | 83    | %         |  |    |              |  |             |           | 82    | % |               |    |   |         |   |       |       |  |  |    |    |  
|                                            |                                 |                       |       |       |           |  |    |              |  |             |           |       |   |               |    |   |         |  

Service revenues.






| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our differentiated products and services, including our Direct
    Connect walkie-talkie features, including the impact of the
    launch of our Nationwide Direct Connect service, and our Nextel
    Online services;                      
|
| |  | increased brand name recognition as a result of increased
    advertising and marketing campaigns;                                                                                                                                           
|
| |  | the high quality of our network;                                                                                                                                                                                                             
|
| |  | the improvement in subscriber retention that we attribute to our
    ongoing focus on customer care and other retention efforts and
    our focus on attracting high quality subscribers;                                                    
|
| |  | 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;

58



---



##### 





| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | selected handset pricing promotions and improved handset
    choices; and                                                                                 
|
| |  | increased sales and marketing staff, including staff associated
    with our Nextel stores, and selling efforts targeted at specific
    vertical markets.





| |   |                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the benefit of changes in billing practices, including
    full-minute rounding, that were implemented in the second
    quarter 2002;                                                                                                                                                                                                   
|
| |  | the improvement in credit and adjustment levels in 2003 as
    compared to 2002, which were higher in 2002 due to service
    discounts and billing disputes as a result of issues experienced
    by customers during the billing system conversion and the
    changes in billing practices implemented in the second quarter
    2002;
|
| |  | the revenues associated with the introduction of Nationwide
    Direct Connect service beginning July 2003;                                                                                                                                                                                                                              
|
| |  | the growth in the subscriber base electing handset insurance and
    participating in service and repair programs; and                                                                                                                                                                                                                   
|
| |  | the increased fees that we began charging many of our customers
    in October 2002 to recover a portion of the costs associated
    with government mandated telecommunications services such as
    E911 and number portability.                                                                                                       

Cost of service.




| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | a 12% increase in costs incurred in the operation and
    maintenance of our network and fixed interconnection
    costs; and
|
| |  | a 13% increase in variable interconnection fees.                                                                             





| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in costs to operate our handset service and repair
    program as a result of the growth in the subscriber base
    electing handset insurance and participating in service and
    repair programs;
|
| |  | an increase in transmitter and receiver and switch related
    operational costs due to a 7% increase in transmitter and
    receiver sites placed into service during 2003; and                                
|
| |  | an increase in roaming fees paid to Nextel Partners due to the
    increase in our customer base and the launch of Nationwide
    Direct Connect service in 2003.                                               





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a net benefit recorded in 2003 in connection with the towers
    leased from SpectraSite Holdings, Inc. Tower lease payments,
    previously recorded as a reduction of financing obligation, are
    classified as tower rent expense in 2003. This tower rent
    expense was more than offset by the deferred gain amortization
    recorded in connection with the tower sale transaction with
    SpectraSite; and
|
| |  | a decrease in fixed interconnection costs as a result of
    initiatives implemented over the past year to gain efficiencies
    in our network by taking advantage of lower facility fees and
    more technologically advanced network equipment that provides
    for additional capacity but requires less leased facilities.                                                                                      



59



---



##### 





Service gross margin.




| |                                                                               
| | ------------------------------------------------------------------------------
| | Handset and Accessory Revenues and Cost of Handset and
    Accessory Revenues.



|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |     |  |  |     |    |  
|-------------------------------------------------- | -------------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | --- |  |  | --- | -- | -
|                                                   |                                        |                       |       |       |           |  |    |              |   | Change from |          
|                                                   |                                        | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|                                                   |                                        | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|                                                   |                                        | 2003                  |       |       | Revenues  |  |    | 2002         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                   |                                        | (dollars in millions) |      
|Current period handset and accessory sales         |                                        | $                     | 1,098 |       |           |  | 10 | %            |   | $           | 892       |       |  |               | 10 | %  |         | $ | 206 |     |  |  | 23  | % 
|SAB No. 101                                        |                                        |                       | (170  | )     |           |  | (1 | )%           |   |             | (357      | )     |  |               | (4 | )% |         |   | 187 |     |  |  | 52  | % 
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                   | Handset and accessory revenues         |                       |       | 928   |           |  |    | 9            | % |             |           | 535   |  |               |    | 6  | %       |   |     | 393 |  |  |     | 73 | %
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|Current period cost of handset and accessory sales |                                        |                       | 1,665 |       |           |  | 15 | %            |   |             | 1,404     |       |  |               | 16 | %  |         |   | 261 |     |  |  | 19  | % 
|SAB No. 101                                        |                                        |                       | (170  | )     |           |  | (1 | )%           |   |             | (357      | )     |  |               | (4 | )% |         |   | 187 |     |  |  | 52  | % 
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                                                   | Cost of handset and accessory revenues |                       |       | 1,495 |           |  |    | 14           | % |             |           | 1,047 |  |               |    | 12 | %       |   |     | 448 |  |  |     | 43 | %
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|Handset and accessory net subsidy                  |                                        | $                     | (567  | )     |           |  |    |              |   | $           | (512      | )     |  |               |    |    |         | $ | (55 | )   |  |  | (11 | )%
|                                                   |                                        |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  

Handset and accessory revenues.




Cost of handset and accessory revenues.


60



---



##### 







Handset and accessory net subsidy.






| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | an increase in the number of handsets sold of about 23%;
    partially offset by
|
| |  | a decrease in the average subsidy per handset of about
    6%; and              
|
| |  | an increase in the gross margin from accessory sales.                           



| |                                              
| | ---------------------------------------------
| | Selling, General and Administrative Expenses.

|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |       |       |           |  |    |              |   | Change from |          
|                           |                                     | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|                           |                                     | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|                           |                                     | 2003                  |       |       | Revenues  |  |    | 2002         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                           |                                     | (dollars in millions) |      
|Selling and marketing      |                                     | $                     | 1,814 |       |           |  | 17 | %            |   | $           | 1,543     |       |  |               | 18 | %  |         | $ | 271 |     |  |  | 18 | % 
|General and administrative |                                     |                       | 1,639 |       |           |  | 15 | %            |   |             | 1,496     |       |  |               | 17 | %  |         |   | 143 |     |  |  | 10 | % 
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|                           | Selling, general and administrative |                       | $     | 3,453 |           |  |    | 32           | % |             | $         | 3,039 |  |               |    | 35 | %       |   | $   | 414 |  |  |    | 14 | %
|                           |                                     |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  

Selling and marketing.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $149 million increase in marketing payroll and related
    expenses primarily associated with our opening an additional 219
    Nextel stores between December 31, 2002 and
    December 31, 2003, and increased employee
    commissions; and                                                                                                                                                                           
|
| |  | a $102 million increase in advertising expenses as a result
    of our new branding campaign launched in the third quarter 2003,
    as well as general marketing campaigns directed at increasing
    brand awareness and promoting our differentiated services,
    including Nationwide Direct Connect and advertising costs
    related to the Boost Mobile test program, which launched in the
    third quarter 2002.

General and administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an $80 million increase in expenses related to billing,
    collection, customer retention and customer care activities
    primarily due to the costs to support a larger customer
    base; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | a $268 million increase in personnel, facilities and
    general corporate expenses due to increases in headcount and
    employee compensation costs, and to a lesser extent, technology
    initiatives, our financial systems software upgrade project,
    legal costs and professional fees; partially offset by                                                                                                                                                                                                                                                                                                                                               
|
| |  | a $205 million decrease in bad debt expense. Bad debt
    expense decreased from $334 million, or 4% of operating
    revenues, for 2002 to $129 million, or 1% of operating
    revenues, for 2003. The decrease in both bad debt expense and
    bad debt expense as a percentage of operating revenues reflects
    the results of system and strategic initiatives implemented over
    the past two years. With the completion of our integrated
    billing, customer care and collections system in 2002,
    productivity of various departments, including collections, has
    improved. Further, we made strategic decisions to strengthen our
    credit

61



---



##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | policies and procedures specifically in the area of compliance
    with our deposit policy, limiting the account sizes for
    high-risk accounts and strengthening identity verification
    processes at the point of credit applications. The credit and
    collection software tools that we implemented now enable us to
    better screen and monitor the credit quality and delinquency
    levels of our customers. We have also benefited from
    improvements in recoveries of past due accounts handled by third
    party collection agencies. These factors and others have
    resulted in increased collections, an improvement in the
    accounts receivable agings and a reduction in the write-offs for
    fraud-related accounts. Therefore, our allowance for doubtful
    accounts as a percentage of accounts receivable has also
    improved from December 31, 2002 to December 31, 2003.



| |                               
| | ------------------------------
| | Depreciation and Amortization.

|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |   |     |    |  |  |    |    |  
|------------ | ----------------------------- | --------------------- | ----- | ----- | --------- |  | -- | ------------ | - | ----------- | --------- | ----- |  | ------------- | -- | -- | ------- | - | --- | -- |  |  | -- | -- | -
|             |                               |                       |       |       |           |  |    |              |   | Change from |          
|             |                               | Year Ended            |       |       | % of      |  |    | Year Ended   |   |             | % of      |       |  | Previous Year |   
|             |                               | December 31,          |       |       | Operating |  |    | December 31, |   |             | Operating |       |  |               |   
|             |                               | 2003                  |       |       | Revenues  |  |    | 2002         |   |             | Revenues  |       |  | Dollars       |    |    | Percent |  
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|             |                               | (dollars in millions) |      
|Depreciation |                               | $                     | 1,643 |       |           |  | 15 | %            |   | $           | 1,541     |       |  |               | 17 | %  |         | $ | 102 |    |  |  | 7  | % 
|Amortization |                               |                       | 51    |       |           |  | 1  | %            |   |             | 54        |       |  |               | 1  | %  |         |   | (3  | )  |  |  | (6 | )%
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  
|             | Depreciation and amortization |                       | $     | 1,694 |           |  |    | 16           | % |             | $         | 1,595 |  |               |    | 18 | %       |   | $   | 99 |  |  |    | 6  | %
|             |                               |                       |       |       |           |  |    |              |   |             |           |       |  |               |    |    |         |  





| |                                                              
| | -------------------------------------------------------------
| | Restructuring and Impairment Charges, Interest and
    Other.

|                                                                                      |  |                       |       |   |               |   |        |         |  |   |         |   |  |  |      |   
|------------------------------------------------------------------------------------- |  | --------------------- | ----- | - | ------------- | - | ------ | ------- |  | - | ------- | - |  |  | ---- | --
|                                                                                      |  | Year Ended            |       |   | Change from   |  
|                                                                                      |  | December 31,          |       |   | Previous Year |  
|                                                                                      |  |                       |       |   |               |  
|                                                                                      |  | 2003                  |       |   | 2002          |   |        | Dollars |  |   | Percent |  
|                                                                                      |  |                       |       |   |               |   |        |         |  |   |         |  
|                                                                                      |  | (dollars in millions) |      
|Restructuring and impairment charges                                                  |  | $                     |      |   |               | $ | (35    | )       |  | $ | 35      |   |  |  | 100  | % 
|Interest expense                                                                      |  |                       | (844  | ) |               |   | (1,048 | )       |  |   | 204     |   |  |  | 19   | % 
|Interest income                                                                       |  |                       | 42    |   |               |   | 58     |         |  |   | (16     | ) |  |  | (28  | )%
|(Loss) gain on retirement of debt and mandatorily redeemable
    preferred stock, net |  |                       | (252  | ) |               |   | 839    |         |  |   | (1,091  | ) |  |  | (130 | )%
|Gain on deconsolidation of NII Holdings                                               |  |                       |      |   |               |   | 1,218  |         |  |   | (1,218  | ) |  |  | (100 | )%
|Equity in losses of unconsolidated affiliates, net                                    |  |                       | (58   | ) |               |   | (309   | )       |  |   | 251     |   |  |  | 81   | % 
|Realized gain on investments                                                          |  |                       | 223   |   |               |   |       |         |  |   | 223     |   |  |  |     |   
|Reduction in fair value of investments                                                |  |                       | (2    | ) |               |   | (37    | )       |  |   | 35      |   |  |  | 95   | % 
|Other, net                                                                            |  |                       | 4     |   |               |   | (2     | )       |  |   | 6       |   |  |  | 300  | % 
|Income tax provision                                                                  |  |                       | (113  | ) |               |   | (391   | )       |  |   | 278     |   |  |  | 71   | % 
|Income available to common stockholders                                               |  |                       | 1,446 |   |               |   | 1,634  |         |  |   | (188    | ) |  |  | (12  | )%

Restructuring and impairment charge.


62



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##### 





Interest expense.




| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $207 million decrease primarily resulting from the
    purchase and retirement of our senior notes, as discussed below;                                                                                                                                                                                                                                                                  
|
| |  | a $39 million decrease primarily due to a reduction in the
    weighted average interest rates related to our bank credit
    facility from 4.7% during 2002 to 3.9% during 2003; and                                                                                                                                                                                                      
|
| |  | a $19 million decrease due to the ineffective portion of
    the change in fair value of the derivative qualifying for hedge
    accounting and a $17 million decrease related to the
    SpectraSite tower lease agreements, accounted for as a financing
    obligation prior to 2003; partially offset by                                                                               
|
| |  | a $57 million increase due to the issuance of our new
    senior notes during the third and fourth quarters 2003; and                                                                                                                                                                                                                                                                      
|
| |  | a $13 million decrease in capitalized interest and an
    $8 million increase related to the third quarter dividends
    on our series D and series E preferred stock being
    classified as interest expense effective July 1, 2003 as a
    result of adopting SFAS No. 150, Accounting for
    Certain Financial Instruments with Characteristics of both
    Liabilities and Equity.



Interest income.


(Loss) gain on retirement of debt and mandatorily
redeemable preferred stock.


Equity in losses of unconsolidated affiliates,
net.


63



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##### 







| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | a $217 million loss representing our share of NII
    Holdings operating results; and           
|
| |  | a $92 million loss primarily attributable to our equity
    method investment in Nextel Partners.

Realized gain on investments.


Reduction in fair value of investments.


Income tax provision.




|   |                                
|-- | -------------------------------
|C. | Liquidity and Capital Resources





64



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##### 









| |            
| | -----------
| | Cash Flows.

|                                      |  |                       |        |   |               |   |        |         |  |   |         |  |  |  |     | 
|------------------------------------- |  | --------------------- | ------ | - | ------------- | - | ------ | ------- |  | - | ------- |  |  |  | --- | 
|                                      |  | Year Ended            |        |   | Change from   |  
|                                      |  | December 31,          |        |   | Previous Year |  
|                                      |  |                       |        |   |               |  
|                                      |  | 2004                  |        |   | 2003          |   |        | Dollars |  |   | Percent | 
|                                      |  |                       |        |   |               |   |        |         |  |   |         | 
|                                      |  | (dollars in millions) |       
|Cash provided by operating activities |  | $                     | 4,288  |   |               | $ | 3,312  |         |  | $ | 976     |  |  |  | 29% | 
|Cash used in investing activities     |  |                       | (1,946 | ) |               |   | (2,061 | )       |  |   | 115     |  |  |  | 6%  | 
|Cash used in financing activities     |  |                       | (1,669 | ) |               |   | (2,291 | )       |  |   | 622     |  |  |  | 27% | 







| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | a $1,142 million increase in net proceeds from short term
    investments; partially offset by                          
|
| |  | a $797 million increase in cash paid for capital
    expenditures;                                                      
|
| |  | a $59 million increase in cash paid for licenses,
    acquisitions, investments and other, net of cash
    acquired; and
|
| |  | a $171 million decrease in proceeds from the sale of
    investments.                                                   





| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in amounts expended to construct new cell sites and
    network improvements in 2004 compared to 2003, reflecting our
    2004 plans to improve the coverage and capacity of our network;
|
| |  | the outsourcing of our site development work and the resulting
    delay in our construction activities during the first half of
    2003; and                                                       
|
| |  | costs incurred in 2004 in connection with WiDEN.                                                                                                                                                     





65



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##### 









| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $1,421 million paid for the purchase and retirement of
    certain of our senior notes and convertible senior notes;                                                                                   
|
| |  | $165 million in repayments related to our remaining capital
    lease obligation, including a payment of $156 million
    associated with the early buy-out option of this capital lease
    agreement;
|
| |  | $626 million in net repayments under our bank credit
    facility;                                                                                                                                     
|
| |  | $141 million paid to Motorola for the purchase of shares of
    our class B common stock, the price for which was based on
    the then-current fair market value; and                                 
|
| |  | $46 million paid for debt financing costs and other;
    partially offset by                                                                                                                           
|
| |  | $494 million of net proceeds from the sale of our
    5.95% senior notes; and                                                                                                                          
|
| |  | $236 million of net proceeds from the issuance of shares of
    our class A common stock primarily under our incentive
    equity plan.                                                                





|   |                                   
|-- | ----------------------------------
|D. | Future Capital Needs and Resources



| |                   
| | ------------------
| | Capital Resources.





66



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##### 







| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the amount of revenue we are able to generate from our
    customers, which in turn is dependent on our ability to attract
    new and retain existing customers;
|
| |  | the cost of acquiring and retaining customers, including the
    subsidies we incur to provide handsets to both our new and
    existing customers;              
|
| |  | the amount of operating expenses required to provide our
    services; and                                                                                       
|
| |  | the amount of non-operating expenses required to operate our
    company, consisting primarily of interest expense.                                              











67



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##### 











|                          |  |                   |       |   |             |   |       |  
|------------------------- |  | ----------------- | ----- | - | ----------- | - | ----- | -
|                          |  | December 31, 2004 |      
|                          |  |                   |      
|                          |  | As Filed          |       |   | As Adjusted |  
|                          |  |                   |       |   |             |  
|                          |  | (in millions)     |      
|2005                      |  | $                 | 22    |   |             | $ |      |  
|2006                      |  |                   | 22    |   |             |   |      |  
|2007                      |  |                   | 22    |   |             |   |      |  
|2008                      |  |                   | 22    |   |             |   |      |  
|2009                      |  |                   | 1,028 |   |             |   | 1,006 |  
|Thereafter                |  |                   | 7,529 |   |             |   | 7,661 |  
|                          |  |                   |       |   |             |  
|                          |  |                   | 8,645 |   |             |   | 8,667 |  
|Add deferred premium      |  |                   | 24    |   |             |   | 24    |  
|Less unamortized discount |  |                   | (120  | ) |             |   | (120  | )
|                          |  |                   |       |   |             |  
|                          |  | $                 | 8,549 |   |             | $ | 8,571 |  
|                          |  |                   |       |   |             |  



| |               
| | --------------
| | Capital Needs.





| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | operating expenses relating to our network;                                             
|
| |  | capital expenditures, as discussed immediately below under
     Capital Expenditures;
|
| |  | potential spectrum purchases and investments in new business
    opportunities;         
|
| |  | payments of at least $2,801 million under the Report and
    Order;                     

68



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##### 





| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | potential material increases in the cost of compliance with
    regulatory mandates, particularly the requirement to deploy
    location-based Phase II E911 capabilities;         
|
| |  | interest payments, and, in future periods, scheduled principal
    payments, related to our long-term debt, and any of our
    securities that we choose to purchase or redeem; and
|
| |  | other general corporate expenditures, including the anticipated
    impact of becoming a full federal cash taxpayer.                                                               







Capital expenditures.




| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the purchase and construction of additional transmitter and
    receiver sites and related equipment to enhance our existing
    iDEN networks geographic coverage and to maintain our
    network quality;
|
| |  | the enhancements to our existing iDEN technology to increase
    data speeds and voice capacity;                                                                                                            
|
| |  | any potential future enhancement of our network through the
    deployment of next generation technologies; and                                                                                             
|
| |  | capital expenditures required to support our back office
    operations and additional Nextel stores.                                                                                                       



69



---



##### 





Future contractual obligations.


|                                  |  |               |        |  |      |   |       |      |  |   |       |  |  |          |       |  |      |   |       |            |  |   |       |  |  |   |        | 
|--------------------------------- |  | ------------- | ------ |  | ---- | - | ----- | ---- |  | - | ----- |  |  | -------- | ----- |  | ---- | - | ----- | ---------- |  | - | ----- |  |  | - | ------ | 
|                                  |  |               |        |  |      |   |       |      |  |   |       |  |  | 2010 and |      
|Future Contractual Obligations    |  | Total         |        |  | 2005 |   |       | 2006 |  |   | 2007  |  |  | 2008     |       |  | 2009 |   |       | Thereafter | 
|                                  |  |               |        |  |      |   |       |      |  |   |       |  |  |          |       |  |      |   |       |            | 
|                                  |  | (in millions) |       
|Public senior notes               |  | $             | 8,992  |  |      | $ | 372   |      |  | $ | 372   |  |  | $        | 372   |  |      | $ | 372   |            |  | $ | 372   |  |  | $ | 7,132  | 
|Bank credit facility(1)(2)        |  |               | 4,351  |  |      |   | 207   |      |  |   | 224   |  |  |          | 235   |  |      |   | 240   |            |  |   | 1,214 |  |  |   | 2,231  | 
|Preferred stock cash payments     |  |               | 245    |  |      |   |      |      |  |   |      |  |  |          |      |  |      |   |      |            |  |   |      |  |  |   | 245    | 
|Operating leases                  |  |               | 3,085  |  |      |   | 515   |      |  |   | 532   |  |  |          | 497   |  |      |   | 442   |            |  |   | 373   |  |  |   | 726    | 
|Purchase obligations and other(3) |  |               | 3,141  |  |      |   | 865   |      |  |   | 708   |  |  |          | 505   |  |      |   | 289   |            |  |   | 267   |  |  |   | 507    | 
|                                  |  |               |        |  |      |   |       |      |  |   |       |  |  |          |       |  |      |   |       |            | 
|Total                             |  | $             | 19,814 |  |      | $ | 1,959 |      |  | $ | 1,836 |  |  | $        | 1,609 |  |      | $ | 1,343 |            |  | $ | 2,226 |  |  | $ | 10,841 | 
|                                  |  |               |        |  |      |   |       |      |  |   |       |  |  |          |       |  |      |   |       |            | 






|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts include principal amortization and estimated
    interest payments based on managements expectation as to
    future interest rates, assume the current payment schedule and
    exclude any additional drawdown under the revolving loan
    commitment.
|   
|(2) | These amounts do not include the effect of the January 2005
    announcement to refinance the Term Loan E under our credit
    facility as discussed above in  D. Future
    Capital Needs and Resources  Capital Resources.                                        
|   
|(3) | These amounts do not take into account the minimum
    $2,801 million to be paid in connection with the Report and
    Order.                                                                                                                                           



70



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##### 









| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (i) we elect to cease using iDEN technology on a nationwide
    basis; (ii) this technology change means that Nextel
    Partners cannot offer nationwide roaming comparable to that
    available to its subscribers before our change; and
    (iii) we elect not to pay for the equipment necessary to
    permit Nextel Partners to make a technology change;
|
| |  | we elect to terminate the relationship with Nextel Partners
    because of its breach of the operating agreements;                                                                                                                                                                                                                                               
|
| |  | we experience a change of control (as would be the case if the
    merger with Sprint is completed as currently structured);                                                                                                                                                                                                                                     
|
| |  | we breach the operating agreements; or                                                                                                                                                                                                                                                                                                                           
|
| |  | Nextel Partners fails to implement changes required by us to
    match changes we have made in our business, operations or
    systems.                                                                                                                                                                                                                          





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as a result of the termination of our operating agreements with
    Nextel Partners as a result of our breach, the purchase price
    could involve a premium based on a pricing formula.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | as a result of the termination of our operating agreements as a
    result of a breach by Nextel Partners, the purchase price could
    involve a discount based on a pricing formula.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | as a result of the election of a majority of the non-Nextel
    stockholders to require us to purchase, after Nextel
    Partners failure to implement changes in business,
    operations or systems required by us, the purchase price will be
    an amount equal to the higher of the fair market value as
    determined by the appraisal process and a 20% rate of
    return on each tranche of invested capital in Nextel Partners,
    whether contributed in cash or in kind, from the date of its
    contribution through the purchase date, which value will be
    divided over all of Nextel Partners capital stock.
|
| |  | for any other reason, the purchase price will be the fair market
    value of the class A common stock. Under the certificate of
    incorporation of Nextel Partners, fair market value is defined
    as the price that a buyer would be willing to pay for all of
    Nextel Partners outstanding capital stock in an
    arms-length transaction and includes a control premium, as
    determined by an appraisal process.                                                                                                                                                                                                    



Future outlook.


71



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##### 







| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | the anticipated level of capital expenditures related to our
    existing iDEN network;
|
| |  | our scheduled debt service requirements;                                               
|
| |  | anticipated payments under the Report and Order;                                       
|
| |  | costs associated with the proposed merger with Sprint; and                             
|
| |  | other future contractual obligations.                                                  







| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the impact of our participation in any future auctions for the
    purchase of licenses for significant amounts of spectrum;                                 
|
| |  | any significant acquisition transactions or the pursuit of any
    significant new business opportunities other than those
    currently being pursued by us;
|
| |  | the funding required in connection with a deployment of next
    generation technologies;                                                                    
|
| |  | potential material additional purchases or redemptions of our
    outstanding debt and equity securities for cash; and                                       
|
| |  | potential material increases in the cost of compliance with
    regulatory mandates, including regulations related to
    Phase II E911 service.             





| |   |                                                      
| | - | -----------------------------------------------------
| |  | the commercial success of our operations;            
|
| |  | the volatility and demand of the capital markets; and
|
| |  | the market prices of our securities.                 





|   |                           
|-- | --------------------------
|E. | Related Party Transactions

Motorola.


72



---



##### 







Nextel Partners.








NII Holdings.


73



---



##### 













Our Related Party Transactions.




|   |                    
|-- | -------------------
|F. | Effect of Inflation





| |                           
| | --------------------------
| | Forward-Looking Statements

Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995.


74



---



##### 





|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk.









| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | quoted market prices for our senior notes, loans under our bank
    credit facility and mandatorily redeemable preferred
    stock; and      
|
| |  | present value of future cash flows for capital lease and finance
    obligations using a discount rate available for similar
    obligations.



|                                                                                  |  |                       |    |   |      |      |    |      |  |   |      |   |  |      |    |   |            |   |       |       |  |   |       |   |  |       |       |   |       |   |       |  |  |   |       |   |  |   |       | 
|--------------------------------------------------------------------------------- |  | --------------------- | -- | - | ---- | ---- | -- | ---- |  | - | ---- | - |  | ---- | -- | - | ---------- | - | ----- | ----- |  | - | ----- | - |  | ----- | ----- | - | ----- | - | ----- |  |  | - | ----- | - |  | - | ----- | 
|                                                                                  |  | Year of Maturity      |    |   | 2004 |      |    | 2003 | 
|                                                                                  |  |                       |    |   |      |      |    |      | 
|                                                                                  |  |                       |    |   |      | Fair |    |      |  |   | Fair |  
|                                                                                  |  | 2005                  |    |   | 2006 |      |    | 2007 |  |   | 2008 |   |  | 2009 |    |   | Thereafter |   |       | Total |  |   | Value |   |  | Total |       |   | Value |  
|                                                                                  |  |                       |    |   |      |      |    |      |  |   |      |   |  |      |    |   |            |   |       |       |  |   |       |   |  |       |       |   |       |  
|                                                                                  |  | (dollars in millions) |   
|I. Interest Rate Sensitivity                                                      |  |                       |    |   |      |      |    |      |  |   |      |   |  |      |    |   |            |   |       |       |  |   |       |   |  |       |       |   |       |   |       |  |  |   |       |   |  |   |       | 
|Mandatorily Redeemable Preferred Stock, Long-term Debt and
    Finance Obligation |  |                       |    |   |      |      |    |      |  |   |      |   |  |      |    |   |            |   |       |       |  |   |       |   |  |       |       |   |       |   |       |  |  |   |       |   |  |   |       | 
|Fixed Rate(1)                                                                     |  | $                     |   |   |      | $    |   |      |  | $ |     |   |  | $    |   |   |            | $ | 6     |       |  | $ | 5,706 |   |  | $     | 5,712 |   |       | $ | 6,064 |  |  | $ | 6,593 |   |  | $ | 7,119 | 
|Average Interest Rate                                                             |  |                       | 8  | % |      |      | 8  | %    |  |   | 8    | % |  |      | 8  | % |            |   | 8     | %     |  |   | 7     | % |  |       | 7     | % |       |   |       |  |  |   | 8     | % |  |   |       | 
|Variable Rate                                                                     |  | $                     | 22 |   |      | $    | 22 |      |  | $ | 22   |   |  | $    | 22 |   |            | $ | 1,022 |       |  | $ | 2,068 |   |  | $     | 3,178 |   |       | $ | 3,170 |  |  | $ | 3,820 |   |  | $ | 3,813 | 
|Average Interest Rate                                                             |  |                       | 5  | % |      |      | 5  | %    |  |   | 5    | % |  |      | 5  | % |            |   | 3     | %     |  |   | 5     | % |  |       | 4     | % |       |   |       |  |  |   | 3     | % |  |   |       | 






|    |                                                             
|--- | ------------------------------------------------------------
|(1) | Amounts individually round to less than $1 million annually.

75



---



##### 





|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.





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





|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Effectiveness of Disclosure Controls and Procedures.




Managements Report on Internal Control Over Financial
Reporting.






Changes in Internal Controls Over Financial Reporting.






76



---



##### 







|         |                   
|-------- | ------------------
|Item 9B. | Other Information.



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 and Related Stockholder Matters.



77



---



##### 



Securities Authorized for Issuance under Equity Compensation
Plans


Equity Compensation Plan Information


|                                                           |  |                      |            |     |                      |                      |                         |                           |  |  |            | 
|---------------------------------------------------------- |  | -------------------- | ---------- | --- | -------------------- | -------------------- | ----------------------- | ------------------------- |  |  | ---------- | 
|                                                           |  |                      |            |     |                      | Number of Securities |                        
|                                                           |  | Number of Securities |            |     |                      |                      | Remaining Available for |                          
|                                                           |  | to be Issued         |            |     | Weighted-average     |                      |                         | Future Issuance Under     | 
|                                                           |  | Upon Exercise of     |            |     | Exercise Price of    |                      |                         | Equity Compensation Plans | 
|                                                           |  | Outstanding Options, |            |     | Outstanding Options, |                      |                         | (Excluding Securities     | 
|                                                           |  | Warrants and Rights  |            |     | Warrants and Rights  |                      |                         | Reflected in Column (a))  | 
|Plan Category                                              |  | (a)                  |            |     | (b)                  |                      |                         | (c)                       | 
|                                                           |  |                      |            |     |                      |                      |                         |                           | 
|Equity compensation plans approved by security holders     |  |                      | 91,441,158 |     |                      | $                    | 23.94                   |                           |  |  | 13,185,685 | 
|Equity compensation plans not approved by security holders |  |                      | 212        | (1) |                      |                      | 7.01                    |                           |  |  | N/A        | 
|                                                           |  |                      |            |     |                      |                      |                         |                           | 
|Total                                                      |  |                      | 91,441,370 |     |                      |                      |                         |                           |  |  | 13,185,685 | 
|                                                           |  |                      |            |     |                      |                      |                         |                           | 






|    |                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These shares are issuable under an equity compensation plan
    assumed in connection with our acquisition of Dial Page, Inc. in
    1996.



|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.





|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accountant Fees and Services.



78



---



##### 



PART IV




|         |                                            
|-------- | -------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules.



|                                                                                                                                     |  |     
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                                     |  | Page
|                                                                                                                                     |  |     
|Reports of Independent Registered Public Accounting Firm                                                                             |  | F-2 
|Consolidated Balance Sheets as of December 31, 2004 and
    2003, As Restated                                                        |  | F-5 
|Consolidated Statements of Operations for the Years Ended
    December 31, 2004, 2003 and 2002, As Restated                          |  | F-6 
|Consolidated Statements of Changes in Stockholders Equity
    for the Years Ended December 31, 2004, 2003 and 2002, As
    Restated |  | F-7 
|Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2004, 2003 and 2002, As Restated                          |  | F-8 
|Notes to Consolidated Financial Statements                                                                                           |  | F-9 
|                                                                                                                                    
|(2) The following financial statement schedules are
    included in this annual report on Form 10-K:                                 |  |     
|                                                                                                                                    
|Schedule I  Condensed Financial Information of
    Registrant                                                                       |  | F-50
|Schedule II  Valuation and Qualifying Accounts                                                                                      |  | F-55







79



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##### 



SIGNATURES






| |                                                     
| | ----------------------------------------------------
| | NEXTEL COMMUNICATIONS, INC.                         
|
| | By: /s/ PAUL N. SALEH                               
| |                                                     
| | Paul N. Saleh                                       
| | Executive Vice President and Chief Financial Officer





|                                                         |  |                                                                                            |  |                |  | 
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                                |  | Title                                                                                      |  | Date          
|                                                         |  |                                                                                            |  |               
|                                                        
|/s/ WILLIAM E. CONWAY,
    JR.William
    E. Conway, Jr. |  | Chairman of the Board of Directors                                                         |  | March 14, 2005
|                                                        
|/s/ TIMOTHY M. DONAHUETimothy
    M. Donahue             |  | President, Chief Executive Officer and Director                                            |  | March 14, 2005
|                                                        
|/s/ PAUL N. SALEHPaul
    N. Saleh                       |  | Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer) |  | March 14, 2005
|                                                        
|/s/ WILLIAM G. ARENDTWilliam
    G. Arendt               |  | Senior Vice President and Controller (Principal Accounting
    Officer)                    |  | March 14, 2005
|                                                        
|/s/ MORGAN E.
    OBRIENMorgan
    E. OBrien           |  | Vice Chairman of the Board                                                                 |  | March 14, 2005
|                                                        
|/s/ KEITH J. BANEKeith
    J. Bane                       |  | Director                                                                                   |  | March 14, 2005
|                                                        
|/s/ FRANK M. DRENDELFrank
    M. Drendel                 |  | Director                                                                                   |  | March 14, 2005
|                                                        
|/s/ V. JANET HILLV.
    Janet Hill                       |  | Director                                                                                   |  | March 14, 2005
|                                                        
|/s/ WILLIAM E. KENNARDWilliam
    E. Kennard             |  | Director                                                                                   |  | March 14, 2005
|                                                        
|/s/ STEPHANIE M. SHERNStephanie
    M. Shern             |  | Director                                                                                   |  | March 14, 2005

80



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##### 



Exhibit Index




|        |   |      |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | - | ---- |  |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |     
|Number  |   |     
|        |   |     
|        | 2 | .1   |  |  |  | Agreement and Plan of Merger, dated December 15, 2004,
    among Sprint Corporation, Nextel Communications, Inc. and S-N
    Merger Corp. (filed December 17, 2004 as Exhibit 2.1
    to Nextels current report on Form 8-K and
    incorporated herein by reference).                                                                                                                                                                                                          
|        | 3 | .1.1 |  |  |  | Amended Certificate of Incorporation of Nextel Communications,
    Inc. (filed March 11, 2004 as Exhibit 3.1.1 to
    Nextels annual report on Form 10-K for the year ended
    December 31, 2003 and incorporated herein by reference).                                                                                                                                                                                                                                        
|        | 3 | .1.2 |  |  |  | Certificate Eliminating Reference to Series D and
    Series E Exchangeable Preferred Stock from the Certificate
    of Incorporation of Nextel Communications, Inc. (filed
    March 11, 2004 as Exhibit 3.1.2 to Nextels
    annual report on Form 10-K for the year ended
    December 31, 2003 and incorporated herein by reference).                                                                                                                                       
|        | 3 | .1.3 |  |  |  | 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 Communications, Inc.
    (filed March 11, 2004 as Exhibit 3.1.1 to
    Nextels annual report on Form  10-K for the year
    ended December 31, 2003 and incorporated herein by
    reference).                                                                                                                                                                                                                                           
|        | 4 | .1   |  |  |  | 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 | .2   |  |  |  | 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 and incorporated
    herein by reference).                                                                                                                                                                           
|        | 4 | .3.1 |  |  |  | Indenture, dated as of July 31, 2003, between Nextel
    Communications, Inc. and BNY Midwest Trust Company, as
    Trustee (filed August 8, 2003 as Exhibit 4.1 to
    Nextels quarterly report on Form 10-Q for the quarter
    ended June 30, 2003 (the 2003 Second Quarter
    10-Q) and incorporated herein by reference).                                                                                                                                               
|        | 4 | .3.2 |  |  |  | Form of Series A 7.375% senior serial redeemable note
    due 2015 (filed August 8, 2003 as Exhibit 4.2 to the
    2003 Second Quarter 10-Q and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                           
|        | 4 | .3.3 |  |  |  | Form of Series B 6.875% senior serial redeemable note
    due 2013 (filed November 10, 2003 as Exhibit 4 to
    Nextels quarterly report on Form 10-Q for the quarter
    ended September 30, 2003 and incorporated herein by
    reference).                                                                                                                                                                                                                                   
|        | 4 | .3.4 |  |  |  | Form of Series A 5.95% senior serial redeemable note
    due 2014 (filed May 10, 2004 as Exhibit 4.1 to
    Nextels quarterly report on Form 10-Q for the quarter
    ended March 31, 2004 (the 2004 First Quarter
    10-Q) and incorporated herein by reference).                                                                                                                                                                                                           
|        | 4 | .4.1 |  |  |  | Second Amended and Restated Credit Agreement dated July 15,
    2004 among Nextel, Nextel Finance Company, the other Restricted
    Companies party thereto, the Lenders Party thereto, and JPMorgan
    Chase Bank, N.A. as Administrative Agent and Collateral Agent
    (filed August 9, 2004 as Exhibit 4.1 to Nextels
    quarterly report on Form 10-Q for the quarter ended
    June 30, 2004 (the 2004 Second Quarter 10-Q)
    and incorporated herein by reference).
|        | 4 | .4.2 |  |  |  | Tranche A Term Loan Agreement dated January 28, 2005
    among Nextel, Nextel Finance Company, the other Restricted
    Companies party thereto, the Lenders Party thereto, and JPMorgan
    Chase Bank as Administrative Agent and Collateral Agent (filed
    February 3, 2005 as Exhibit 4 to Nextels current
    report on Form 8-K and incorporated herein by reference).                                                                                                  

81



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##### 



|        |    |        |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | -- | ------ |  |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       
|Number  |    |       
|        |    |       
|        | 4  | .4.3   |  |  |  | Amendment No. 1 dated February 15, 2005 to the Second
    Amended and Restated Credit Agreement dated July 15, 2004
    among Nextel, Nextel Finance Company, the other Restricted
    Companies party thereto, the Lenders Party thereto, and JPMorgan
    Chase Bank, N.A. as Administrative Agent and Collateral Agent
    (filed February 17, 2005 as Exhibit 4.1 to
    Nextels current report on Form 8-K and incorporated
    herein by reference).                                                                                              
|        | 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 1991 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 1991 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 Nextels 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 (filed April 2, 2001 as Exhibit 10.1.11 to
    Nextels annual (filed April 2, 2001 as
    Exhibit 10.1.11 to Nextels annual report on
    Form 10-K for the year ended December 31, 2000 and
    incorporated herein by reference).                                                                                                                                                                                   

82



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##### 



|        |    |        |  |  |  |                                                                                                                                                                                                                                                                                                                                                                          
|------- | -- | ------ |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       
|Number  |    |       
|        |    |       
|        | 10 | .1.12* |  |  |  | Amendment 003 dated March 29, 2001 to iDEN Subscriber
    Supply Agreement dated November 4, 1991 between Nextel and
    Motorola (filed May 15, 2001 as Exhibit 10.1 to
    Nextels quarterly report on Form 10-Q for the quarter
    ended March 31, 2001 and incorporated herein by reference).                                                                      
|        | 10 | .1.13* |  |  |  | Amendment dated December 28, 2000 to iDEN Infrastructure
    [*] Supply Agreement dated April 13, 1999, as amended,
    between Nextel and Motorola (filed April 2, 2001 as
    Exhibit 10.1.12 to Nextels annual report on
    Form 10-K for the year ended December 31, 2000 and
    incorporated herein by reference).                                               
|        | 10 | .1.14* |  |  |  | Amendment 003 dated November 13, 2001 Availability/
    Outage Goals for 2001 to iDEN Infrastructure [*] Supply
    Agreement dated April  13, 1999, as amended, between
    Nextel and Motorola (filed March  29, 2002 as
    Exhibit 10.1.14 to Nextels annual report on
    Form 10-K for the year ended December 31, 2001 and
    incorporated herein by reference).
|        | 10 | .1.15* |  |  |  | Amendment 004 dated March 15, 2002 to iDEN Subscriber
    Supply Agreement dated November 4, 1991 between Nextel and
    Motorola (filed May 15, 2002 as Exhibit 10.1 to the
    quarterly report on Form 10-Q for the quarter ended
    March 31, 2002 (the 2002 First Quarter 10-Q)
    and incorporated herein by reference).                                       
|        | 10 | .1.16* |  |  |  | Amendment 004 dated March 22, 2002 to Availability/ Outage
    Goals for 2002 to iDEN Infrastructure [*] Supply Agreement dated
    April 13, 1999, as amended, between Nextel and Motorola
    (filed May 15, 2002 as Exhibit 10.2 to the First
    Quarter 2002 10-Q and incorporated herein by reference).                                                            
|        | 10 | .1.17* |  |  |  | Extension Amendment dated March 16, 2004 to iDEN
    Infrastructure [*] Supply Agreement dated April 13, 1999,
    as amended, between Nextel and Motorola (filed May 10, 2004
    as Exhibit 10.1.1 to the 2004 First Quarter 10-Q and
    incorporated herein by reference).                                                                                           
|        | 10 | .1.18* |  |  |  | Term Sheet for Subscriber Units and Services Agreement dated
    December 31, 2003 between Nextel and Motorola (filed
    May 10, 2004 as Exhibit 10.1.2 to the 2004 First
    Quarter 10-Q and incorporated herein by reference).                                                                                                                                       
|        | 10 | .1.19* |  |  |  | Amendment No. 1 dated March 31, 2004 to the Term Sheet
    for Subscriber Units and Services Agreement dated
    December 31, 2004 between Nextel and Motorola (filed
    May 10, 2004 as Exhibit 10.1.3 to the 2004 First
    Quarter 10-Q and incorporated herein by reference).                                                                                       
|        | 10 | .1.20  |  |  |  | Second Extension Amendment to the iDEN Infrastructure 5-Year
    Supply Agreement, dated December 14, 2004, between
    Motorola, Inc. and Nextel Communications, Inc.                                                                                                                                                                                                   
|        | 10 | .1.21* |  |  |  | Amendment Seven to the Term Sheet for Subscriber Units and
    Services Agreement, dated December 14, 2004, between
    Motorola, Inc. and Nextel Communications, Inc.                                                                                                                                                                                                   
|        | 10 | .2.1   |  |  |  | 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 | .2.2   |  |  |  | Letter Agreement dated December 14, 2004, among Nextel
    Communications, Inc., Motorola, Inc. and Motorola SMR, Inc.
    (filed December 20, 2004 as Exhibit 99.3 to the
    current report on Form 8-K of Motorola, Inc. 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).                                                                                                         
|        | 10 | .4.1   |  |  |  | Form of Registration Rights Agreement dated July 28, 1995
    between Nextel and Digital Radio (filed March 31, 1997 as
    Exhibit 10.38 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).                                                                          

83



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##### 



|        |    |         |  |  |  |                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------- |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    |        
|        |    |        
|        | 10 | .4.2    |  |  |  | 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 Nextels current
    report on Form 8-K and incorporated herein by reference).                                     
|        | 10 | .4.3    |  |  |  | Option Exercise and Lending Commitment Agreement between Nextel
    and Digital Radio dated June 16, 1997 (filed July 9,
    1997 as Exhibit 10.1 to Nextels current report on
    Form 8-K and incorporated herein by reference).                                                                                               
|        | 10 | .4.4    |  |  |  | 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 | .4.5    |  |  |  | Agreement dated March 5, 2003 between Nextel, Digital
    Radio, L.L.C. and Craig O. McCaw (filed March 6, 2003 as
    Exhibit 10.1 to Nextels current report on
    Form 8-K 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 Nextels
    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 Nextels current report on
    Form 8-K and incorporated herein by reference).                                                                                                             
|        | 10 | .6.1**  |  |  |  | Form of Officer and Director Indemnification Agreement of Nextel
    (filed August 9, 2004 as Exhibit 10.3 to the 2004
    Second Quarter 10-Q and incorporated herein by reference).                                                                                                                                             
|        | 10 | .6.2**  |  |  |  | Nextel Amended and Restated Incentive Equity Plan (filed
    April 2, 2001 as Exhibit 10.8 to Nextels annual
    report on Form 10-K for the year ended December 31,
    2000 and incorporated herein by reference).                                                                                                             
|        | 10 | .6.3**  |  |  |  | Form of Deferred Share Agreement (Employee Form) under the
    Nextel Amended and Restated Incentive Equity Plan (filed
    November 8, 2004 as Exhibit 10.1 to Nextels
    quarterly report on Form 10-Q for the quarter ended
    September 30, 2004 (the 2004 Third
    Quarter 10-Q) and incorporated herein by reference).
|        | 10 | .6.4**  |  |  |  | Form of Deferred Share Agreement (Non-Affiliate Director Form)
    under the Nextel Amended and Restated Incentive Equity Plan
    (filed November 8, 2004 as Exhibit 10.2 to the 2004
    Third Quarter 10-Q and incorporated herein by reference).                                                                              
|        | 10 | .6.5**  |  |  |  | Form of Deferred Share Agreement  Recognition Award
    under the Nextel Amended and Restated Incentive Equity Plan
    (filed March 2, 2005 as Exhibit 10.1 to Nextels
    current report on Form 8-K and incorporated herein by
    reference).                                                                               
|        | 10 | .6.6**  |  |  |  | Form of Nonqualified Stock Option Agreement (Employee Form)
    under the Nextel Amended and Restated Incentive Equity Plan
    (filed November 8, 2004 as Exhibit 10.3 to the 2004
    Third Quarter 10-Q and incorporated herein by reference).                                                                                 
|        | 10 | .6.7**  |  |  |  | Form of Nonqualified Stock Option Agreement (Non-Affiliate
    Director Form) under the Nextel Amended and Restated Incentive
    Equity Plan (filed November 8, 2004 as Exhibit 10.4 to
    the 2004 Third Quarter 10-Q and incorporated herein by
    reference).                                                               
|        | 10 | .6.8**  |  |  |  | Nextel Severance Benefits Plan (filed March 29, 2002 as
    Exhibit 10.9 to Nextels annual report on
    Form 10-K for the year ended December 31, 2001 and
    incorporated herein by reference).                                                                                                                               
|        | 10 | .6.9**  |  |  |  | Nextel Amended and Restated Associate Stock Purchase Plan (filed
    April 16, 2004 as Annex A to Nextels proxy
    statement in connection with its 2004 annual meeting of
    stockholders and incorporated herein by reference).                                                                                              
|        | 10 | .6.10** |  |  |  | Nextel Amended and Restated Cash Compensation Deferral Plan
    (filed December 13, 2004 as Exhibit 10.1 to
    Nextels current report on Form 8-K and incorporated
    herein by reference).                                                                                                                                    

84



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##### 



|        |    |         |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ------- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    |        
|        |    |        
|        | 10 | .6.11** |  |  |  | Nextel Change of Control Retention Bonus and Severance Pay Plan
    dated July 14, 1999 (filed April 2, 2001 as
    Exhibit 10.12 to Nextels annual report on
    Form 10-K for the year ended December 31, 2000 and
    incorporated herein by reference).                                                                                                                    
|        | 10 | .6.12** |  |  |  | First Amendment, dated September 19, 2002, to Nextels
    Change of Control Retention Bonus and Severance Pay Plan (filed
    November 14, 2002 as Exhibit 10.1 to Nextels
    quarterly report on Form 10-Q for the quarter ended
    September 30, 2002 and incorporated herein by reference).                                                                              
|        | 10 | .6.13** |  |  |  | Nextel Communications, Inc. 2002/2003 Long-Term Incentive Plan
    (filed March 27, 2003 as Exhibit 10.19 to
    Nextels annual report on Form 10-K for the year ended
    December 31, 2002 (the 2002 Form 10-K) and
    incorporated herein by reference).                                                                                                                 
|        | 10 | .6.14** |  |  |  | Nextel Communications, Inc. 2004/2005 Long-Term Incentive Plan
    (filed March 11, 2004 as Exhibit 10.6.9 to
    Nextels annual report on Form 10-K for the year ended
    December 31, 2003 and incorporated herein by reference).                                                                                                                                           
|        | 10 | .7.1**  |  |  |  | Employment Agreement, effective as of July 1, 2003, by and
    between Nextel Communications, Inc. and Timothy M. Donahue
    (filed August 8, 2003 as Exhibit 10.1 to the 2003
    Second Quarter 10-Q and incorporated herein by reference).                                                                                                                                  
|        | 10 | .7.2**  |  |  |  | Letter, dated December 15, 2004, from Timothy M. Donahue to
    Nextel (filed December 17, 2004 as Exhibit 10.1 to
    Nextels current report on Form 8-K and incorporated
    herein by reference).                                                                                                                                                                           
|        | 10 | .7.3**  |  |  |  | Employment Agreement dated April 1, 2004 between Thomas N.
    Kelly, Jr. and Nextel (filed May 10, 2004 as
    Exhibit 10.2.1 to the 2004 First Quarter 10-Q and
    incorporated herein by reference).                                                                                                                                                                        
|        | 10 | .7.4**  |  |  |  | Employment Agreement dated April 1, 2004 between Paul N.
    Saleh and Nextel (filed May 10, 2004 as Exhibit 10.2.2
    to the 2004 First Quarter 10-Q and incorporated herein by
    reference).                                                                                                                                                                               
|        | 10 | .7.5**  |  |  |  | Employment Agreement dated April 1, 2004 between Barry J.
    West and Nextel (filed May 10, 2004 as Exhibit 10.2.3
    to the 2004 First Quarter 10-Q and incorporated herein by
    reference).                                                                                                                                                                               
|        | 10 | .7.6**  |  |  |  | Employment Agreement dated April 1, 2004 between Leonard J.
    Kennedy and Nextel (filed May 10, 2004 as
    Exhibit 10.2.4 to the 2004 First Quarter 10-Q and
    incorporated herein by reference).                                                                                                                                                                          
|        | 10 | .7.7**  |  |  |  | Resignation and Non-Competition Agreement dated
    November 11, 2003, between Morgan E. OBrien and
    Nextel (filed March 11, 2004 as Exhibit 10.7.4 to
    Nextels annual report on Form 10-K for the year ended
    December 31, 2003 and incorporated herein by reference).                                                                                              
|        | 10 | .8.1    |  |  |  | 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 Nextels current report on
    Form 8-K and incorporated herein by reference).                                                                                                         
|        | 10 | .8.2    |  |  |  | Amended and Restated Shareholders Agreement among Nextel
    Partners and the shareholders named therein dated
    February 18, 2000 (the Nextel Partners Shareholder
    Agreement)(filed by Nextel Partners February 22, 2000
    as Exhibit 10.2 to amendment no. 2 to the registration
    statement no. 333-95473 on Form S-1 and incorporated herein
    by reference).
|        | 10 | .8.3    |  |  |  | Amendment no. 1 dated February 22, 2000 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    October 23, 2000 as Exhibit 10.2 to the registration
    statement no. 333-48470 on Form S-4 and incorporated herein
    by reference).                                                                                                              
|        | 10 | .8.4    |  |  |  | Amendment no. 2 dated March 20, 2001 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 11, 2001 as Exhibit 10.2(b) to Nextel
    Partners current report on Form 8-K and incorporated
    herein by reference).                                                                                                                           
|        | 10 | .8.5    |  |  |  | Amendment no. 3 dated April 18, 2001 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 11, 2001 as Exhibit 10.2(c) to Nextel
    Partners current report on Form 8-K and incorporated
    herein by reference).                                                                                                                           

85



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##### 



|        |    |       |  |  |  |                                                                                                                                                                                                                                                                                                                         
|------- | -- | ----- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .8.6  |  |  |  | Amendment no. 4 dated July 25, 2001 to the Nextel Partners
    Shareholders Agreement (filed by Nextel Partners on
    November 13, 2001 as Exhibit 10.2(d) to Nextel
    Partners current report on Form 8-K and incorporated
    herein by reference).                                                               
|        | 10 | .8.7  |  |  |  | Amendment No. 5 dated June 13, 2002 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 13, 2003 as Exhibit 10.2(e) to Nextel Partners
    quarterly report on Form 10-Q for the quarterly period
    ended March 31, 2003 (the Nextel Partners 2003 First
    Quarter Form 10-Q)).
|        | 10 | .8.8  |  |  |  | Amendment No. 6 dated July 24, 2002 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 13, 2003 as Exhibit 10.2(f) to the Nextel Partners
    2003 First Quarter Form 10-Q).                                                                                                        
|        | 10 | .8.9  |  |  |  | Amendment No. 7 dated October 18, 2002 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 13, 2003 as Exhibit 10.2(g) to the Nextel Partners
    2003 First Quarter Form 10-Q).                                                                                                     
|        | 10 | .8.10 |  |  |  | Amendment No. 8 dated May 12, 2003 to the Nextel
    Partners Shareholders Agreement (filed by Nextel Partners on
    May 13, 2003 as Exhibit 10.2(h) to the Nextel Partners
    2003 First Quarter Form 10-Q).                                                                                                         
|        | 10 | .8.11 |  |  |  | Amendment No. 9 to the Nextel Partners Shareholders
    Agreement (filed by Nextel Partners on May 10, 2004 as
    Exhibit 10.2(i) to the Nextel Partners quarterly report on
    Form 10-Q for the quarterly period ended March 31,
    2004).                                                                         
|        | 10 | .8.12 |  |  |  | Agreement Specifying Obligations of, and Limiting Liability and
    Recourse to, Nextel dated January 29, 1999 (filed
    February 24, 1999 as Exhibit 10.3 to Nextels
    current report on Form 8-K and incorporated herein by
    reference).                                                                       
|        | 21 |       |  |  |  | Subsidiaries of Nextel.                                                                                                                                                                                                                                                                                                 
|        | 23 |       |  |  |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                       
|        | 31 |       |  |  |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                                                                                                                                                
|        | 32 |       |  |  |  | Section 1350 Certifications.                                                                                                                                                                                                                                                                                            






| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| | * | 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.

86



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Index to Consolidated Financial Statements and


Financial Statement Schedules


|                                                         |                                                                                                                                          |      |     
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---- | ----
|                                                         |                                                                                                                                          | Page
|                                                         |                                                                                                                                          |     
|REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |                                                                                                                                          | F-2 
|CONSOLIDATED FINANCIAL STATEMENTS                        |                                                                                                                                          |     
|                                                         | Consolidated Balance Sheets
    As of December 31, 2004 and 2003, As Restated                                                            |      | F-5 
|                                                         | Consolidated Statements of Operations
    For the Years Ended December 31, 2004, 2003 and 2002, As
    Restated                          |      | F-6 
|                                                         | Consolidated Statements of Changes in Stockholders
    Equity
    For the Years Ended December 31, 2004, 2003 and 2002, As
    Restated |      | F-7 
|                                                         | Consolidated Statements of Cash Flows
    For the Years Ended December 31, 2004, 2003 and 2002, As
    Restated                          |      | F-8 
|                                                         | Notes to Consolidated Financial Statements                                                                                               |      | F-9 
|FINANCIAL STATEMENT SCHEDULES                            |                                                                                                                                          |     
|                                                         | Schedule I  Condensed Financial Information of
    Registrant                                                                           |      | F-50
|                                                         | Schedule II  Valuation and Qualifying Accounts                                                                                          |      | F-55

F-1



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















Internal Control 
Integrated Framework








F-2



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















F-3



---



##### 











F-4



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


As of December 31, 2004 and 2003


|                                                                                                      |                                                                                                                              |                            |        |               |        |   |        |        |        | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------------- | ------ | - | ------ | ------ | ------ | 
|                                                                                                      |                                                                                                                              | 2004                       |        |               | 2003   |  
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              |                            |        | (as restated) |       
|                                                                                                      |                                                                                                                              |                            |        | (see note 1)  |       
|                                                                                                      |                                                                                                                              | (dollars in millions)      |       
|ASSETS                                                                                               
|Current assets                                                                                        |                                                                                                                              |                            |        |               |        |   |        |       
|                                                                                                      | Cash and cash equivalents                                                                                                    |                            | $      | 1,479         |        |   | $      | 806    |       
|                                                                                                      | Short-term investments                                                                                                       |                            |        | 335           |        |   |        | 1,165  |       
|                                                                                                      | Accounts and notes receivable, net                                                                                           |                            |        | 1,452         |        |   |        | 1,276  |       
|                                                                                                      | Due from related parties                                                                                                     |                            |        | 132           |        |   |        | 70     |       
|                                                                                                      | Handset and accessory inventory                                                                                              |                            |        | 322           |        |   |        | 223    |       
|                                                                                                      | Deferred tax assets (note 9)                                                                                                 |                            |        | 882           |        |   |        |       |       
|                                                                                                      | Prepaid expenses and other current assets (note 2)                                                                           |                            |        | 605           |        |   |        | 148    |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | Total current assets       |        |               | 5,207  |   |        |        | 3,688  | 
|Investments                                                                                           |                                                                                                                              |                            | 360    |               |        |   | 408    |       
|Property, plant and equipment, net                                                                    |                                                                                                                              |                            | 9,613  |               |        |   | 9,093  |       
|Intangible assets, net (note 5)                                                                       |                                                                                                                              |                            | 7,223  |               |        |   | 7,038  |       
|Other assets                                                                                          |                                                                                                                              |                            | 341    |               |        |   | 283    |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | $                          | 22,744 |               |        | $ | 20,510 |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                     
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 
|Current liabilities                                                                                   |                                                                                                                              |                            |        |               |        |   |        |       
|                                                                                                      | Accounts payable                                                                                                             |                            | $      | 986           |        |   | $      | 663    |       
|                                                                                                      | Accrued expenses and other                                                                                                   |                            |        | 1,304         |        |   |        | 1,382  |       
|                                                                                                      | Due to related parties                                                                                                       |                            |        | 297           |        |   |        | 285    |       
|                                                                                                      | Current portion of long-term debt and capital lease obligation                                                               |                            |        | 22            |        |   |        | 487    |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | Total current liabilities  |        |               | 2,609  |   |        |        | 2,817  | 
|Long-term debt                                                                                        |                                                                                                                              |                            | 8,527  |               |        |   | 9,725  |       
|Deferred income taxes (note 9)                                                                        |                                                                                                                              |                            | 1,781  |               |        |   | 1,873  |       
|Other liabilities                                                                                     |                                                                                                                              |                            | 311    |               |        |   | 258    |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | Total liabilities          |        |               | 13,228 |   |        |        | 14,673 | 
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|Commitments and contingencies (notes 6 and 10)                                                        |                                                                                                                              |                            |        |               |        |   |        |       
|Zero coupon mandatorily redeemable preferred stock,convertible, 245,245 shares issued and outstanding |                                                                                                                              |                            | 108    |               |        |   | 99     |       
|Stockholders equity                                                                                  |                                                                                                                              |                            |        |               |        |   |        |       
|                                                                                                      | Common stock, class A, 1.088 billion and
    1.068 billion shares issued and outstanding                                     |                            |        | 1             |        |   |        | 1      |       
|                                                                                                      | Common stock, class B, nonvoting convertible,
    36 million shares issued; 30 million and
    36 million shares outstanding |                            |        |              |        |   |        |       |       
|                                                                                                      | Paid-in capital                                                                                                              |                            |        | 12,610        |        |   |        | 11,942 |       
|                                                                                                      | Accumulated deficit                                                                                                          |                            |        | (3,363        | )      |   |        | (6,363 | )     
|                                                                                                      | Treasury stock, at cost                                                                                                      |                            |        | (141          | )      |   |        |       |       
|                                                                                                      | Deferred compensation, net                                                                                                   |                            |        | (33           | )      |   |        | (16    | )     
|                                                                                                      | Accumulated other comprehensive income                                                                                       |                            |        | 334           |        |   |        | 174    |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | Total stockholders equity |        |               | 9,408  |   |        |        | 5,738  | 
|                                                                                                      |                                                                                                                              |                            |        |               |        |  
|                                                                                                      |                                                                                                                              | $                          | 22,744 |               |        | $ | 20,510 |       
|                                                                                                      |                                                                                                                              |                            |        |               |        |  





F-5



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


For the Years Ended December 31, 2004, 2003 and 2002


|                                                     |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |        |  
|---------------------------------------------------- | -------------------------------------------------------------------------------------- | --------------------------------------- | ------ | ------------- | ---- | - | ------------- | ----- | - | - | ----- | ------ | -
|                                                     |                                                                                        | 2004                                    |        |               | 2003 |   |               | 2002  |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     |                                                                                        |                                         |        | (as restated) |      |   | (as restated) |      
|                                                     |                                                                                        |                                         |        | (see note 1)  |      |   | (see note 1)  |      
|                                                     |                                                                                        | (in millions, except per share amounts) |       
|Operating revenues                                   |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |       
|                                                     | Service revenues                                                                       |                                         | $      | 11,925        |      |   | $             | 9,892 |   |   | $     | 8,186  |  
|                                                     | Handset and accessory revenues                                                         |                                         |        | 1,443         |      |   |               | 928   |   |   |       | 535    |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     |                                                                                        |                                         | 13,368 |               |      |   | 10,820        |       |   |   | 8,721 |       
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Operating expenses                                   |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |       
|                                                     | Cost of service (exclusive of depreciation included below)                             |                                         |        | 1,926         |      |   |               | 1,674 |   |   |       | 1,488  |  
|                                                     | Cost of handset and accessory revenues                                                 |                                         |        | 2,077         |      |   |               | 1,495 |   |   |       | 1,047  |  
|                                                     | Selling, general and administrative                                                    |                                         |        | 4,241         |      |   |               | 3,453 |   |   |       | 3,039  |  
|                                                     | Restructuring and impairment charges                                                   |                                         |        |              |      |   |               |      |   |   |       | 35     |  
|                                                     | Depreciation                                                                           |                                         |        | 1,807         |      |   |               | 1,643 |   |   |       | 1,541  |  
|                                                     | Amortization                                                                           |                                         |        | 34            |      |   |               | 51    |   |   |       | 54     |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     |                                                                                        |                                         | 10,085 |               |      |   | 8,316         |       |   |   | 7,204 |       
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Operating income                                     |                                                                                        |                                         | 3,283  |               |      |   | 2,504         |       |   |   | 1,517 |       
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Other income (expense)                               |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |       
|                                                     | Interest expense                                                                       |                                         |        | (594          | )    |   |               | (844  | ) |   |       | (1,048 | )
|                                                     | Interest income                                                                        |                                         |        | 29            |      |   |               | 42    |   |   |       | 58     |  
|                                                     | (Loss) gain on retirement of debt, net of debt conversion costs
    of $0, $0 and $160 |                                         |        | (117          | )    |   |               | (245  | ) |   |       | 354    |  
|                                                     | Gain on deconsolidation of NII Holdings                                                |                                         |        |              |      |   |               |      |   |   |       | 1,218  |  
|                                                     | Equity in earnings (losses) of unconsolidated affiliates, net                          |                                         |        | 15            |      |   |               | (58   | ) |   |       | (309   | )
|                                                     | Realized gain on sale of investments, net                                              |                                         |        | 26            |      |   |               | 223   |   |   |       |       |  
|                                                     | Other, net                                                                             |                                         |        | 3             |      |   |               | 2     |   |   |       | (39    | )
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     |                                                                                        |                                         | (638   | )             |      |   | (880          | )     |   |   | 234   |       
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Income before income tax benefit (provision)         |                                                                                        |                                         | 2,645  |               |      |   | 1,624         |       |   |   | 1,751 |       
|Income tax benefit (provision)                       |                                                                                        |                                         | 355    |               |      |   | (113          | )     |   |   | (391  | )     
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Net income                                           |                                                                                        |                                         | 3,000  |               |      |   | 1,511         |       |   |   | 1,360 |       
|                                                     | (Loss) gain on retirement of mandatorily redeemable preferred
    stock                |                                         |        |              |      |   |               | (7    | ) |   |       | 485    |  
|                                                     | Mandatorily redeemable preferred stock dividends and accretion                         |                                         |        | (9            | )    |   |               | (58   | ) |   |       | (211   | )
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Income available to common stockholders              |                                                                                        | $                                       | 2,991  |               |      | $ | 1,446         |       |   | $ | 1,634 |       
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Earnings per common share                            |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |       
|                                                     | Basic                                                                                  |                                         | $      | 2.69          |      |   | $             | 1.38  |   |   | $     | 1.85   |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     | Diluted                                                                                |                                         | $      | 2.62          |      |   | $             | 1.34  |   |   | $     | 1.75   |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|Weighted average number of common shares outstanding |                                                                                        |                                         |        |               |      |   |               |       |   |   |       |       
|                                                     | Basic                                                                                  |                                         |        | 1,111         |      |   |               | 1,047 |   |   |       | 884    |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  
|                                                     | Diluted                                                                                |                                         |        | 1,152         |      |   |               | 1,089 |   |   |       | 966    |  
|                                                     |                                                                                        |                                         |        |               |      |   |               |       |  





F-6



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


For the Years Ended December 31, 2004, 2003 and 2002


|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |     |     |  
|----------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------------------------------- | ------------ | - | --- | ------------ | - | ------- | ------ | -- | ----------- | -------------- | - | - | ------ | ---------- | -------- | -- | - | ---------- | - | -------------------- | ----------- | - | ------ | ------ | - | - | ------------ | ----- |  | ----------- | - | - | ----------- | - | ---- | ----- | - | - | ----- | --- | - | - | --- |  | --- | - | ---- | - |  | --- | --- | - |  | - | ----- | ----- | --- | --- | --- | -
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   | Accumulated Other    |             |   |       
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   | Comprehensive Income |             |   |       
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |  
|                                                      |                                                                                 | Convertible                                                                               |                                                         |                                                                   | Class A      |   |     | Class B      |   |         |        |    |             |                |   |   |        | Unrealized |          |    |   |            |  
|                                                      |                                                                                 | Preferred Stock                                                                           |                                                         |                                                                   | Common Stock |   |     | Common Stock |   |         |        |    |             | Treasury Stock |   |   |        |            | Gain     |    |   | Cumulative |   |                      | Cash        |   |        |       
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   | Paid-in |        |    | Accumulated |                |   |   |        |            | Deferred |    |   | (Loss) on  |   |                      | Translation |   |        | Flow   |   |   |             
|                                                      |                                                                                 | Shares                                                                                    |                                                         |                                                                   | Amount       |   |     | Shares       |   |         | Amount |    |             | Shares         |   |   | Amount |            | Capital  |    |   | Deficit    |   |                      | Shares      |   |        | Amount |   |   | Compensation |       |  | Investments |   |   | Adjustments |   |      | Hedge |   |   | Total |    
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |    
|                                                      |                                                                                 | (in millions)                                                                             |                                                        
|Balance, December 31, 2001 (as restated)
    (note 1) |                                                                                 |                                                                                           | 8                                                       |                                                                   |              | $ | 283 |              |   |         | 763    |    |             | $              | 1 |   |        |            | 36       |    |   | $          |  |                      |             | $ | 8,581  |        |   | $ | (9,234       | )     |  |             |  |   |             | $ |     |       |   | $ | (17   | )   |   | $ | 7   |  |     | $ | (229 | ) |  | $   | (29 | ) |  | $ | (637  | )    
|                                                      | Net income (as restated)                                                        |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              | 1,360 |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 1,360 |    
|                                                      |                                                                                 | Other comprehensive income, net of income tax:                                            |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |    
|                                                      |                                                                                 |                                                                                           | Foreign currency translation adjustment                 |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  | 228 |     |   |  |   |       |       |     | 228 |    
|                                                      |                                                                                 |                                                                                           | Net unrealized gains on available- for-sale securities: |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |     |    
|                                                      |                                                                                 |                                                                                           |                                                         | Unrealized holding losses                                         |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   | (37  | ) |  |     |     |   |  |   |       |       |     |     | (37 | )
|                                                      |                                                                                 |                                                                                           |                                                         | Reclassification adjustment for losses included in net income     |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   | 37   |   |  |     |     |   |  |   |       |       |     |     | 37  |  
|                                                      |                                                                                 |                                                                                           | Cash flow hedge:                                        |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |     |    
|                                                      |                                                                                 |                                                                                           |                                                         | Reclassification of transition adjustment included in net income  |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   | 8     |       |     |     | 8   |  
|                                                      |                                                                                 |                                                                                           |                                                         | Unrealized loss on cash flow hedge                                |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   | (6    | )     |     |     | (6  | )
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|                                                      | Total comprehensive income                                                      |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 1,590 |    
|                                                      | Common stock issued under equity plans                                          |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 8  |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 49     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 49    |    
|                                                      | Conversion of preferred stock into common stock                                 |                                                                                           |                                                         | (4                                                                | )            |   |     | (147         | ) |         |        | 24 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 147    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |      |    
|                                                      | Exchange of debt securities for common stock                                    |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 98 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 867    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 867   |    
|                                                      | Exchange of mandatorily redeemable preferred stock for common
    stock         |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 75 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 601    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 601   |    
|                                                      | Deferred compensation and other                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 11     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       | 10  |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 21    |    
|                                                      | Gain on retirement of mandatorily redeemable preferred stock                    |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 485    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 485   |    
|                                                      | Dividends and accretion on mandatorily redeemable preferred stock               |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | (211   | ) |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (211  | )  
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|Balance, December 31, 2002 (as restated)
    (note 1) |                                                                                 |                                                                                           | 4                                                       |                                                                   |              |   | 136 |              |   |         | 968    |    |             |                | 1 |   |        |            | 36       |    |   |            |  |                      |             |   | 10,530 |        |   |   | (7,874       | )     |  |             |  |   |             |   |     |       |   |   | (7    | )   |   |   | 7   |  |     |   | (1   | ) |  |     | (27 | ) |  |   | 2,765 |      
|                                                      | Net income (as restated)                                                        |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              | 1,511 |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 1,511 |    
|                                                      |                                                                                 | Other comprehensive income, net of income tax:                                            |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |    
|                                                      |                                                                                 |                                                                                           | Foreign currency translation adjustment                 |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  | (4  | )   |   |  |   |       |       |     | (4  | )  
|                                                      |                                                                                 |                                                                                           | Net unrealized gains on available- for-sale securities: |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |     |    
|                                                      |                                                                                 |                                                                                           |                                                         | Unrealized holding gains, net of income tax of $102 (as restated) |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   | 172  |   |  |     |     |   |  |   |       |       |     |     | 172 |  
|                                                      |                                                                                 |                                                                                           | Cash flow hedge:                                        |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |     |    
|                                                      |                                                                                 |                                                                                           |                                                         | Reclassification of transition adjustment included in net income  |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   | 4     |       |     |     | 4   |  
|                                                      |                                                                                 |                                                                                           |                                                         | Unrealized gain on cash flow hedge                                |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   | 23    |       |     |     | 23  |  
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|                                                      | Total comprehensive income                                                      |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 1,706 |    
|                                                      | Common stock issued under direct stock purchase plan and other
    equity plans |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 47 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 707    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 707   |    
|                                                      | Conversion of preferred stock into common stock                                 |                                                                                           |                                                         | (4                                                                | )            |   |     | (136         | ) |         |        | 22 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 136    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |      |    
|                                                      | Exchange of debt securities for common stock                                    |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 31 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 588    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 588   |    
|                                                      | Deferred compensation and other                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 24     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       | (9  | ) |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 15    |    
|                                                      | Increase on issuance of equity by affiliates, net of deferred
    income tax    |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 22     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 22    |    
|                                                      | Loss on retirement of mandatorily redeemable preferred stock                    |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | (7     | ) |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (7    | )  
|                                                      | Dividends and accretion on mandatorily redeemable preferred stock               |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | (58    | ) |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (58   | )  
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|Balance, December 31, 2003 (as restated)
    (note 1) |                                                                                 |                                                                                           |                                                        |                                                                   |              |   |    |              |   |         | 1,068  |    |             |                | 1 |   |        |            | 36       |    |   |            |  |                      |             |   | 11,942 |        |   |   | (6,363       | )     |  |             |  |   |             | $ |     |       |   |   | (16   | )   |   |   | 179 |  |     |   | (5   | ) |  |     |    |   |  |   | 5,738 |      
|                                                      | Net income                                                                      |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              | 3,000 |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 3,000 |    
|                                                      |                                                                                 | Other comprehensive income, net of income tax:                                            |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       |       |     |    
|                                                      |                                                                                 |                                                                                           | Foreign currency translation adjustment                 |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  | 2   |     |   |  |   |       |       |     | 2   |    
|                                                      |                                                                                 | Unrealized holding gains on available- for-sale securities, net
    of income tax of $109 |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  | 158 |   |      |   |  |     |     |   |  |   |       |       | 158 |    
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|                                                      | Total comprehensive income                                                      |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 3,160 |    
|                                                      | Common stock issued under equity plans and other                                |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        | 20 |             |                |   |  |        |            |          |    |   |            |   |                      |             |   |        | 267    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 267   |    
|                                                      | Deferred compensation                                                           |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 32     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       | (17 | ) |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 15    |    
|                                                      | Purchase of treasury stock (note 1)                                             |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |  |        |            |          | (6 | ) |            |   |                      |             |   |        |        |   |   |              |       |  |             |   | 6 |             |   |      | (141  | ) |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (141  | )  
|                                                      | Release of valuation allowance attributable to stock options
    (note 9)       |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 337    |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 337   |    
|                                                      | Stock option tax deduction benefit                                              |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | 82     |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | 82    |    
|                                                      | Adjustment to equity method investment, net of deferred income
    tax          |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | (41    | ) |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (41   | )  
|                                                      | Accretion on zero coupon mandatorily redeemable preferred stock                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        | (9     | ) |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |   |   |     |  |     |   |      |   |  |     |     |   |  |   |       | (9    | )  
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  
|Balance, December 31, 2004                            |                                                                                 |                                                                                           |                                                        |                                                                   |              | $ |    |              |   |         | 1,088  |    |             | $              | 1 |   |        |            | 30       |    |   | $          |  |                      |             | $ | 12,610 |        |   | $ | (3,363       | )     |  |             | 6 |   |             | $ | (141 | )     |   | $ | (33   | )   |   | $ | 337 |  |     | $ | (3   | ) |  | $   |    |   |  | $ | 9,408 |      
|                                                      |                                                                                 |                                                                                           |                                                         |                                                                   |              |   |     |              |   |         |        |    |             |                |   |   |        |            |          |    |   |            |   |                      |             |   |        |        |   |   |              |       |  |             |   |   |             |   |      |       |   |   |       |     |  



F-7



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2004, 2003 and 2002


|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |       |      |        |        |        |      |        |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ------ | ---- | ------------- | ------ | ----- | ---- | ------ | ------ | ------ | ---- | ------ | -
|                                                     |                                                                                           | 2004                                                                   |                                              |                                           | 2003   |      |               | 2002   |      
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|                                                     |                                                                                           |                                                                        |                                              | (as restated)                             |        |      | (as restated) |       
|                                                     |                                                                                           |                                                                        |                                              | (see note 1)                              |        |      | (see note 1)  |       
|                                                     |                                                                                           | (in millions)                                                          |                                             
|Cash flows from operating activities                 |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |       |      |        |       
|                                                     | Net income                                                                                |                                                                        | $                                            | 3,000                                     |        |      | $             | 1,511  |       |      | $      | 1,360  |       
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities:     |                                                                        |                                              |                                           |        |      |               |        |       |      |        |        |       
|                                                     |                                                                                           | Amortization of debt financing costs and accretion of senior
    notes |                                              |                                           | 24     |      |               |        | 46    |      |        |        | 316    |     
|                                                     |                                                                                           | Provision for losses on accounts receivable                            |                                              |                                           | 127    |      |               |        | 129   |      |        |        | 334    |     
|                                                     |                                                                                           | Amortization of deferred gain from sale of towers                      |                                              |                                           | (96    | )    |               |        | (105  | )    |        |        |       |     
|                                                     |                                                                                           | Restructuring and impairment charges                                   |                                              |                                           |       |      |               |        |      |      |        |        | 24     |     
|                                                     |                                                                                           | Depreciation and amortization                                          |                                              |                                           | 1,841  |      |               |        | 1,694 |      |        |        | 1,595  |     
|                                                     |                                                                                           | Loss (gain) on retirement of debt                                      |                                              |                                           | 117    |      |               |        | 245   |      |        |        | (514   | )   
|                                                     |                                                                                           | Debt conversion expense                                                |                                              |                                           |       |      |               |        |      |      |        |        | 160    |     
|                                                     |                                                                                           | Gain on deconsolidation of NII Holdings                                |                                              |                                           |       |      |               |        |      |      |        |        | (1,228 | )   
|                                                     |                                                                                           | Equity in (earnings) losses of unconsolidated affiliates,
    net      |                                              |                                           | (15    | )    |               |        | 58    |      |        |        | 309    |     
|                                                     |                                                                                           | Realized gain on investments, net                                      |                                              |                                           | (26    | )    |               |        | (223  | )    |        |        |       |     
|                                                     |                                                                                           | Tax benefit from the release of valuation allowance, net               |                                              |                                           | (1,113 | )    |               |        |      |      |        |        |       |     
|                                                     |                                                                                           | Income tax provision                                                   |                                              |                                           | 651    |      |               |        | 62    |      |        |        | 391    |     
|                                                     |                                                                                           | Other, net                                                             |                                              |                                           | 41     |      |               |        | 59    |      |        |        | 71     |     
|                                                     |                                                                                           | Change in assets and liabilities, net of effects from
    acquisitions |                                              |                                           |        |      |               |        |       |      |        |        |        |     
|                                                     |                                                                                           |                                                                        | Accounts and notes receivable                |                                           |        | (328 | )             |        |       | (350 | )      |        |        | (492 | )     
|                                                     |                                                                                           |                                                                        | Handset and accessory inventory              |                                           |        | (110 | )             |        |       | 29   |        |        |        | (21  | )     
|                                                     |                                                                                           |                                                                        | Prepaid expenses and other assets            |                                           |        | (285 | )             |        |       | (65  | )      |        |        | (21  | )     
|                                                     |                                                                                           |                                                                        | Accounts payable, accrued expenses and other |                                           |        | 460  |               |        |       | 222  |        |        |        | 239  |       
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|                                                     |                                                                                           |                                                                        |                                              | Net cash provided by operating activities |        |      | 4,288         |        |       |      | 3,312  |        |        |      | 2,523  |  
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|Cash flows from investing activities                 |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |       |      |        |       
|                                                     | Capital expenditures                                                                      |                                                                        |                                              | (2,513                                    | )      |      |               | (1,716 | )     |      |        | (1,863 | )     
|                                                     | Proceeds from maturities and sales of short-term investments                              |                                                                        |                                              | 2,761                                     |        |      |               | 2,511  |       |      |        | 3,486  |       
|                                                     | Purchases of short-term investments                                                       |                                                                        |                                              | (1,933                                    | )      |      |               | (2,825 | )     |      |        | (3,068 | )     
|                                                     | Payments for purchases of licenses, investments and other, net
    of cash acquired       |                                                                        |                                              | (338                                      | )      |      |               | (279   | )     |      |        | (432   | )     
|                                                     | Proceeds from sales of investments and other                                              |                                                                        |                                              | 77                                        |        |      |               | 248    |       |      |        | 2      |       
|                                                     | Cash relinquished as a result of the deconsolidation of NII
    Holdings                  |                                                                        |                                              |                                          |        |      |               |       |       |      |        | (250   | )     
|                                                     | Payments for acquisitions, net of cash acquired                                           |                                                                        |                                              |                                          |        |      |               |       |       |      |        | (111   | )     
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|                                                     |                                                                                           |                                                                        |                                              | Net cash used in investing activities     |        |      | (1,946        | )      |       |      | (2,061 | )      |        |      | (2,236 | )
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|Cash flows from financing activities                 |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |       |      |        |       
|                                                     | Purchase and retirement of debt securities and mandatorily
    redeemable preferred stock |                                                                        |                                              | (1,421                                    | )      |      |               | (4,598 | )     |      |        | (843   | )     
|                                                     | Proceeds from issuance of debt securities                                                 |                                                                        |                                              | 494                                       |        |      |               | 2,483  |       |      |        |       |       
|                                                     | Repayments under bank credit facility                                                     |                                                                        |                                              | (1,626                                    | )      |      |               | (2,965 | )     |      |        | (47    | )     
|                                                     | Borrowings under bank credit facility                                                     |                                                                        |                                              | 1,000                                     |        |      |               | 2,269  |       |      |        | 47     |       
|                                                     | Proceeds from issuance of stock                                                           |                                                                        |                                              | 236                                       |        |      |               | 689    |       |      |        | 35     |       
|                                                     | Repayments under capital lease and finance obligations                                    |                                                                        |                                              | (9                                        | )      |      |               | (44    | )     |      |        | (100   | )     
|                                                     | Payment for capital lease buy-out                                                         |                                                                        |                                              | (156                                      | )      |      |               | (54    | )     |      |        |       |       
|                                                     | Mandatorily redeemable preferred stock dividends paid                                     |                                                                        |                                              |                                          |        |      |               | (57    | )     |      |        | (19    | )     
|                                                     | Purchase of treasury stock                                                                |                                                                        |                                              | (141                                      | )      |      |               |       |       |      |        |       |       
|                                                     | Debt financing costs and other                                                            |                                                                        |                                              | (46                                       | )      |      |               | (14    | )     |      |        | (1     | )     
|                                                     | Proceeds from sale-leaseback transactions                                                 |                                                                        |                                              |                                          |        |      |               |       |       |      |        | 6      |       
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|                                                     |                                                                                           |                                                                        |                                              | Net cash used in financing activities     |        |      | (1,669        | )      |       |      | (2,291 | )      |        |      | (922   | )
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|Net increase (decrease) in cash and cash equivalents |                                                                                           |                                                                        | 673                                          |                                           |        |      | (1,040        | )      |       |      | (635   | )     
|Cash and cash equivalents, beginning of period       |                                                                                           |                                                                        | 806                                          |                                           |        |      | 1,846         |        |       |      | 2,481  |       
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      
|Cash and cash equivalents, end of period             |                                                                                           | $                                                                      | 1,479                                        |                                           |        | $    | 806           |        |       | $    | 1,846  |       
|                                                     |                                                                                           |                                                                        |                                              |                                           |        |      |               |        |      





F-8



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                          
|-- | ---------------------------------------------------------
|1. | Summary of Operations and Significant Accounting Policies

Operations. sm sm tm






Principles of Consolidation.


Use of Estimates.


Cash and Cash Equivalents.


F-9



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | Supplemental cash flow information.

|                                                     |                                                               |                         |       |       |      |   |       |       |  |   |       |       | 
|---------------------------------------------------- | ------------------------------------------------------------- | ----------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                     |                                                               | Year Ended December 31, |      
|                                                     |                                                               |                         |      
|                                                     |                                                               | 2004                    |       |       | 2003 |   |       | 2002  | 
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|                                                     |                                                               | (in millions)           |      
|Capital expenditures, including capitalized interest |                                                               |                         |       |       |      |   |       |       |  |   |       |      
|                                                     | Cash paid for capital expenditures                            |                         | $     | 2,513 |      |   | $     | 1,716 |  |   | $     | 1,863 | 
|                                                     | Change in capital expenditures accrued and unpaid or financed |                         |       | (153  | )    |   |       | 140   |  |   |       | 41    | 
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|                                                     |                                                               | $                       | 2,360 |       |      | $ | 1,856 |       |  | $ | 1,904 |      
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|Interest costs                                       |                                                               |                         |       |       |      |   |       |       |  |   |       |      
|                                                     | Interest expense                                              |                         | $     | 594   |      |   | $     | 844   |  |   | $     | 1,048 | 
|                                                     | Interest capitalized                                          |                         |       | 9     |      |   |       | 35    |  |   |       | 48    | 
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|                                                     |                                                               | $                       | 603   |       |      | $ | 879   |       |  | $ | 1,096 |      
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|Cash paid for interest, net of amounts capitalized   |                                                               | $                       | 586   |       |      | $ | 794   |       |  | $ | 712   |      
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|Cash received for interest                           |                                                               | $                       | 27    |       |      | $ | 30    |       |  | $ | 54    |      
|                                                     |                                                               |                         |       |       |      |   |       |       | 
|Cash paid for income taxes                           |                                                               | $                       | 85    |       |      | $ | 50    |       |  | $ | 7     |      
|                                                     |                                                               |                         |       |       |      |   |       |       | 

Investments.






Allowance for Doubtful Accounts.


Handset and Accessory Inventory.


F-10



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Property, Plant and Equipment.






Asset Retirement Obligations.


Capitalized Software to be Sold, Leased or Otherwise
Marketed.


F-11



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Intangible Assets.




Valuation of Long-Lived Assets.


Derivative Instruments and Hedging Activities.




F-12



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Debt Financing Costs.


Revenue Recognition.




F-13



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Customer Related Direct Costs.


Treasury Stock.


Stock-Based Compensation.




|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |      |   |       |      |      | 
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ----------------------- | ----- | ---- | ---- | - | ----- | ---- | ---- | - | ----- | ---- | ---- | 
|                                                     |                                                                                                                    | Year Ended December 31, |      
|                                                     |                                                                                                                    |                         |      
|                                                     |                                                                                                                    | 2004                    |       |      | 2003 |   |       | 2002 |     
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|                                                     |                                                                                                                    | (in millions, except    |      
|                                                     |                                                                                                                    | per share amounts)      |      
|Income available to common stockholders, as reported |                                                                                                                    | $                       | 2,991 |      |      | $ | 1,446 |      |      | $ | 1,634 |     
|                                                     | Stock-based compensation expense included in reported net
    income, net of income tax of $4, $0 and $0           |                         |       | 11   |      |   |       | 35   |      |   |       | 8    |     
|                                                     | Stock-based compensation expense determined under fair value
    based method, net of income tax of $55, $0 and $0 |                         |       | (205 | )    |   |       | (360 | )    |   |       | (350 | )   
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|Income available to common stockholders, pro forma   |                                                                                                                    | $                       | 2,797 |      |      | $ | 1,121 |      |      | $ | 1,292 |     
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|Earnings per common share                            |                                                                                                                    |                         |       |      |      |   |       |      |      |   |       |     
|                                                     | As reported                                                                                                        |                         |       |      |      |   |       |      |      |   |       |      |     
|                                                     |                                                                                                                    | Basic                   |       | $    | 2.69 |   |       | $    | 1.38 |   |       | $    | 1.85 | 
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|                                                     |                                                                                                                    | Diluted                 |       | $    | 2.62 |   |       | $    | 1.34 |   |       | $    | 1.75 | 
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|                                                     | Pro forma                                                                                                          |                         |       |      |      |   |       |      |      |   |       |      |     
|                                                     |                                                                                                                    | Basic                   |       | $    | 2.52 |   |       | $    | 1.07 |   |       | $    | 1.46 | 
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     
|                                                     |                                                                                                                    | Diluted                 |       | $    | 2.45 |   |       | $    | 1.04 |   |       | $    | 1.40 | 
|                                                     |                                                                                                                    |                         |       |      |      |   |       |      |     



F-14



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Advertising Costs.


Research and Development.


Foreign Currency.


Income Taxes.


Earnings Per Common Share.


F-15



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |    |   |       |      |    | 
|------------------------------------------------------------------ | ----------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----- | ---- | ---- | - | ----- | ---- | -- | - | ----- | ---- | -- | 
|                                                                   |                                                                               | Year Ended December 31,                                                 |      
|                                                                   |                                                                               |                                                                         |      
|                                                                   |                                                                               | 2004                                                                    |       |      | 2003 |   |       | 2002 |   
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|                                                                   |                                                                               | (in millions, except                                                    |      
|                                                                   |                                                                               | per share amounts)                                                      |      
|Income available to common stockholders  basic                    |                                                                               | $                                                                       | 2,991 |      |      | $ | 1,446 |      |    | $ | 1,634 |     
|                                                                   | Interest expense and accretion eliminated upon the assumed
    conversion of: |                                                                         |       |      |      |   |       |      |    |   |       |      |   
|                                                                   |                                                                               | 4.75% convertible senior notes due 2007                                 |       |      |     |   |       |      | 13 |   |       |      | 15 | 
|                                                                   |                                                                               | 6% convertible senior notes due 2011                                    |       |      | 16   |   |       |      |   |   |       |      | 37 | 
|                                                                   |                                                                               | Zero coupon convertible preferred stock mandatorily redeemable
    2013 |       |      | 10   |   |       |      |   |   |       |      | 8  | 
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|Income available to common stockholders 
    diluted              |                                                                               | $                                                                       | 3,017 |      |      | $ | 1,459 |      |    | $ | 1,694 |     
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|Weighted average number of common shares
    outstanding  basic   |                                                                               |                                                                         | 1,111 |      |      |   | 1,047 |      |    |   | 884   |     
|                                                                   | Effect of dilutive securities:                                                |                                                                         |       |      |      |   |       |      |    |   |       |      |   
|                                                                   |                                                                               | Class A convertible preferred stock                                     |       |      |     |   |       |      | 4  |   |       |      | 33 | 
|                                                                   |                                                                               | Equity plans                                                            |       |      | 25   |   |       |      | 27 |   |       |      | 6  | 
|                                                                   |                                                                               | 4.75% convertible senior notes due 2007                                 |       |      |     |   |       |      | 11 |   |       |      | 12 | 
|                                                                   |                                                                               | 6% convertible senior notes due 2011                                    |       |      | 11   |   |       |      |   |   |       |      | 26 | 
|                                                                   |                                                                               | Zero coupon convertible preferred stock mandatorily redeemable
    2013 |       |      | 5    |   |       |      |   |   |       |      | 5  | 
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|Weighted average number of common shares
    outstanding  diluted |                                                                               |                                                                         | 1,152 |      |      |   | 1,089 |      |    |   | 966   |     
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|Earnings per common share                                          |                                                                               |                                                                         |       |      |      |   |       |      |    |   |       |     
|                                                                   | Basic                                                                         |                                                                         | $     | 2.69 |      |   | $     | 1.38 |    |   | $     | 1.85 |   
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   
|                                                                   | Diluted                                                                       |                                                                         | $     | 2.62 |      |   | $     | 1.34 |    |   | $     | 1.75 |   
|                                                                   |                                                                               |                                                                         |       |      |      |   |       |      |   







F-16



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Reclassifications.


Concentrations of Risk.










| |                                                  
| | -------------------------------------------------
| | Restatement of Consolidated Financial Statements.



F-17



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










Consolidated Balance Sheet


|                        |                                        |               |   |        |             |  |   |        |  
|----------------------- | -------------------------------------- | ------------- | - | ------ | ----------- |  | - | ------ | -
|                        |                                        | As Previously |   |        |            
|                        |                                        | Reported      |   |        | As Restated | 
|                        |                                        |               |   |        |             | 
|                        |                                        | (in millions) |  
|As of December 31, 2003 |                                        |               |   |        |             |  |   |       
|                        | Deferred income taxes                  |               | $ | 1,867  |             |  | $ | 1,873  |  
|                        | Other liabilities                      |               |   | 166    |             |  |   | 258    |  
|                        | Total liabilities                      |               |   | 14,575 |             |  |   | 14,673 |  
|                        | Accumulated deficit                    |               |   | (6,256 | )           |  |   | (6,363 | )
|                        | Accumulated other comprehensive income |               |   | 165    |             |  |   | 174    |  
|                        | Total stockholders equity             |               |   | 5,836  |             |  |   | 5,738  |  

F-18



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidated Statements of Operations


|                             |                                                    |                      |   |       |             |  |   |       |      | 
|---------------------------- | -------------------------------------------------- | -------------------- | - | ----- | ----------- |  | - | ----- | ---- | 
|                             |                                                    | As Previously        |   |       |            
|                             |                                                    | Reported             |   |       | As Restated | 
|                             |                                                    |                      |   |       |             | 
|                             |                                                    | (in millions, except |  
|                             |                                                    | per share amounts)   |  
|Year ended December 31, 2003 |                                                    |                      |   |       |             |  |   |      
|                             | Cost of service (exclusive of depreciation)        |                      | $ | 1,656 |             |  | $ | 1,674 |     
|                             | Operating income                                   |                      |   | 2,522 |             |  |   | 2,504 |     
|                             | Equity in losses of unconsolidated affiliates, net |                      |   | (40   | )           |  |   | (58   | )   
|                             | Realized gain on sale of investments, net          |                      |   | 213   |             |  |   | 223   |     
|                             | Income before income tax provision                 |                      |   | 1,650 |             |  |   | 1,624 |     
|                             | Net income                                         |                      |   | 1,537 |             |  |   | 1,511 |     
|                             | Income available to common stockholders            |                      |   | 1,472 |             |  |   | 1,446 |     
|                             | Earnings per common share                          |                      |   |       |             |  |   |       |     
|                             |                                                    | Basic                |   | $     | 1.41        |  |   | $     | 1.38 | 
|                             |                                                    |                      |   |       |             | 
|                             |                                                    | Diluted              |   | $     | 1.36        |  |   | $     | 1.34 | 
|                             |                                                    |                      |   |       |             | 
|Year ended December 31, 2002 |                                                    |                      |   |       |             |  |   |      
|                             | Cost of service (exclusive of depreciation)        |                      | $ | 1,469 |             |  | $ | 1,488 |     
|                             | Operating income                                   |                      |   | 1,536 |             |  |   | 1,517 |     
|                             | Equity in losses of unconsolidated affiliates, net |                      |   | (302  | )           |  |   | (309  | )   
|                             | Income before income tax provision                 |                      |   | 1,777 |             |  |   | 1,751 |     
|                             | Net income                                         |                      |   | 1,386 |             |  |   | 1,360 |     
|                             | Income available to common stockholders            |                      |   | 1,660 |             |  |   | 1,634 |     
|                             | Earnings per common share                          |                      |   |       |             |  |   |       |     
|                             |                                                    | Basic                |   | $     | 1.88        |  |   | $     | 1.85 | 
|                             |                                                    |                      |   |       |             | 
|                             |                                                    | Diluted              |   | $     | 1.78        |  |   | $     | 1.75 | 
|                             |                                                    |                      |   |       |             | 

F-19



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidated Statements of Changes in Stockholders
Equity (Deficit)


|                        |                             |               |   |        |             |  |   |        |  
|----------------------- | --------------------------- | ------------- | - | ------ | ----------- |  | - | ------ | -
|                        |                             | As Previously |   |        |            
|                        |                             | Reported      |   |        | As Restated | 
|                        |                             |               |   |        |             | 
|                        |                             | (in millions) |  
|As of December 31, 2003 |                             |               |   |        |             |  |   |       
|                        | Net income                  |               | $ | 1,537  |             |  | $ | 1,511  |  
|                        | Unrealized holding gains    |               |   | 163    |             |  |   | 172    |  
|                        | Total comprehensive income  |               |   | 1,723  |             |  |   | 1,706  |  
|                        | Accumulated deficit         |               |   | (6,256 | )           |  |   | (6,363 | )
|                        | Total stockholders equity  |               |   | 5,836  |             |  |   | 5,738  |  
|As of December 31, 2002 |                             |               |   |        |             |  |   |       
|                        | Net income                  |               | $ | 1,386  |             |  | $ | 1,360  |  
|                        | Total comprehensive income  |               |   | 1,616  |             |  |   | 1,590  |  
|                        | Accumulated deficit         |               |   | (7,793 | )           |  |   | (7,874 | )
|                        | Total stockholders equity  |               |   | 2,846  |             |  |   | 2,765  |  
|As of December 31, 2001 |                             |               |   |        |             |  |   |       
|                        | Accumulated deficit         |               | $ | (9,179 | )           |  | $ | (9,234 | )
|                        | Total stockholders deficit |               |   | (582   | )           |  |   | (637   | )

Consolidated Statements of Cash Flows


|                             |                                                                                                                      |               |   |       |             |  |   |       |  
|---------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------- | - | ----- | ----------- |  | - | ----- | -
|                             |                                                                                                                      | As Previously |   |       |            
|                             |                                                                                                                      | Reported      |   |       | As Restated | 
|                             |                                                                                                                      |               |   |       |             | 
|                             |                                                                                                                      | (in millions) |  
|Year ended December 31, 2003 |                                                                                                                      |               |   |       |             |  |   |      
|                             | Net income                                                                                                           |               | $ | 1,537 |             |  | $ | 1,511 |  
|                             | Equity in losses of unconsolidated affiliates, net                                                                   |               |   | 40    |             |  |   | 58    |  
|                             | Realized gain on investments, net                                                                                    |               |   | (213  | )           |  |   | (223  | )
|                             | Changes in assets and liabilities, net of effects from
    acquisitions Accounts payable, accrued expenses and other |               |   | 204   |             |  |   | 222   |  
|Year ended December 31, 2002 |                                                                                                                      |               |   |       |             |  |   |      
|                             | Net income                                                                                                           |               | $ | 1,386 |             |  | $ | 1,360 |  
|                             | Equity in losses of unconsolidated affiliates, net                                                                   |               |   | 302   |             |  |   | 309   |  
|                             | Changes in assets and liabilities, net of effects from
    acquisitions Accounts payable, accrued expenses and other |               |   | 220   |             |  |   | 239   |  



| |                               
| | ------------------------------
| | New Accounting Pronouncements.

FASB Interpretation No 46.


F-20



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




EITF Topic D-108.


SFAS No. 123R.


F-21



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                       
|-- | --------------------------------------
|2. | Supplemental Balance Sheet Information

|                                          |                                                               |               |       |        |      |   |       |        |  
|----------------------------------------- | ------------------------------------------------------------- | ------------- | ----- | ------ | ---- | - | ----- | ------ | -
|                                          |                                                               | December 31,  |      
|                                          |                                                               |               |      
|                                          |                                                               | 2004          |       |        | 2003 |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | (in millions) |      
|Accounts and notes receivable             |                                                               |               |       |        |      |   |       |       
|                                          | Trade                                                         |               | $     | 1,482  |      |   | $     | 1,336  |  
|                                          | Other receivables                                             |               |       | 34     |      |   |       | 26     |  
|                                          | Less allowance for doubtful accounts                          |               |       | (64    | )    |   |       | (86    | )
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 1,452 |        |      | $ | 1,276 |       
|                                          |                                                               |               |       |        |      |  
|Prepaid expenses and other current assets |                                                               |               |       |        |      |   |       |       
|                                          | Prepaid expenses                                              |               | $     | 262    |      |   | $     | 120    |  
|                                          | Investment in NII Holdings                                    |               |       | 293    |      |   |       |       |  
|                                          | Deferred costs of handset sales and activation (note 1)       |               |       | 50     |      |   |       | 28     |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 605   |        |      | $ | 148   |       
|                                          |                                                               |               |       |        |      |  
|Property, plant and equipment             |                                                               |               |       |        |      |   |       |       
|                                          | Buildings and improvements                                    |               | $     | 303    |      |   | $     | 221    |  
|                                          | Network equipment and software                                |               |       | 14,343 |      |   |       | 12,541 |  
|                                          | Non-network internal use software, office equipment and other |               |       | 1,351  |      |   |       | 1,095  |  
|                                          | Less accumulated depreciation and amortization                |               |       | (7,340 | )    |   |       | (5,562 | )
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               |               | 8,657 |        |      |   | 8,295 |       
|                                          | Network asset inventory and construction in progress          |               |       | 956    |      |   |       | 798    |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 9,613 |        |      | $ | 9,093 |       
|                                          |                                                               |               |       |        |      |  
|Accounts payable                          |                                                               |               |       |        |      |   |       |       
|                                          | Trade                                                         |               | $     | 519    |      |   | $     | 343    |  
|                                          | Other payables                                                |               |       | 467    |      |   |       | 320    |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 986   |        |      | $ | 663   |       
|                                          |                                                               |               |       |        |      |  
|Accrued expenses and other                |                                                               |               |       |        |      |   |       |       
|                                          | Payroll related                                               |               | $     | 220    |      |   | $     | 288    |  
|                                          | Deferred access revenues                                      |               |       | 367    |      |   |       | 310    |  
|                                          | Accrued interest                                              |               |       | 129    |      |   |       | 148    |  
|                                          | Deferred gain from sale of towers                             |               |       | 61     |      |   |       | 94     |  
|                                          | Deferred handset sales and activation fees (note 1)           |               |       | 42     |      |   |       | 28     |  
|                                          | Other                                                         |               |       | 485    |      |   |       | 514    |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 1,304 |        |      | $ | 1,382 |       
|                                          |                                                               |               |       |        |      |  
|Other liabilities                         |                                                               |               |       |        |      |   |       |       
|                                          | Deferred gain from sale of towers                             |               | $     | 32     |      |   | $     | 92     |  
|                                          | Other                                                         |               |       | 279    |      |   |       | 166    |  
|                                          |                                                               |               |       |        |      |  
|                                          |                                                               | $             | 311   |        |      | $ | 258   |       
|                                          |                                                               |               |       |        |      |  

F-22



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |            
|-- | -----------
|3. | Investments

|                                                                                              |                                                               |               |     |    |      |   |     |   | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------- | --- | -- | ---- | - | --- | - | 
|                                                                                              |                                                               | December 31,  |    
|                                                                                              |                                                               |               |    
|                                                                                              |                                                               | 2004          |     |    | 2003 |  
|                                                                                              |                                                               |               |     |    |      |  
|                                                                                              |                                                               | (in millions) |    
|Marketable equity securities,excluding current portion
    of NII Holdings investment of $293 |                                                               | $             | 293 |    |      | $ | 307 |  
|Marketable debt securities,NII Holdings                                                       |                                                               |               |    |    |      |   | 67  |  
|Equity method investments,at cost net of equity in
    earnings (loss)                        |                                                               |               |     |    |      |   |     |  
|                                                                                              | Nextel Partners, net of equity in net losses of $330 and $346 |               |     | 24 |      |   |     |  | 
|                                                                                              | Other                                                         |               |     | 3  |      |   |     | 4 | 
|Nonmarketable equity securities,at cost                                                       |                                                               |               | 40  |    |      |   | 30  |  
|                                                                                              |                                                               |               |     |    |      |  
|                                                                                              |                                                               | $             | 360 |    |      | $ | 408 |  
|                                                                                              |                                                               |               |     |    |      |  

NII Holdings.








F-23



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Nextel Partners.














| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (i) we elect to cease using iDEN technology on a nationwide
    basis; (ii) this technology change means that Nextel
    Partners cannot offer nationwide roaming comparable to that
    available to its subscribers before our change; and
    (iii) we elect not to pay for the equipment necessary to
    permit Nextel Partners to make a technology change;

F-24



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | we elect to terminate the relationship with Nextel Partners
    because of its breach of the operating agreements;                     
|
| |  | we breach the operating agreements; or                                                                                                 
|
| |  | Nextel Partners fails to implement changes required by us to
    match changes we have made in our business, operations or
    systems.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as a result of the termination of our operating agreements with
    Nextel Partners as a result of our breach, the purchase price
    could involve a premium based on a pricing formula.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | as a result of the termination of our operating agreements as a
    result of a breach by Nextel Partners, the purchase price could
    involve a discount based on a pricing formula.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | as a result of the election of a majority of the non-Nextel
    stockholders to require us to purchase, after Nextel
    Partners failure to implement changes in business,
    operations or systems required by us, the purchase price will be
    an amount equal to the higher of the fair market value as
    determined by the appraisal process and a 20% rate of return on
    each tranche of invested capital in Nextel Partners, whether
    contributed in cash or in kind, from the date of its
    contribution through the purchase date, which value will be
    divided over all of Nextel Partners capital stock.
|
| |  | for any other reason, the purchase price will be the fair market
    value of the class A common stock. Under the certificate of
    incorporation of Nextel Partners, fair market value is defined
    as the price that a buyer would be willing to pay for all of
    Nextel Partners outstanding capital stock in an
    arms-length transaction and includes a control premium, as
    determined by an appraisal process.                                                                                                                                                                                                    









F-25



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


SpectraSite.






|   |                         
|-- | ------------------------
|4. | Significant Transactions

Acquisitions.








Restructuring and Impairment Charges.


F-26



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                  
|-- | -----------------
|5. | Intangible Assets

|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          |  |   |    |    |  |   |       |       | 
|----------------------------- | ---------------------------------------------------- | ------------- |  | ----------------- | -------- | - | ----------------- | ------------ | --- | - | -------- | ----- |  | -------- | ----- | ----- | ------------ | - | ----- | -------- |  | - | -- | -- |  | - | ----- | ----- | 
|                              |                                                      |               |  | December 31, 2004 |          |   | December 31, 2003 |             
|                              |                                                      |               |  |                   |          |   |                   |             
|                              |                                                      |               |  | Gross             |          |   |                   |              | Net |   |          | Gross |  |          |       |       | Net          |  
|                              |                                                      | Useful        |  |                   | Carrying |   |                   | Accumulated  |     |   | Carrying |       |  | Carrying |       |       | Accumulated  |   |       | Carrying | 
|                              |                                                      | Lives         |  |                   | Value    |   |                   | Amortization |     |   | Value    |       |  | Value    |       |       | Amortization |   |       | Value    | 
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 
|                              |                                                      | (in millions) | 
|Amortized intangible assets   |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          |  |   |    |    |  |   |       |      
|                              | Customer lists                                       |               |  | 3 years           |          |   | $                 | 40           |     |   | $        | 38    |  |          | $     | 2     |              |   | $     | 98       |  |   | $  | 75 |  |   | $     | 23    | 
|                              | Spectrum sharing and noncompete agreements and other |               |  | Up to 10 years    |          |   |                   | 77           |     |   |          | 24    |  |          |       | 53    |              |   |       | 82       |  |   |    | 17 |  |   |       | 65    | 
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 
|                              |                                                      |               |  |                   |          |   | 117               |              |     |   | 62       |       |  |          | 55    |       |              |   | 180   |          |  |   | 92 |    |  |   | 88    |      
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 
|Unamortized intangible assets |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          |  |   |    |    |  |   |       |      
|                              | FCC licenses                                         |               |  | Indefinite        |          |   |                   | 7,140        |     |   |          |       |  |          |       | 7,140 |              |   |       | 6,922    |  |   |    |    |  |   |       | 6,922 | 
|                              | Goodwill                                             |               |  | Indefinite        |          |   |                   | 28           |     |   |          |       |  |          |       | 28    |              |   |       | 28       |  |   |    |    |  |   |       | 28    | 
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 
|                              |                                                      |               |  |                   |          |   | 7,168             |              |     |   |          |       |  |          | 7,168 |       |              |   | 6,950 |          |  |   |    |    |  |   | 6,950 |      
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 
|Total intangible assets       |                                                      |               |  |                   |          | $ | 7,285             |              |     | $ | 62       |       |  | $        | 7,223 |       |              | $ | 7,130 |          |  | $ | 92 |    |  | $ | 7,038 |      
|                              |                                                      |               |  |                   |          |   |                   |              |     |   |          |       |  |          |       |       |              |   |       |          | 









F-27



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Adoption of SFAS No. 142.


F-28



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                                                             
|-- | ----------------------------------------------------------------------------
|6. | Long-Term Debt, Capital Lease and Mandatorily Redeemable
    Preferred Stock

|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |   |  |   |       |     |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------------------- | ------ | ----------- | ------------ | - | ----------- | ------------- |  | - | ------------ | - |  | - | ----- | --- | -
|                                                                                                                                                                                                                                                                                  |                      |                       |        | Retirements |              |   | Borrowings, |               |  |  
|                                                                                                                                                                                                                                                                                  |                      | Balance               |        |             | and          |   |             | Debt-for-Debt |  |   | Balance      |  
|                                                                                                                                                                                                                                                                                  |                      | December 31,          |        |             | Repayments   |   |             | Exchange and  |  |   | December 31, |  
|                                                                                                                                                                                                                                                                                  |                      | 2003                  |        |             | of Principal |   |             | Other         |  |   | 2004         |  
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  
|                                                                                                                                                                                                                                                                                  |                      | (dollars in millions) |       
|9.375% senior serial redeemable notes due 2009                                                                                                                                                                                                                                    |                      | $                     | 1,599  |             |              | $ | (567        | )             |  | $ | (1,032       | ) |  | $ |      |    
|5.25% convertible senior notes due 2010                                                                                                                                                                                                                                           |                      |                       | 607    |             |              |   |            |               |  |   |             |   |  |   | 607   |    
|9.5% senior serial redeemable notes due 2011,including a deferred premium of $36 and $7                                                                                                                                                                                           |                      |                       | 895    |             |              |   | (171        | )             |  |   | (510         | ) |  |   | 214   |    
|6% convertible senior notes due 2011                                                                                                                                                                                                                                              |                      |                       | 608    |             |              |   | (608        | )             |  |   |             |   |  |   |      |    
|6.875% senior serial redeemable notes due 2013,including a deferred premium of $0 and $5 and net of an
    unamortized discount of $0 and $58                                                                                                                                     |                      |                       | 500    |             |              |   |            |               |  |   | 864          |   |  |   | 1,364 |    
|5.95% senior serial redeemable notes due 2014,
    including a deferred premium of $0 and $12 and net of an
    unamortized discount of $0 and $59                                                                                                                                |                      |                       |       |             |              |   |            |               |  |   | 1,046        |   |  |   | 1,046 |    
|7.375% senior serial redeemable notes due 2015, net
    of unamortized premium of $8 and unamortized discount of $3                                                                                                                                                               |                      |                       | 2,008  |             |              |   |            |               |  |   | 126          |   |  |   | 2,134 |    
|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 (2.4% to
    4.7%  2004; 2.4% to 6.9%  2003)                                                              |                      |                       | 3,804  |             |              |   | (1,626      | )             |  |   | 1,000        |   |  |   | 3,178 |    
|Capital lease obligation                                                                                                                                                                                                                                                          |                      |                       | 165    |             |              |   | (165        | )             |  |   |             |   |  |   |      |    
|Other                                                                                                                                                                                                                                                                             |                      |                       | 26     |             |              |   | (16         | )             |  |   | (4           | ) |  |   | 6     |    
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  
|Total long-term debt                                                                                                                                                                                                                                                              |                      |                       | 10,212 |             |              | $ | (3,153      | )             |  | $ | 1,490        |   |  |   | 8,549 |    
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  
|                                                                                                                                                                                                                                                                                  | Less current portion |                       |        | (487        | )            |   |             |               |  |   |              |   |  |   |       | (22 | )
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  
|                                                                                                                                                                                                                                                                                  |                      | $                     | 9,725  |             |              |   |             |               |  |   |              |   |  | $ | 8,527 |    
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  
|Zero coupon convertible preferred stock mandatorily
    redeemable 2013, no dividend; convertible into
    4,779,386 shares of class A common stock;
    245,245 shares issued and outstanding; stated at accreted
    liquidation preference value at 9.25% compounded quarterly |                      | $                     | 99     |             |              | $ |            |               |  | $ | 9            |   |  | $ | 108   |    
|                                                                                                                                                                                                                                                                                  |                      |                       |        |             |              |   |             |               |  |   |              |  

9.375% Senior Notes.


F-29



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


5.25% Convertible Senior Notes.


9.5% Senior Notes.


6% Convertible Senior Notes.


6.875% Senior Notes.


5.95% Senior Notes.


F-30



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




7.375% Senior Notes.


Zero Coupon Preferred Stock.


Series D Preferred Stock.


Series E Preferred Stock.


2004 Debt Retirements.


F-31



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




2004 Debt-for-Debt Exchanges.


2003 and 2002 Debt and Preferred Stock
Retirements.




Bank Credit Facility.




F-32



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












Capital Lease Obligation.


F-33



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Future Maturities of Long-Term Debt




|                          |  |               |       |  
|------------------------- |  | ------------- | ----- | -
|                          |  | December 31,  |      
|                          |  | 2004          |      
|                          |  |               |      
|                          |  | (in millions) |      
|2005                      |  | $             | 22    |  
|2006                      |  |               | 22    |  
|2007                      |  |               | 22    |  
|2008                      |  |               | 22    |  
|2009                      |  |               | 1,028 |  
|Thereafter                |  |               | 7,529 |  
|                          |  |               |      
|                          |  |               | 8,645 |  
|Add deferred premium      |  |               | 24    |  
|Less unamortized discount |  |               | (120  | )
|                          |  |               |      
|                          |  | $             | 8,549 |  
|                          |  |               |      





|   |                                    
|-- | -----------------------------------
|7. | Fair Value of Financial Instruments



|                                                                                   |  |               |       |  |            |   |       |          |  |   |            |  |  |   |        | 
|---------------------------------------------------------------------------------- |  | ------------- | ----- |  | ---------- | - | ----- | -------- |  | - | ---------- |  |  | - | ------ | 
|                                                                                   |  | December 31,  |      
|                                                                                   |  |               |      
|                                                                                   |  | 2004          |       |  | 2003       |  
|                                                                                   |  |               |       |  |            |  
|                                                                                   |  | Carrying      |       |  | Estimated  |   |       | Carrying |  |   | Estimated  | 
|                                                                                   |  | Amount        |       |  | Fair Value |   |       | Amount   |  |   | Fair Value | 
|                                                                                   |  |               |       |  |            |   |       |          |  |   |            | 
|                                                                                   |  | (in millions) |      
|Marketable equity securities, NII Holdings (including
    current portion of $293) |  | $             | 586   |  |            | $ | 586   |          |  | $ | 307        |  |  | $ | 307    | 
|Marketable debt securities, NII Holdings                                           |  |               |      |  |            |   |      |          |  |   | 67         |  |  |   | 67     | 
|Long-term debt, including current portion                                          |  |               | 8,549 |  |            |   | 9,084 |          |  |   | 10,047     |  |  |   | 10,565 | 
|Mandatorily redeemable preferred stock                                             |  |               | 108   |  |            |   | 150   |          |  |   | 99         |  |  |   | 146    | 

F-34



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Cash and Cash Equivalents, Short-Term Investments,
Accounts and Notes Receivable, Accounts Payable, Accrued
Expenses and Due to Related Parties.


Marketable Debt and Equity Securities.


|     |                                      |               |   |       |            |  |       |            |  |       |   |   |  |  |   |     | 
|---- | ------------------------------------ | ------------- | - | ----- | ---------- |  | ----- | ---------- |  | ----- | - | - |  |  | - | --- | 
|     |                                      |               |   | Gross |            |  | Gross |            | 
|     |                                      | Amortized     |   |       | Unrealized |  |       | Unrealized |  | Fair  |  
|     |                                      | Cost          |   |       | Gain       |  |       | Loss       |  | Value |  
|     |                                      |               |   |       |            |  |       |            |  |       |  
|     |                                      | (in millions) |  
|2004 |                                      |               |   |       |            |  |       |            |  |       |   |   |  |  |   |    
|     | Available-for-sale equity securities |               | $ | 33    |            |  | $     | 553        |  |       | $ |  |  |  | $ | 586 | 
|2003 |                                      |               |   |       |            |  |       |            |  |       |   |   |  |  |   |    
|     | Available-for-sale equity securities |               | $ | 33    |            |  | $     | 274        |  |       | $ |  |  |  | $ | 307 | 
|     | Available-for-sale debt securities   |               |   | 47    |            |  |       | 20         |  |       |   |  |  |  |   | 67  | 

Long-Term Debt.


Derivative Instruments.


Mandatorily Redeemable Preferred Stock.


Finance Obligation.


Letters of Credit.




|   |                                              
|-- | ---------------------------------------------
|8. | Derivative Instruments and Hedging Activities



F-35



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












F-36



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |             
|-- | ------------
|9. | Income Taxes



|                               |         |                         |     |      |      |   |      |      |   |   |      |      |  
|------------------------------ | ------- | ----------------------- | --- | ---- | ---- | - | ---- | ---- | - | - | ---- | ---- | -
|                               |         | Year Ended December 31, |    
|                               |         |                         |    
|                               |         | 2004                    |     |      | 2003 |   |      | 2002 |  
|                               |         |                         |     |      |      |   |      |      |  
|                               |         | (in millions)           |    
|Current                        |         |                         |     |      |      |   |      |      |   |   |      |     
|                               | State   |                         | $   | (107 | )    |   | $    | (51  | ) |   | $    | (5   | )
|Deferred                       |         |                         |     |      |      |   |      |      |   |   |      |     
|                               | Federal |                         |     | 452  |      |   |      | (51  | ) |   |      | (325 | )
|                               | State   |                         |     | 10   |      |   |      | (11  | ) |   |      | (61  | )
|                               |         |                         |     |      |      |   |      |      |  
|                               |         |                         | 462 |      |      |   | (62  | )    |   |   | (386 | )   
|                               |         |                         |     |      |      |   |      |      |  
|Income tax benefit (provision) |         | $                       | 355 |      |      | $ | (113 | )    |   | $ | (391 | )   
|                               |         |                         |     |      |      |   |      |      |  



|                                              |  |                         |       |   |      |   |      |      |  |   |      |  
|--------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                              |  | Year Ended December 31, |      
|                                              |  |                         |      
|                                              |  | 2004                    |       |   | 2003 |   |      | 2002 | 
|                                              |  |                         |       |   |      |   |      |      | 
|                                              |  | (in millions)           |      
|Income tax provision at statutory rate        |  | $                       | (926  | ) |      | $ | (568 | )    |  | $ | (613 | )
|State tax provision, net                      |  |                         | (123  | ) |      |   | (59  | )    |  |   | (83  | )
|Tax contingencies                             |  |                         | (142  | ) |      |   |     |      |  |   |     |  
|Gain on deconsolidation of NII Holdings       |  |                         |      |   |      |   |     |      |  |   | 482  |  
|Gain on retirement of debt                    |  |                         |      |   |      |   |     |      |  |   | (109 | )
|Decrease in valuation allowance               |  |                         | 1,546 |   |      |   | 531  |      |  |   | 34   |  
|Equity in losses of unconsolidated affiliates |  |                         |      |   |      |   | (16  | )    |  |   | (86  | )
|Other                                         |  |                         |      |   |      |   | (1   | )    |  |   | (16  | )
|                                              |  |                         |       |   |      |   |      |      | 
|                                              |  | $                       | 355   |   |      | $ | (113 | )    |  | $ | (391 | )
|                                              |  |                         |       |   |      |   |      |      | 

F-37



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                                  |                   |     |     |           |   |       |       | 
|-------------------------------- | -------------------------------- | ----------------- | --- | --- | --------- | - | ----- | ----- | 
|                                 |                                  | December 31, 2004 |    
|                                 |                                  |                   |    
|                                 |                                  | Current           |     |     | Long-term |  
|                                 |                                  |                   |     |     |           |  
|                                 |                                  | (in millions)     |    
|Deferred tax assets              |                                  |                   |     |     |           |   |       |      
|                                 | Net operating loss carryforwards |                   | $   | 925 |           |   | $     | 1,452 | 
|                                 | Capital loss carryforward        |                   |     |    |           |   |       | 713   | 
|                                 | Accruals and other liabilities   |                   |     | 70  |           |   |       | 64    | 
|                                 | Federal AMT                      |                   |     |    |           |   |       | 30    | 
|                                 | Research credit                  |                   |     |    |           |   |       | 3     | 
|                                 | Investments                      |                   |     |    |           |   |       | 85    | 
|                                 |                                  |                   |     |     |           |  
|                                 |                                  |                   | 995 |     |           |   | 2,347 |      
|Valuation allowance              |                                  |                   | (1  | )   |           |   | (657  | )    
|                                 |                                  |                   |     |     |           |  
|                                 |                                  |                   | 994 |     |           |   | 1,690 |      
|                                 |                                  |                   |     |     |           |  
|Deferred tax liabilities         |                                  |                   |     |     |           |   |       |      
|                                 | Property, plant and equipment    |                   |     |    |           |   |       | 1,596 | 
|                                 | Intangibles                      |                   |     |    |           |   |       | 1,735 | 
|                                 | Investments                      |                   |     | 112 |           |   |       | 112   | 
|                                 | Other                            |                   |     |    |           |   |       | 28    | 
|                                 |                                  |                   |     |     |           |  
|                                 |                                  |                   | 112 |     |           |   | 3,471 |      
|                                 |                                  |                   |     |     |           |  
|Current deferred tax asset       |                                  | $                 | 882 |     |           |   |       |      
|                                 |                                  |                   |     |     |           |  
|                                
|Long-term deferred tax liability |                                  |                   |     |     |           | $ | 1,781 |      
|                                 |                                  |                   |     |     |           |  

F-38



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |                                  |               |        |       | 
|------------------------ | -------------------------------- | ------------- | ------ | ----- | 
|                         |                                  | December 31,  |       
|                         |                                  | 2003          |       
|                         |                                  |               |       
|                         |                                  | (in millions) |       
|Deferred tax assets      |                                  |               |        |      
|                         | Net operating loss carryforwards |               | $      | 2,805 | 
|                         | Capital loss carryforward        |               |        | 723   | 
|                         | Accruals and other liabilities   |               |        | 176   | 
|                         | Federal AMT                      |               |        | 14    | 
|                         | Research credit                  |               |        | 3     | 
|                         | Investments                      |               |        | 64    | 
|                         |                                  |               |       
|                         |                                  |               | 3,785  |      
|Valuation allowance      |                                  |               | (2,544 | )    
|                         |                                  |               |       
|                         |                                  |               | 1,241  |      
|                         |                                  |               |       
|Deferred tax liabilities |                                  |               |        |      
|                         | Property, plant and equipment    |               |        | 1,320 | 
|                         | Intangibles                      |               |        | 1,665 | 
|                         | Investments                      |               |        | 129   | 
|                         |                                  |               |       
|                         |                                  |               | 3,114  |      
|                         |                                  |               |       
|                         | Net deferred tax liability       |               | $      | 1,873 | 
|                         |                                  |               |       







F-39



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies

Operating Lease Commitments.




|           |  |   |       | 
|---------- |  | - | ----- | 
|2005       |  | $ | 515   | 
|2006       |  |   | 532   | 
|2007       |  |   | 497   | 
|2008       |  |   | 442   | 
|2009       |  |   | 373   | 
|Thereafter |  |   | 726   | 
|           |  |   |      
|           |  | $ | 3,085 | 
|           |  |   |      



Other Commitments.


Contingencies.


F-40



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                               
|--- | ------------------------------
|11. | Capital Stock and Stock Rights





| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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; and                                                                                                         
|
| |  | 20,000,000 shares of preferred stock, par value
    $0.01 per share, 800,000 shares of which have been
    designated as zero coupon convertible preferred stock due 2013
    described in note 6.





| |             
| | ------------
| | Common Stock



Class A Common Stock.


Class B Common Stock.


F-41



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | 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;                                                      







| |        
| | -------
| | Ranking





| |                                   
| | ----------------------------------
| | Common Stock Reserved for Issuance



|                                                                                    |  |  |       | 
|----------------------------------------------------------------------------------- |  |  | ----- | 
|5.25% convertible debt conversion rights                                            |  |  | 8.1   | 
|Zero coupon preferred stock conversion rights                                       |  |  | 4.8   | 
|Class B common stock conversion rights                                              |  |  | 29.7  | 
|Incentive equity and employee stock purchase plan and other
    options outstanding |  |  | 114.3 | 
|Acquisitions and other                                                              |  |  | 39.5  | 
|                                                                                    |  |  |      
|                                                                                    |  |  | 196.4 | 
|                                                                                    |  |  |      





|    |                                 
|--- | --------------------------------
|12. | Stock and Employee Benefit Plans

Incentive Equity Plan.




| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | have been granted at prices equal to or exceeding the market
    value of the stock on the grant date;
|
| |  | vest over periods up to four years; and                                                               
|
| |  | expire ten years subsequent to award.                                                                 



F-42



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                               |           |        |      |                  |                |   |       |       | 
|------------------------------ | --------- | ------ | ---- | ---------------- | -------------- | - | ----- | ----- | 
|                               |           |        |      | Weighted Average |               
|                               |           | Shares |      |                  | Exercise Price |  
|                               |           |        |      |                  |                |  
|Outstanding, December 31, 2001 |           |        | 78.8 |                  |                | $ | 27.14 |      
|                               | Granted   |        |      | 28.6             |                |   |       | 5.37  | 
|                               | Exercised |        |      | (4.8             | )              |   |       | 7.12  | 
|                               | Canceled  |        |      | (14.4            | )              |   |       | 25.40 | 
|                               |           |        |      |                  |                |  
|Outstanding, December 31, 2002 |           |        | 88.2 |                  |                |   | 21.45 |      
|                               | Granted   |        |      | 20.9             |                |   |       | 16.87 | 
|                               | Exercised |        |      | (16.9            | )              |   |       | 11.23 | 
|                               | Canceled  |        |      | (6.1             | )              |   |       | 30.02 | 
|                               |           |        |      |                  |                |  
|Outstanding, December 31, 2003 |           |        | 86.1 |                  |                |   | 21.70 |      
|                               | Granted   |        |      | 24.4             |                |   |       | 26.02 | 
|                               | Exercised |        |      | (17.5            | )              |   |       | 13.07 | 
|                               | Canceled  |        |      | (3.7             | )              |   |       | 24.94 | 
|                               |           |        |      |                  |                |  
|Outstanding, December 31, 2004 |           |        | 89.3 |                  |                |   | 24.45 |      
|                               |           |        |      |                  |                |  
|Exercisable, December 31, 2002 |           |        | 46.2 |                  |                |   | 23.51 |      
|                               |           |        |      |                  |                |  
|Exercisable, December 31, 2003 |           |        | 46.0 |                  |                |   | 25.73 |      
|                               |           |        |      |                  |                |  
|Exercisable, December 31, 2004 |           |        | 48.9 |                  |                |   | 28.46 |      
|                               |           |        |      |                  |                |  



|                |  |  |  |                     |      |                  |                     |  |                  |                |  |   |        |                  |  |                |      |  |  |   |       | 
|--------------- |  |  |  | ------------------- | ---- | ---------------- | ------------------- |  | ---------------- | -------------- |  | - | ------ | ---------------- |  | -------------- | ---- |  |  | - | ----- | 
|                |  |  |  | Options Outstanding |      |                  | Options Exercisable | 
|                |  |  |  |                     |      |                  |                     | 
|Exercise        |  |  |  |                     |      | Weighted Average |                     |  | Weighted Average |                |  |   |        | Weighted Average | 
|Price Range     |  |  |  | Shares              |      |                  | Life Remaining      |  |                  | Exercise Price |  |   | Shares |                  |  | Exercise Price |     
|                |  |  |  |                     |      |                  |                     |  |                  |                |  |   |        |                  |  |                |     
|$ 2.91 - $ 6.99 |  |  |  |                     | 13.0 |                  |                     |  | 7.24 years       |                |  | $ | 5.24   |                  |  |                | 6.3  |  |  | $ | 5.24  | 
|7.01 -   12.98  |  |  |  |                     | 11.0 |                  |                     |  | 6.98 years       |                |  |   | 10.99  |                  |  |                | 5.8  |  |  |   | 10.29 | 
|13.08 -  18.97  |  |  |  |                     | 11.5 |                  |                     |  | 5.68 years       |                |  |   | 15.23  |                  |  |                | 8.9  |  |  |   | 15.18 | 
|19.00 -  22.97  |  |  |  |                     | 12.0 |                  |                     |  | 6.88 years       |                |  |   | 21.46  |                  |  |                | 9.1  |  |  |   | 21.97 | 
|23.00 -  26.66  |  |  |  |                     | 13.0 |                  |                     |  | 9.16 years       |                |  |   | 23.85  |                  |  |                | 2.7  |  |  |   | 24.18 | 
|27.33 -  30.94  |  |  |  |                     | 14.9 |                  |                     |  | 9.28 years       |                |  |   | 27.72  |                  |  |                | 2.2  |  |  |   | 27.53 | 
|31.25 -  49.16  |  |  |  |                     | 0.9  |                  |                     |  | 5.30 years       |                |  |   | 39.74  |                  |  |                | 0.9  |  |  |   | 39.75 | 
|50.00 -  79.59  |  |  |  |                     | 13.0 |                  |                     |  | 5.15 years       |                |  |   | 61.78  |                  |  |                | 13.0 |  |  |   | 61.78 | 
|                |  |  |  |                     |      |                  |                     |  |                  |                |  |   |        |                  |  |                |     
|                |  |  |  |                     | 89.3 |                  |                     |  |                  |                |  |   |        |                  |  |                | 48.9 |  |  |   |       | 
|                |  |  |  |                     |      |                  |                     |  |                  |                |  |   |        |                  |  |                |     



F-43



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Associate Stock Purchase Plan.


Fair Value Disclosures.


|                                                           |  |      |             |  |      |  |             |      |  |  |             | 
|---------------------------------------------------------- |  | ---- | ----------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|                                                           |  | 2004 |             |  | 2003 |  |             | 2002 | 
|                                                           |  |      |             |  |      |  |             |      | 
|Expected stock price volatility                            |  |      | 78% - 82%   |  |      |  | 82% - 84%   |      |  |  | 69% - 83%   | 
|Risk-free interest rates                                   |  |      | 2.8% - 4.2% |  |      |  | 2.2% - 3.6% |      |  |  | 2.5% - 5.1% | 
|Expected life of option and deferred share grants in years |  |      | 3 - 5       |  |      |  | 3 - 5       |      |  |  | 3 - 5       | 
|Expected life of stock purchase plan grants in years       |  |      | 0.25        |  |      |  | 0.25        |      |  |  | 0.25        | 
|Expected dividend yield                                    |  |      |            |  |      |  |            |      |  |  |            | 



Employee Benefit Plans.




F-44



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Long-Term Incentive Plan.




|    |                           
|--- | --------------------------
|13. | Related Party Transactions



Motorola.








F-45



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|     |                                           |               |       |       | 
|---- | ----------------------------------------- | ------------- | ----- | ----- | 
|     |                                           | Total         |      
|     |                                           | Payments      |      
|     |                                           |               |      
|     |                                           | (in millions) |      
|2004 |                                           |               |       |      
|     | Handsets and accessory inventory          |               | $     | 2,356 | 
|     | Network equipment and software            |               |       | 814   | 
|     | Warranty, maintenance, training and other |               |       | 93    | 
|     |                                           |               |      
|     |                                           | $             | 3,263 |      
|     |                                           |               |      
|2003 |                                           |               |       |      
|     | Handsets and accessory inventory          |               | $     | 1,461 | 
|     | Network equipment and software            |               |       | 528   | 
|     | Warranty, maintenance, training and other |               |       | 166   | 
|     |                                           |               |      
|     |                                           | $             | 2,155 |      
|     |                                           |               |      
|2002 |                                           |               |       |      
|     | Handsets and accessory inventory          |               | $     | 1,444 | 
|     | Network equipment and software            |               |       | 776   | 
|     | Warranty, maintenance, training and other |               |       | 94    | 
|     |                                           |               |      
|     |                                           | $             | 2,314 |      
|     |                                           |               |      



McCaw Affiliates.


F-46



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Other Related Party Transactions.




|    |                                     
|--- | ------------------------------------
|14. | Quarterly Financial Data (Unaudited)

|     |                                         |                                         |   |       |        |  |   |       |      |  |        |       |      |  |   |       |      | 
|---- | --------------------------------------- | --------------------------------------- | - | ----- | ------ |  | - | ----- | ---- |  | ------ | ----- | ---- |  | - | ----- | ---- | 
|     |                                         | First                                   |   |       | Second |  |   | Third |      |  | Fourth |      
|     |                                         |                                         |   |       |        |  |   |       |      |  |        |      
|     |                                         | (1)                                     |   |       | (1)    |  |   | (1)   |      |  |       
|     |                                         | (in millions, except per share amounts) |  
|2004 |                                         |                                         |   |       |        |  |   |       |      |  |        |       |      |  |   |      
|     | Operating revenues                      |                                         | $ | 3,103 |        |  | $ | 3,289 |      |  | $      | 3,398 |      |  | $ | 3,578 |     
|     | Operating income                        |                                         |   | 764   |        |  |   | 807   |      |  |        | 855   |      |  |   | 857   |     
|     | Income tax benefit (provision)          |                                         |   | (33   | )      |  |   | 717   |      |  |        | (98   | )    |  |   | (231  | )   
|     | Net income                              |                                         |   | 595   |        |  |   | 1,342 |      |  |        | 590   |      |  |   | 473   |     
|     | Income available to common stockholders |                                         |   | 593   |        |  |   | 1,340 |      |  |        | 588   |      |  |   | 470   |     
|     | Earnings per common share(2)            |                                         |   |       |        |  |   |       |      |  |        |       |      |  |   |       |     
|     |                                         | Basic                                   |   | $     | 0.54   |  |   | $     | 1.21 |  |        | $     | 0.53 |  |   | $     | 0.42 | 
|     |                                         |                                         |   |       |        |  |   |       |      |  |        |      
|     |                                         | Diluted                                 |   | $     | 0.52   |  |   | $     | 1.16 |  |        | $     | 0.52 |  |   | $     | 0.42 | 
|     |                                         |                                         |   |       |        |  |   |       |      |  |        |      

F-47



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|     |                                         |                                         |   |       |        |  |   |       |      |  |                  |       |      |  |   |       |      | 
|---- | --------------------------------------- | --------------------------------------- | - | ----- | ------ |  | - | ----- | ---- |  | ---------------- | ----- | ---- |  | - | ----- | ---- | 
|     |                                         | First                                   |   |       | Second |  |   | Third |      |  | Fourth           |      
|     |                                         |                                         |   |       |        |  |   |       |      |  |                  |      
|     |                                         | (1)                                     |   |       | (1)    |  |   | (1)   |      |  | (as restated)(1) |      
|     |                                         | (in millions, except per share amounts) |  
|2003 |                                         |                                         |   |       |        |  |   |       |      |  |                  |       |      |  |   |      
|     | Operating revenues                      |                                         | $ | 2,371 |        |  | $ | 2,556 |      |  | $                | 2,887 |      |  | $ | 3,006 |     
|     | Operating income                        |                                         |   | 488   |        |  |   | 578   |      |  |                  | 695   |      |  |   | 743   |     
|     | Income tax provision                    |                                         |   | (22   | )      |  |   | (27   | )    |  |                  | (21   | )    |  |   | (43   | )   
|     | Net income                              |                                         |   | 235   |        |  |   | 294   |      |  |                  | 340   |      |  |   | 642   |     
|     | Income available to common stockholders |                                         |   | 203   |        |  |   | 266   |      |  |                  | 338   |      |  |   | 639   |     
|     | Earnings per common share(2)            |                                         |   |       |        |  |   |       |      |  |                  |       |      |  |   |       |     
|     |                                         | Basic                                   |   | $     | 0.20   |  |   | $     | 0.26 |  |                  | $     | 0.32 |  |   | $     | 0.58 | 
|     |                                         |                                         |   |       |        |  |   |       |      |  |                  |      
|     |                                         | Diluted                                 |   | $     | 0.19   |  |   | $     | 0.25 |  |                  | $     | 0.31 |  |   | $     | 0.56 | 
|     |                                         |                                         |   |       |        |  |   |       |      |  |                  |      










|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The fourth quarter 2003 results presented above have been
    restated for the effects of correcting the errors described in
    note 1 to the consolidated financial statements. Management
    believes the effects of these restatements on the quarterly
    amounts presented are not material. The results for the first
    three quarters of 2003 and 2004 will be restated in our
    respective 2004 10-Q/As filed separately.
|   
|(2) | The sum of the quarterly earnings per share amounts may not
    equal the annual amounts because of the changes in the
    weighted-average number of shares outstanding during the year.                                                                                                                                                                                                                                                



|    |                  
|--- | -----------------
|15. | Subsequent Events

Report and Order.




F-48



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Term loan refinancing.


F-49



---



##### 



NEXTEL COMMUNICATIONS, INC.


(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


Condensed Balance Sheets


As of December 31, 2004 and 2003


|                                       |                           |                      |        |               |       |   |        |       |       | 
|-------------------------------------- | ------------------------- | -------------------- | ------ | ------------- | ----- | - | ------ | ----- | ----- | 
|                                       |                           | 2004                 |        |               | 2003  |  
|                                       |                           |                      |        |               |       |  
|                                       |                           |                      |        | (as restated) |      
|                                       |                           | (in millions)        |       
|ASSETS                                
|Current assets                         |                           |                      |        |               |       |   |        |      
|                                       | Cash and cash equivalents |                      | $      | 857           |       |   | $      | 457   |      
|                                       | Short-term investments    |                      |        | 335           |       |   |        | 1,135 |      
|                                       | Other current assets      |                      |        | 25            |       |   |        | 21    |      
|                                       |                           |                      |        |               |       |  
|                                       |                           | Total current assets |        |               | 1,217 |   |        |       | 1,613 | 
|Due from subsidiaries (notes 2 and 5)  |                           |                      | 2,741  |               |       |   | 2,216  |      
|Investments in subsidiaries (note 2)   |                           |                      | 10,472 |               |       |   | 8,454  |      
|Property, plant and equipment, net     |                           |                      | 26     |               |       |   | 24     |      
|Deferred tax assets                    |                           |                      | 805    |               |       |   | 128    |      
|Other assets                           |                           |                      | 44     |               |       |   | 66     |      
|                                       |                           |                      |        |               |       |  
|                                       |                           | $                    | 15,305 |               |       | $ | 12,501 |      
|                                       |                           |                      |        |               |       |  
|                                      
|LIABILITIES AND STOCKHOLDERS EQUITY  
|Current liabilities                    |                           | $                    | 394    |               |       | $ | 430    |      
|Long-term debt (note 3)                |                           |                      | 5,366  |               |       |   | 6,217  |      
|Other liabilities                      |                           |                      | 29     |               |       |   | 17     |      
|Mandatorily redeemable preferred stock |                           |                      | 108    |               |       |   | 99     |      
|Stockholders equity                   |                           |                      | 9,408  |               |       |   | 5,738  |      
|                                       |                           |                      |        |               |       |  
|                                       |                           | $                    | 15,305 |               |       | $ | 12,501 |      
|                                       |                           |                      |        |               |       |  



F-50



---



##### 



NEXTEL COMMUNICATIONS, INC.


(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (continued)


Condensed Statements of Operations and Comprehensive Income
(Loss)


For the Years Ended December 31, 2004, 2003 and 2002


|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |     |   |      |      |     |  
|---------------------------------------------- | ----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ----- | ------------- | ---- | - | ------------- | ----- | --- | - | ---- | ---- | --- | -
|                                               |                                                                                                 | 2004                                                                        |       |               | 2003 |   |               | 2002  |    
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|                                               |                                                                                                 |                                                                             |       | (as restated) |      |   | (as restated) |      
|                                               |                                                                                                 | (in millions)                                                               |      
|Operating expenses                             |                                                                                                 |                                                                             |       |               |      |   |               |       |     |   |      |     
|                                               | Selling, general and administrative                                                             |                                                                             | $     | 136           |      |   | $             | 140   |     |   | $    | 124  |    
|                                               | Restructuring and impairment charges                                                            |                                                                             |       |              |      |   |               |      |     |   |      | 35   |    
|                                               | Depreciation and amortization                                                                   |                                                                             |       | 3             |      |   |               | 10    |     |   |      | 41   |    
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|                                               |                                                                                                 |                                                                             | 139   |               |      |   | 150           |       |     |   | 200  |     
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Other income (expense)                         |                                                                                                 |                                                                             |       |               |      |   |               |       |     |   |      |     
|                                               | Interest expense                                                                                |                                                                             |       | (462          | )    |   |               | (634  | )   |   |      | (753 | )  
|                                               | Interest income                                                                                 |                                                                             |       | 19            |      |   |               | 16    |     |   |      | 44   |    
|                                               | Intercompany income (note 4)                                                                    |                                                                             |       | 675           |      |   |               | 758   |     |   |      | 753  |    
|                                               | (Loss) gain on retirement of debt, net of debt conversion costs
    of $0, $0 and $160 (note 3) |                                                                             |       | (83           | )    |   |               | (245  | )   |   |      | 354  |    
|                                               | Intercompany management fee (note 5)                                                            |                                                                             |       | 109           |      |   |               | 140   |     |   |      | 124  |    
|                                               | Equity in net income (losses) of subsidiaries                                                   |                                                                             |       | 2,392         |      |   |               | 1,626 |     |   |      | (710 | )  
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|                                               |                                                                                                 |                                                                             | 2,650 |               |      |   | 1,661         |       |     |   | (188 | )   
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Income (loss) before income tax benefit        |                                                                                                 |                                                                             | 2,511 |               |      |   | 1,511         |       |     |   | (388 | )   
|Income tax benefit                             |                                                                                                 |                                                                             | 489   |               |      |   |              |       |     |   |     |     
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Net income (loss)                              |                                                                                                 |                                                                             | 3,000 |               |      |   | 1,511         |       |     |   | (388 | )   
|                                               | (Loss) gain on retirement of mandatorily redeemable preferred
    stock                         |                                                                             |       |              |      |   |               | (7    | )   |   |      | 485  |    
|                                               | Mandatorily redeemable preferred stock dividends and accretion                                  |                                                                             |       | (9            | )    |   |               | (58   | )   |   |      | (211 | )  
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Income (loss) available to common stockholders |                                                                                                 | $                                                                           | 2,991 |               |      | $ | 1,446         |       |     | $ | (114 | )   
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Comprehensive income (loss), net of income tax |                                                                                                 |                                                                             |       |               |      |   |               |       |     |   |      |     
|                                               | Net income (loss)                                                                               |                                                                             | $     | 3,000         |      |   | $             | 1,511 |     |   | $    | (388 | )  
|                                               | Net unrealized gain (loss) on available-for-sale securities:                                    |                                                                             |       |               |      |   |               |       |     |   |      |      |    
|                                               |                                                                                                 | Unrealized holding gains (losses) arising during the period                 |       |               | 158  |   |               |       | 172 |   |      |      | (37 | )
|                                               |                                                                                                 | Reclassification adjustment for loss included in net loss                   |       |               |     |   |               |       |    |   |      |      | (8  | )
|                                               | Foreign currency translation adjustment                                                         |                                                                             |       | 2             |      |   |               | (4    | )   |   |      | 228  |    
|                                               | Cash flow hedge:                                                                                |                                                                             |       |               |      |   |               |       |     |   |      |      |    
|                                               |                                                                                                 | Reclassification of transition adjustment included in net income
    (loss) |       |               |     |   |               |       | 4   |   |      |      | 8   |  
|                                               |                                                                                                 | Unrealized gain (loss) on cash flow hedge                                   |       |               |     |   |               |       | 23  |   |      |      | (6  | )
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    
|Comprehensive income (loss)                    |                                                                                                 | $                                                                           | 3,160 |               |      | $ | 1,706         |       |     | $ | (203 | )   
|                                               |                                                                                                 |                                                                             |       |               |      |   |               |       |    



F-51



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##### 



NEXTEL COMMUNICATIONS, INC.


(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


Condensed Statement of Cash Flows


For the Years Ended December 31, 2004, 2003 and 2002


|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |        |   |        |        |      |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | --- | ------------- | ----- | - | ------------- | ------ | ------ | - | ------ | ------ | ---- | -
|                                                     |                                                                                           | 2004                                                |     |               | 2003  |   |               | 2002   |       
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|                                                     |                                                                                           |                                                     |     | (as restated) |       |   | (as restated) |       
|                                                     |                                                                                           | (in millions)                                       |    
|Cash flows from operating activities                 |                                                                                           |                                                     |     |               |       |   |               |        |        |   |        |       
|                                                     | Net income (loss)                                                                         |                                                     | $   | 3,000         |       |   | $             | 1,511  |        |   | $      | (388   | )   
|                                                     | Adjustment to reconcile net income (loss) to net cash used in
    operating activities    |                                                     |     | (3,438        | )     |   |               | (1,940 | )      |   |        | 309    |     
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|                                                     |                                                                                           | Net cash used in operating activities               |     |               | (438  | ) |               |        | (429   | ) |        |        | (79  | )
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|Cash flows from investing activities                 |                                                                                           |                                                     |     |               |       |   |               |        |        |   |        |       
|                                                     | Purchases of short-term investments                                                       |                                                     |     | (1,905        | )     |   |               | (2,738 | )      |   |        | (3,068 | )   
|                                                     | Proceeds from maturities and sales of short-term investments                              |                                                     |     | 2,703         |       |   |               | 2,454  |        |   |        | 3,486  |     
|                                                     | Other investments and advances from (to) affiliates                                       |                                                     |     | 681           |       |   |               | (784   | )      |   |        | (780   | )   
|                                                     | Cash dividend from subsidiary                                                             |                                                     |     | 196           |       |   |               | 2,604  |        |   |        |       |     
|                                                     | Capital expenditures and other                                                            |                                                     |     | (5            | )     |   |               | (4     | )      |   |        |       |     
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|                                                     |                                                                                           | Net cash provided by (used in) investing activities |     |               | 1,670 |   |               |        | 1,532  |   |        |        | (362 | )
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|Cash flows from financing activities                 |                                                                                           |                                                     |     |               |       |   |               |        |        |   |        |       
|                                                     | Issuance of debt securities                                                               |                                                     |     | 494           |       |   |               | 2,483  |        |   |        |       |     
|                                                     | Purchase and retirement of debt securities and mandatorily
    redeemable preferred stock |                                                     |     | (1,421        | )     |   |               | (4,598 | )      |   |        | (843   | )   
|                                                     | Proceeds from exercise of stock options, warrants and other                               |                                                     |     | 236           |       |   |               | 689    |        |   |        | 35     |     
|                                                     | Debt financing costs and other                                                            |                                                     |     | (141          | )     |   |               | (57    | )      |   |        | (19    | )   
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|                                                     |                                                                                           | Net cash used in financing activities               |     |               | (832  | ) |               |        | (1,483 | ) |        |        | (827 | )
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                           |                                                     | 400 |               |       |   | (380          | )      |        |   | (1,268 | )     
|Cash and cash equivalents, beginning of period       |                                                                                           |                                                     | 457 |               |       |   | 837           |        |        |   | 2,105  |       
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       
|Cash and cash equivalents, end of period             |                                                                                           | $                                                   | 857 |               |       | $ | 457           |        |        | $ | 837    |       
|                                                     |                                                                                           |                                                     |     |               |       |   |               |        |       



F-52



---



##### 



NEXTEL COMMUNICATIONS, INC.


(Parent only)


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


Notes to Condensed Financial Statements


















F-53



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##### 











F-54



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |   |        |   |  |   |       | 
|---------------------------- | ------------------------------------------- | ------------- | - | ----- | ---------- |  | - | ---------- | --- |  | ---------- | ---- | --------- | ------ | - | ------ | - |  | - | ----- | 
|                             |                                             | Balance at    |   |       | Charged to |  |   | Charged to |     |  |            |      | Balance   |       
|                             |                                             | Beginning     |   |       | Costs and  |  |   | Other      |     |  |            |      | at End of |       
|                             |                                             | of Period     |   |       | Expenses   |  |   | Accounts   |     |  | Deductions |      |           | Period |  
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             |                                             | (in millions) |  
|Year Ended December 31, 2004 |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |   |        |   |  |   |      
|                             | Allowance for doubtful accounts             |               | $ | 86    |            |  | $ | 130        |     |  | $          |     |           |        | $ | (152   | ) |  | $ | 64    | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Reserve for inventory obsolescence          |               | $ | 6     |            |  | $ | 6          |     |  | $          |     |           |        | $ | (1     | ) |  | $ | 11    | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Valuation allowance for deferred tax assets |               | $ | 2,544 |            |  | $ |           |     |  | $          | (340 | )(1)      |        | $ | (1,546 | ) |  | $ | 658   | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|Year Ended December 31, 2003 |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |   |        |   |  |   |      
|                             | Allowance for doubtful accounts             |               | $ | 127   |            |  | $ | 129        |     |  | $          |     |           |        | $ | (170   | ) |  | $ | 86    | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Reserve for inventory obsolescence          |               | $ | 8     |            |  | $ | 2          |     |  | $          |     |           |        | $ | (4     | ) |  | $ | 6     | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Valuation allowance for deferred tax assets |               | $ | 3,075 |            |  | $ |           |     |  | $          |     |           |        | $ | (531   | ) |  | $ | 2,544 | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|Year Ended December 31, 2002 |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |   |        |   |  |   |      
|                             | Allowance for doubtful accounts             |               | $ | 167   |            |  | $ | 334        |     |  | $          | (9   | )         |        | $ | (365   | ) |  | $ | 127   | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Reserve for inventory obsolescence          |               | $ | 17    |            |  | $ | 11         |     |  | $          | (9   | )         |        | $ | (11    | ) |  | $ | 8     | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  
|                             | Valuation allowance for deferred tax assets |               | $ | 3,054 |            |  | $ | 766        | (3) |  | $          | (711 | )(2)      |        | $ | (34    | ) |  | $ | 3,075 | 
|                             |                                             |               |   |       |            |  |   |            |     |  |            |      |           |        |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the release of the valuation allowance primarily
    attributable to the tax benefit of stock option deductions.                                                                                                                                                                                                                                                                                                                                        
|   
|(2) | In 2002, NII Holdings filed a voluntary petition for
    reorganization under Chapter 11 of the U.S. Bankruptcy
    Code. As a result of NII Holdings bankruptcy filing, we
    deconsolidated NII Holdings in 2002 and deducted the
    December 31, 2001 amounts relating to NII Holdings in the
    Charged to Other Accounts column in 2002.
    Accordingly, our ending 2002 balances are not directly
    comparable to our ending 2001 and 2000 balances.
|   
|(3) | As a result of NII Holdings bankruptcy, we incurred a
    capital loss for tax purposes of $1,938 million, and
    accordingly we increased our valuation allowance by
    $766 million.                                                                                                                                                                                                                                                                          

F-55