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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-K

|                                             |  |                                                                                           
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------
|þ                                            |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31,
	2001
|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                     |  | 20191                                
|(Address of principal executive offices)                        |  | (Zip Code)                           

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

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

Securities registered pursuant to
Section 12(g) of the Act: class A common stock, $0.001
par value

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.  Yes  þ     No  o

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

Based on the closing sales price on
March 15, 2002, the aggregate market value of the voting
and nonvoting common stock held by nonaffiliates of the
registrant was about $3,870,168,000.

On March 15, 2002, the number of shares
outstanding of the registrants class A common stock,
$0.001 par value, and class B nonvoting common stock,
$0.001 par value, was 763,336,766 and 35,660,000, respectively.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement relating to the
Annual Meeting of Stockholders scheduled to be held May 30,
2002 are incorporated in Part III, Items 10, 11, 12
and 13.



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TABLE OF CONTENTS



|                                                                                                                      |                                                                                                          |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                                               
|                                                                                                                      | Item 1. Business                                                                                        
|                                                                                                                      | Item 2. Properties                                                                                      
|                                                                                                                      | Item 3. Legal Proceedings                                                                               
|                                                                                                                      | Item 4. Submission of Matters to a Vote of Security Holders                                             
|PART II                                                                                                              
|                                                                                                                      | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters                       
|                                                                                                                      | Item 6. Selected Financial Data                                                                         
|                                                                                                                      | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations           
|                                                                                                                      | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                     
|                                                                                                                      | Item 8. Financial Statements and Supplementary Data                                                     
|                                                                                                                      | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            
|PART III                                                                                                             
|                                                                                                                      | Item 10. Directors and Executive Officers of the Registrant                                             
|                                                                                                                      | Item 11. Executive Compensation                                                                         
|                                                                                                                      | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
|                                                                                                                      | Item 13. Certain Relationships and Related Transactions                                                 
|PART IV                                                                                                              
|                                                                                                                      | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               
|SIGNATURES                                                                                                           
|INDEPENDENT AUDITORS REPORT                                                                                         
|NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES                                                                         
|CONSOLIDATED BALANCE SHEETS As of December 31, 2001 and 2000                                                         
|NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES                                                                         
|CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999                           
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                           
|SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT Condensed Balance Sheets As of December 31, 2001 and 2000
|SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS                                                                     
|Amend.3 dated 11/13/01 re:iDEN Supply Agreement                                                                      
|Nextel Severance Benefits Plan                                                                                       
|Employment Agreement bet.Paul N. Saleh and Nextel                                                                    
|Subsidiaries of Nextel                                                                                               
|Consent of Deloitte & Touche LLP.                                                                                    



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TABLE OF CONTENTS

PART I

|         |  |                                                                                                  |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|Item     |  |                                                                                                  |  | Page
|         |  |                                                                                                  |  |     
|1.       |  | Business                                                                                         |  |      | 1  | 
|2.       |  | Properties                                                                                       |  |      | 38 | 
|3.       |  | Legal Proceedings                                                                                |  |      | 39 | 
|4.       |  | Submission of Matters to a Vote of Security
	Holders                                             |  |      | 40 | 
|PART II 
|        
|5.       |  | Market for Registrants Common Equity and
	Related Stockholder Matters                           |  |      | 42 | 
|6.       |  | Selected Financial Data                                                                          |  |      | 42 | 
|7.       |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations           |  |      | 44 | 
|7A.      |  | Quantitative and Qualitative Disclosures about
	Market Risk                                      |  |      | 67 | 
|8.       |  | Financial Statements and Supplementary Data                                                      |  |      | 68 | 
|9.       |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure            |  |      | 68 | 
|PART III
|        
|10.      |  | Directors and Executive Officers of the Registrant                                               |  |      | 69 | 
|11.      |  | Executive Compensation                                                                           |  |      | 69 | 
|12.      |  | Security Ownership of Certain Beneficial Owners
	and Management and Related Stockholders Matters |  |      | 69 | 
|13.      |  | Certain Relationships and Related Transactions                                                   |  |      | 69 | 
|PART IV 
|        
|14.      |  | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                                |  |      | 70 | 

See page 39 for Executive Officers of
the Registrant.



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NEXTEL COMMUNICATIONS, INC.






PART I


FORWARD LOOKING STATEMENTS

This annual report on Form 10-K contains
forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
include forward looking statements concerning expected
technological improvements, new products, and services,
operating results, cost savings and liquidity levels that are
based on the expectations of our management as of the date of
this filing. However, there may be events in the future that we
are not able to predict or over which we have no control. We
caution investors that actual results may differ materially from
those contained in the forward looking statements as a result of
uncertainties and risks, including the risk factors identified
in this annual report on Form 10-K. More information about
potential factors that could affect our business and financial
results is set forth under
Item 1. Business  Risk Factors
and Part II, Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations.




Item 1.     Business

A.     Overview

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

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



| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service, including
	advanced calling features such as speakerphone, conference
	calling, voice-mail, call forwarding and additional line service; 
|
| |  | Nextel Direct Connect® service, which allows
	subscribers in the same local calling area to contact each other
	instantly, on a private one-to-one call or on a group call;
|
| |  | Internet services, mobile messaging services,
	e-mail and advanced JavaTM enabled business
	applications, which are marketed as Nextel Wireless
	Web services; and       
|
| |  | international roaming capabilities, which are
	marketed as Nextel WorldwideSM.                                                                                           

As of December 31, 2001:



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we had about 8,666,500 digital handsets in
	service in the United States; and                                                                                                             
|
| |  | our digital mobile network or the compatible
	digital mobile network of Nextel Partners, Inc. was operational
	in 195 of the top 200 metropolitan statistical areas in the
	United States.

We owned about 32% of the common stock of Nextel
Partners as of December 31, 2001. Nextel Partners provides
digital wireless communications services under the Nextel brand
name in mid-sized and tertiary U.S. markets. Nextel Partners has
the right to operate in 55 of the top 200 metropolitan
statistical areas in the United States ranked by population.

In addition to our domestic operations, we have
ownership interests in international wireless companies through
our substantially wholly owned subsidiary, NII Holdings, Inc.
(formerly known as Nextel International, Inc.). NII Holdings
through its operating subsidiaries provides wireless
communications services targeted at meeting the needs of
business customers in selected international markets. Its
principal operations are in selected major business centers and
related transportation corridors in Brazil, Mexico, Argentina
and Peru. As of December 31, 2001, NII Holdings had about
1,162,600 digital

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handsets in service in its Latin American
markets. NII Holdings currently is in discussions with its
creditors regarding restructuring its debt obligations, which
total about $2.67 billion. If NII Holdings is unable to
obtain additional funding and negotiate a successful
restructuring, it may be required to further write-down assets,
sell strategic assets, reorganize under Chapter 11 of the
United States Bankruptcy Code or take other measures, including
liquidation of its assets. See E. NII Holdings, Inc.


Our consolidated financial statements include
financial information reflecting the financial position and
results of operations relating to NII Holdings and its
consolidated subsidiaries as of the relevant dates and periods
indicated in those statements. For selected financial
information concerning our domestic operations, the operations
of NII Holdings and our operations on a consolidated basis, see
note 15 to the consolidated financial statements. More detailed
information relating specifically to NII Holdings may be found
in the periodic and other reports filed by NII Holdings with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 and related rules. Except as noted above and as
otherwise indicated, the description of our business in this
document refers to our United States operations.

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

B.     2001 Goals
Update and 2002 Goals

In our 2000 annual report, we set as our primary
goals for 2001 to:



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

1. New
Customer Products and Solutions

In November 2001, we introduced two new
Internet-ready handsets, designed and manufactured by
Motorola®, the i90cTM, one of the smallest
flip-style handsets with speakerphone in the U.S. market, and
the i80sTM, the slimmest and most lightweight handset
used on the Nextel National NetworkSM. The i90c
features an external screen that lets customers view caller ID
and status information, a smart key for closed-flip operation,
and an internal display screen with a distinctive blue backlight
that supports three font sizes so users can zoom in or enlarge
information on the screen. Both the i90c and i80s handsets are
part of a new platform of handsets with embedded Java software,
which also provide a built-in speakerphone, voice-activated
dialing for hands-free operation and a voice recorder for calls
and memos. The handsets also include an advanced phonebook that
manages up to 250 contacts and datebook tools to manage
calendars and alert users of business and personal meetings.
Additionally, the i90c comes with musical ring tones to add a
more personal touch and help users distinguish their calls from
other wireless devices.

In April 2001, we introduced the
i85sTM and the i50sxTM handsets, which are
also part of our platform of handsets with embedded Java
software. These new handsets, developed and manufactured by
Motorola, combine the qualities of our Internet-ready handsets
with additional features and functionality such as the ability
to download Java-based applications and voice-activated dialing
and recorder features.

In February 2001, we introduced the
i2000plusTM handset, our first global handset with
Internet capabilities. The i2000plus allows international
roaming, which we market as Nextel Worldwide services. Like our
other Internet-ready handsets, the i2000plus enables wireless
Internet services by allowing web-based applications and content
to be supplied directly to our subscribers. The i2000plus is a
dual-mode

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handset manufactured by Motorola that operates on
both iDEN technology and the Global System for Mobile
Communications, or GSM, digital wireless technology that is the
current digital cellular communications standard in Europe and
elsewhere. Our Nextel Worldwide services allow roaming on iDEN
800 MHz and GSM 900 MHz networks in more than 80 countries
worldwide with the convenience of one handset, one number and
one bill.


We also introduced several other new products in
2001. For example, we introduced our first portable keyboard
designed to work with our advanced handsets to enhance mobile
office applications. The portable keyboard, called the Motorola
iBoardTM, provides the convenience and utility of a
full-size, laptop keyboard for composing e-mail messages,
managing address books and calendars and using Java
applications, such as a business calculator and expense report
pad. In February 2001, we introduced Mobile E-mail.
Using this service, Nextel Wireless Web customers who have POP3
accessible e-mail accounts at the office or e-mail accounts with
Internet Service Providers such as Earthlink, Mindspring or
Prodigy will be able to access their existing business and
personal e-mail accounts from their Nextel handsets. POP3, or
Post Office Protocol 3, is a widely used standard for
receiving e-mail.

We also introduced several new data applications
designed to provide our customers the most effective, innovative
ways to communicate with, and boost productivity from, their
mobile workers. For example, Nextel and At Road, Inc. introduced
an application combining voice, data, and location services into
one integrated digital mobile wireless solution. With
@Roads LocationSmartTM technology, Nextel
customers in the service trades and transportation/ trucking
industries can now easily communicate with and manage
transportation fleets, enabling the receipt of real-time reports
on location, speed and stops. We continue to work with our
customers and third-party developers to create data solutions to
meet our customers growing appetite for wireless
solutions. In addition to custom applications, currently our
customers have the option of downloading over the
air applications from our website directly onto their
handsets, including business and productivity tools and games.

We also have expanded the suite of content
available using the Nextel Wireless Web. These sites provide a
wide range of services relevant to everyday life, enabling
customers to check news, weather and traffic, research business
information, book flights, shop for gifts and more. Nextel
Wireless Web combines the vast resources of the Web with the
convenience and immediacy of an Internet-ready handset. For
example, our customers are able to access the LA Times, United
Airlines, Hoovers Online, FedEx Corporate Services, Inc.
and NFL.com from their digital handsets.

In July 2001, we launched an enhanced Nextel
Direct Connect service that allows any Nextel subscriber to
communicate instantly with any other Nextel subscriber in the
same local calling area. Previously, customers were only able to
use Nextel Direct Connect within their own pre-defined user
group. We also have expanded our calling areas. For example, the
New York calling area runs from Toms River, New Jersey to
Springfield, Massachusetts. Our enhanced Nextel Direct Connect
service is available across all our calling areas nationwide.

2. Enhanced
Network and Customer Care

During 2001, we enhanced our digital mobile
network by providing more comprehensive coverage to our
subscribers. Our digital mobile network is now accessible over a
greater area, and we enhanced our coverage in existing markets,
particularly focusing on improved in-building
coverage to support an increased customer base. Specifically, in
2001 we increased the number of our transmitter and receiver
sites in service on our digital mobile network to 15,500 by
adding 2,800 sites. We also increased the number of switches in
service on our digital mobile network to 81 by adding 6 switches
during 2001. To improve the quality and capacity of our digital
mobile network during 2001, we also purchased, or agreed to
purchase, additional spectrum in the 800 and 900 MHz bands.
Giving effect to pending acquisitions, we and Nextel Partners
now have about 22 MHz of spectrum in the 800 and 900 MHz
bands in virtually all

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of the top 100 U.S. markets. Additional
benchmarks we achieved for the year ended December 31, 2001
include:




| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | a 1,988,300 increase in digital handsets in
	service from 6,678,200 to 8,666,500; and                                 
|
| |  | a 65% increase in total system minutes of use
	from about 31.5 billion during 2000 to about
	51.9 billion during 2001.

We recently began the launch of our new billing
and customer care platform called Ensemble. Ensemble
is a world class activations, customer care and billing system
designed to provide increased reliability and functionality for
our customer care representatives, system scalability to allow
services to be provided to an estimated 25 million
subscribers, one common database and integration of all platform
software modules included in the system.

3. Expanded
Distribution Channels

We also made significant strides in 2001 in
expanding our distribution channels, particularly in channels
that we believe allow us to acquire customers at a lower cost
upon achieving economies of scale in those channels. In May
2001, we acquired a substantial portion of the operations,
assets and rights associated with about 200 stores from
Lets Talk Cellular & Wireless, Inc., a specialty
cellular and wireless retailer, for a cash purchase price of
$34 million. We re-branded these stores as Nextel stores
which, in addition to generating new customers and brand
awareness, serve as additional points of contact for existing
and new customers. We also have opened additional Nextel stores
and currently expect to continue to expand this distribution
channel in 2002.

Also in 2001, we expanded the number of new
subscribers garnered through our web sales and tele-sales.
Through our website, we provide customers with access to
information about our products and services, permit account
inquiries and encourage handset and accessory sales directly
over the Internet. Customers also are able to compare the
various rate plans and access the full suite of our products and
services, including handsets, accessories, and special
promotions. We also provide our customers with a toll-free
number (1-800-NEXTEL9) to purchase our products and services,
which we refer to as tele-sales. As we increase our brand
awareness through our expanded marketing efforts, we believe our
Nextel stores, web sales and tele-sales will be increasingly
useful distribution channels for all of our services.

4. Increasing
Efficiencies and Reducing Costs

We began several initiatives in 2001 to reduce
our future costs and increase our operating efficiency. The
conversion from our prior customer service and billing platform
to Ensemble, as discussed above, is expected to increase our
overall operating efficiency and allow us to respond effectively
to competition by maintaining our award winning level of
customer satisfaction. We also expect substantial savings to
result from this new system in terms of reduced billing costs
and reduced information technology maintenance costs.

The Ensemble platform also will assist us in
achieving additional savings in connection with our outsourcing
of many aspects of the customer care function to IBM and
TeleTech Holdings Inc., a world leader in customer relationship
management solutions. In January 2002, we announced an
eight-year customer relationship management agreement with IBM
and Teletech to manage our customer care centers. Under the
terms of the agreement, about 4,000 of our employees were
transferred to TeleTech. This agreement is designed to enhance
customer care and build ongoing brand loyalty for Nextel as we
work with IBM and TeleTech to introduce leading edge technology
and process improvements, including a voice response system
designed to address customer requests, at a reduced cost to us.

Also in December 2001, we entered into a
five-year information technology outsourcing agreement with
Electronic Data Systems Corp. (EDS) under which EDS will
manage our corporate data center, database administration,
helpdesk, desktop services and other technical functions. We and
EDS have chosen Sun Microsystems Inc. as the platform provider
of choice for this agreement. Under the terms of

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this outsourcing agreement, about 290 employees
were transferred to EDS and will continue to work in support of
our information technology infrastructure.


5. 2002
Goals

For 2002, our principal business objectives are
to:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to focus on increasing efficiencies and
	reducing costs wherever possible;                                                                                   
|
| |  | continue to deliver leading edge product and
	service solutions to our customers, focusing on our business
	applications and differentiation of our service offerings;
|
| |  | maximize the return on our investment in our
	existing digital mobile network while optimizing its
	performance; and                                                  
|
| |  | continue to attract and retain high quality
	customers.                                                                                                               

C.     Business
Strategy

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

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



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service, including
	advanced calling features such as speakerphone, conference
	calling, voice-mail, call forwarding and additional line service;
|
| |  | Nextel Direct Connect service, which allows
	subscribers in the same local calling area to contact each other
	instantly, on a private one-to-one call or on a group call;
|
| |  | Internet services, mobile messaging services,
	e-mail and advanced Java enabled business applications, which
	are marketed as Nextel Wireless Web services; and           
|
| |  | international roaming capabilities, which are
	marketed as Nextel Worldwide.                                                                                              

We believe that our unique Nextel Direct Connect
service is our primary service that differentiates us from
competing communications providers. We are the only company
providing national service that offers the benefits of this
instantaneous communications solution along with mobile
telephone service. We believe that for customers who already
subscribe to or who would benefit by access to multiple wireless
services, the convenience of combining multiple wireless
communications options in a single handset for a single package
price with a single billing statement are important features
that further distinguish us from many of our competitors.

A sizeable portion of business users
communications involves contacting others within the same
organization. We believe that our Nextel Direct Connect service
is especially well-suited to address these intracompany wireless
communications needs. The Nextel Direct Connect service gives
customers the ability to instantly set up a conference on either
a private (one-to-one) or group (one-to-many) basis. To further
expand the flexibility and convenience offered by our Nextel
Direct Connect service to users outside a single organization
but within a single industry or interest group in a local
calling area, we pioneered the Nextel Business
NetworksSM concept. Nextel Business Networks extended
Nextel Direct Connect service beyond a companys employees
to suppliers or other parties involved in the same industry.

In 2001, we further enhanced Nextel Direct
Connect by allowing any Nextel subscriber to communicate
instantly with any other Nextel subscriber in the same local
calling area, and allowing customers the ability to set up their
own talk groups, offering greater customer satisfaction at a
lower cost to us. Another enhancement of Nextel Direct Connect,
which we call traveling Direct Connect is expected
to become available in some markets in 2002. Using this service,
any two or more Nextel

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subscribers traveling to a market outside of
their local calling area will be able to use Nextel Direct
Connect in the visited market and will be able to communicate
instantly with other Nextel subscribers in that market using our
Nextel Direct Connect service. For example, if a group of Nextel
subscribers were traveling from New York to Las Vegas, they
would be able to instantly contact each other while in the Las
Vegas area and would be able to use our Nextel Direct Connect
service to also contact any other Nextel subscriber who resides
in the Las Vegas calling area. Also with the assistance of
Motorola, we are targeting expansion of Nextel Direct Connect
services nationally beginning in 2003, and we also are exploring
extending Nextel Direct Connect to a global community of
wireless users. See Forward Looking Statements.


We expect to further expand our differentiated
suite of products and services in 2002 by jointly developing and
offering, in conjunction with Motorola and Research In Motion
Limited, a new Nextel/BlackBerryTM handheld with both
voice and data capabilities. This personal data assistant
(PDA) style handset will operate on the Nextel National
Network. This device is also expected to support Java 2
Micro Edition (J2METM) applications.

2. We focus on the business
customer.Our corporate marketing
strategy has traditionally focused on targeting business users
that we believe will be likely to appreciate the potential for
our wireless communication service capabilities to increase
efficiencies and reduce costs in their business activities. We
originally concentrated our sales efforts on a number of
distinct occupational groupings of mobile workers, but in the
past few years we have broadened our primary targeted customer
population to include a much wider group of business users. In
2002, we expect to continue to expand our customer base while
targeting our marketing efforts in particular on supporting our
newer distribution channels: web sales, tele-sales and Nextel
stores.

We also are committed to continuing to provide
our customers with superior service, in part by striving to
deliver the best customer care experience. We expect our
outsourcing agreements with IBM and TeleTech to generate
continued superior customer satisfaction, based, in part, on
technological advancements from IBM and the expertise of a
customer management specialist like TeleTech. We believe the
associated benefits under these agreements will add to the
progress in enhancing customer satisfaction we expect from our
new billing and customer care platform, Ensemble. With the
combination of these developments, we believe we are well
positioned to handle the core needs of our growing customer base
as we expand our product and service offerings.

3. Our technology
plans.In October 2001, Motorola
and we announced an anticipated significant technology upgrade
to our iDEN digital mobile network, which Motorola is developing
for our expected deployment in 2003. We expect that this upgrade
will effectively double our voice capacity for interconnect
calls and leverage our investment in our existing
infrastructure. We also announced a compression technology
enhancement expected to be available for launch in 2002 to
deliver packet data service more efficiently at perceived higher
speeds. We believe these developments will allow us to provide
increased wireless data speeds while avoiding or delaying
capacity constraints. See Forward Looking Statements.

Nextels existing deployment of the iDEN
technology is one of the most comprehensive wireless coverage
networks in the United States. Along with this exceptional
geographic coverage is our strong, feature-rich product
portfolio based on the Nextel Direct Connect service and what we
believe is the most far reaching and robust packet data network
of any national wireless operator. It is from this position that
Nextel is evaluating the cost and service advantages and
disadvantages of potential future technology choices, including
third generation or 3G technologies, as
well as preliminary evaluations of technologies beyond 3G.

Fundamentally, we believe that any 3G technology
investment must be justified based on voice capacity needs and
not simply incremental data services capabilities, as well as on
the expected benefits third generation services will provide to
our customers considering the cost of providing those services.
We do not see a need to migrate to a 3G technology at this
time for voice capacity given the significant capacity
enhancements Motorola plans to deliver in 2003 for the existing
iDEN technology, as discussed above. However, based on our
current outlook, we do anticipate an eventual 3G deployment and
therefore

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continue to stay abreast of 3G technology and
other technological developments. We will only deploy third
generation technology when it is warranted by expected customer
demand, we have sufficient capital to deploy the technology and
the anticipated benefits of services requiring third generation
technology outweigh the costs of providing those services. Some
of the factors that may influence us to accelerate a 3G
deployment include:




| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the possibility that expected capacity upgrades
	to our existing digital mobile network may not be developed and
	delivered as currently contemplated;                                                 
|
| |  | a significant increase in customer demand for
	higher speed data services beyond those available using our
	existing digital mobile network; or                                                        
|
| |  | developments relating to the spectrum realignment
	now before the Federal Communications Commission, or FCC. See
	G. Our Digital Mobile Network and Services  7.
	Public safety spectrum initiative.

Furthermore, we have entered into several
exclusive development agreements with QUALCOMM, Inc. and
Motorola to preserve and enhance the development of our unique
Nextel Direct Connect service on various code division multiple
access, or CDMA, platforms.

4. Our pricing strategy, marketing
program and distribution channels.We offer pricing options that we believe differentiate our
services from those of many of our competitors. Our pricing
packages offer our customers simplicity and predictability in
their wireless telecommunications billing by combining Nextel
Direct Connect minutes with a mix of cellular and long-distance
minutes. Furthermore, no roaming charges are assessed for mobile
telephone services provided to our customers traveling anywhere
on our digital mobile network or the compatible digital mobile
network of Nextel Partners in the United States. We also offer
special pricing plans that allow some customers to aggregate the
total number of account minutes for all their handsets and
reallocate the aggregate minutes among those handsets.

Our marketing program and related advertising
campaigns currently are designed to increase brand awareness and
in particular to expand the use of our newer, lower cost
distribution channels: web sales, tele-sales and our Nextel
stores. As we increase the brand awareness of Nextel and our
innovative Nextel Direct Connect service, we believe these
channels will account for both larger absolute numbers and a
greater percentage of our new subscriber additions. Our
marketing and advertising is also designed to stimulate
additional demand for our services by stressing their
versatility, value, simplicity and quality.

We use both direct and indirect sales forces as
part of our strategy to increase our customer base. We expect to
selectively enhance both direct and indirect distribution
channels as we further penetrate existing markets, expand our
coverage in those markets and, through Nextel Partners, expand
our reach into ancillary markets. As discussed under B.
2001 Goals Update and 2002 Goals  3. Expanded Distribution
Channels, we also expect to expand our web sales,
tele-sales and sales through Nextel stores, allowing us to reach
out to existing and new customer groups in effective and
cost-efficient ways.

5. We have strategic relationships
with Motorola, Craig O. McCaw and Nextel
Partners.Our two largest
shareholders are Motorola and Mr. Craig O. McCaw and
related entities. As of December 31, 2001, Motorola was the
beneficial owner of about 14% of our class A common stock,
assuming the conversion of the outstanding shares of our class B
nonvoting common stock, all of which are owned by Motorola. We
have a number of important strategic and commercial
relationships with Motorola. Motorola provides the iDEN
infrastructure equipment and handsets used throughout our
domestic markets and the international markets served by NII
Holdings operating subsidiaries. As discussed above, we
also work closely with Motorola to improve existing products and
develop new technologies and enhancements to existing
technologies for use in our digital mobile network. See H.
Agreements with Significant Stockholders 
2. Motorola.

As of December 31, 2001, Mr. McCaw and
his affiliates beneficially owned about 8% of our class A common
stock, assuming the conversion of all shares of the preferred
stock and the exercise of all options held by controlled
affiliates of Mr. McCaw. We also benefit from
Mr. McCaws more than 25 years of

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experience in the wireless communications
business. Mr. McCaw currently serves as a member of our
Board of Directors and also as Chairman of the Operations
Committee of our Board of Directors, which is responsible for
formulating key aspects of our business strategy. See
H. Agreements with Significant
Stockholders  1. Craig O. McCaw and related
entities.


Digital wireless communications services are
provided under the Nextel brand name in mid-sized and tertiary
U.S. markets by Nextel Partners. Nextel Partners has the right
to operate in 55 of the top 200 metropolitan statistical areas
in the United States ranked by population. In January 1999, one
of our subsidiaries entered into a joint venture agreement with
Nextel Partners, and that subsidiary owned about 32% of Nextel
Partners common stock as of December 31, 2001. We
entered into this relationship principally to accelerate the
build-out of the Nextel digital mobile network outside the
largest metropolitan market areas which are the main focus of
our network coverage. As an inducement to obtain Nextel
Partners commitment to undertake and complete the
anticipated network expansion, Nextel Partners was granted the
exclusive right to offer wireless communications services under
the Nextel brand name in their markets.

D.  2001 Developments and
Year-to-Date 2002 Developments

1. Acquisitions.In May 2001, we purchased from Mobex Communications, Inc.
800 MHz and 900 MHz specialized mobile radio licenses
and related assets and an equity interest in a subsidiary of
Mobex for a total cash purchase price of $117 million. Also
in May 2001, we purchased from Arch Wireless, Inc. 900 MHz
specialized mobile radio licenses and Arch Wireless redeemable
cumulative preferred stock for a total cash purchase price of
$250 million. In June 2001, we purchased from Motorola
900 MHz specialized mobile radio licenses and related
assets for a cash purchase price of $58 million. In
December 2001, we purchased from Pacific Wireless Technologies,
Inc. 800 MHz specialized mobile radio licenses and related
assets for a cash purchase price of $58 million. In early
2002, we purchased from Chadmoore Wireless Group, Inc.
800 MHz and 900 MHz specialized mobile radio licenses
and related assets for a cash purchase price of
$130 million.

2. 9.5% senior serial redeemable notes
due 2011.In January 2001, we
completed the sale of $1.25 billion in aggregate principal
amount of our 9.5% senior serial redeemable notes due 2011,
generating $1.245 billion in net cash proceeds. Cash
interest is payable on February 1 and August 1 at a
rate of 9.5% per year. The notes are senior unsecured
indebtedness of ours and rank equal in right of payment with all
our other unsubordinated, unsecured indebtedness.

3. 6% convertible redeemable senior
notes.In May 2001, we completed
the sale of $1.0 billion in aggregate principal amount of
our 6% convertible redeemable senior notes due 2011, generating
$980 million in net cash proceeds. Cash interest is payable
on June 1 and December 1 at a rate of 6% per year.
These notes are convertible at the option of the holders into
our class A common stock at any time prior to redemption,
repurchase or maturity at a conversion price of about $23.84 per
share, subject to adjustment. These notes are senior unsecured
indebtedness of ours and rank equal in right of payment with all
our other unsubordinated, unsecured indebtedness.

4. Nextel
stores.In May 2001, we purchased
a substantial portion of the operations, assets and rights
associated with about 200 stores from Lets Talk Cellular
& Wireless, a specialty cellular and wireless retailer, for
a cash purchase price of $34 million. We re-branded these
stores as Nextel stores which, in addition to generating new
customers and brand awareness, serve as additional points of
contact for existing and new customers.

5. Officer and director
developments.In February 2001,
William E. Conway, Jr. was appointed Chairman of our Board
of Directors, replacing Daniel F. Akerson. Mr. Conway
has served as one of our directors since February 1997. Also in
February 2001, Mr. Akerson was appointed non-executive
Chairman of NII Holdings. In October 2001, Mr. Akerson
resigned from our Board of Directors and also from his position
as Chairman of the Board of Directors of NII Holdings. In May
2001, William E. Kennard, former Chairman of the FCC,
joined our Board of Directors. In September 2001,
J. Timothy Bryan, Chief

8



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Financial Officer of Eagle River, Inc., an
affiliate of Mr. McCaw, joined our Board of Directors as a
designee of Digital Radio, L.L.C.


In April 2001, we announced that James F. Mooney
had been named our Executive Vice President and Chief Operating
Officer, replacing Steven P. Dussek. In September 2001, we
announced that Paul N. Saleh had been named our Executive Vice
President and Chief Financial Officer, replacing John S.
Brittain, Jr.

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

7. Customer care
developments.During 2001, we
initiated operations in our fifth and sixth customer care
centers in Temple, Texas and Bremerton, Washington. In January
2002, we announced an eight-year customer relationship
management agreement with IBM and Teletech, a world leader in
customer relationship management solutions, to manage our
customer care centers. Under the terms of the agreement, about
4,000 of our employees were transferred to TeleTech. This
agreement is designed to enhance customer care and build ongoing
brand loyalty for Nextel as we work with IBM and TeleTech to
introduce leading edge technology and process improvements,
including a voice response system designed to address customer
requests at a reduced cost to us.

8. Information technology
outsourcing.In December 2001, we
entered into a five-year information technology outsourcing
agreement with Electronic Data Systems Corp. (EDS) under
which EDS will manage our corporate data center, database
administration, helpdesk, desktop services, and other technical
functions. We and EDS have chosen Sun Microsystems as the
platform provider of choice for this agreement. Under the terms
of this outsourcing agreement, about 290 of our employees were
transferred to EDS and will continue to work in support of our
information technology infrastructure.

As a result of the customer care and information
technology outsourcing arrangements, we expect to record a
restructuring charge in the first quarter of 2002 related to
vacating unneeded facilities and other matters.

9. Direct Connect
upgrade.In July 2001, we launched
an enhanced Nextel Direct Connect service that allows any Nextel
subscriber to communicate instantly with any other Nextel
subscriber in the same local calling area. This service has now
been introduced in all of our markets. We also have announced
plans for our next enhancement to Nextel Direct Connect which
will allow any two or more Nextel subscribers traveling to a
market outside of their local calling area to continue to use
Nextel Direct Connect with each other and with other Nextel
subscribers in the visited market. This traveling Direct Connect
feature is expected to become available in some markets in 2002,
and is the next step in our planned introduction of a nationwide
Nextel Direct Connect feature. See Forward Looking
Statements.

10. Option
exercise.In July 2001, various
members of the McCaw family, and entities affiliated with them
who previously were members of Digital Radio, L.L.C., a
controlled affiliate of Mr. McCaw, exercised in full
options to purchase from us an aggregate of 10.0 million
shares of our class A common stock at a per share exercise
price of $10.75 for an aggregate purchase price of
$108 million.

E.  NII Holdings, Inc.

We have ownership interests in international
wireless companies through our substantially wholly owned
subsidiary, NII Holdings, Inc. (formerly known as Nextel
International, Inc.). NII Holdings through its operating
subsidiaries provides wireless communications services targeted
at meeting the needs of business customers in selected
international markets. Its principal operations are in selected
major business centers and related transportation corridors of
Brazil, Mexico, Argentina and Peru. NII Holdings also provides
analog specialized mobile radio services in Chile and owns,
directly and indirectly, about a 59% interest in a digital
mobile services provider in the Philippines.

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In the latter half of 2000, NII Holdings began a
process to complete an initial public offering to raise funds to
support the continued expansion and enhancement of its digital
mobile networks. In March 2001, due to adverse market
conditions, NII Holdings announced its decision to discontinue
its initial public offering at that time and withdrew its
registration statement. In the first quarter of 2001, NII
Holdings also amended the terms of its vendor financing
agreements with Motorola to extend the maturities and modify the
covenants under those facilities.

The downturn in the global capital markets, among
other things, has made it impossible for NII Holdings to obtain
significant new financing from third parties through the
issuance of equity or debt securities. In April 2001, NII
Holdings issued 2,500 shares of its series A exchangeable
redeemable preferred stock to one of our wholly owned
subsidiaries in exchange for cash proceeds of $250 million.
In July 2001, NII Holdings issued another 2,500 shares of its
series A exchangeable redeemable preferred stock to the same
subsidiary in exchange for another cash investment of
$250 million.

In August 2001, we purchased an aggregate of
$422 million in principal amount of NII Holdings 13%
senior redeemable discount notes due 2007, $241 million in
principal amount of NII Holdings 12.125% senior serial
redeemable discount notes due 2008 and $194 million in
principal amount of NII Holdings 12.75% senior serial
redeemable notes due 2010 in exchange for an aggregate of
21,577,098 shares of our class A common stock. Nextel
Communications continues to hold this $857 million
aggregate principal amount of notes, and therefore, these notes
remain outstanding obligations of NII Holdings.

During the third quarter of 2001, following
NII Holdings review of the economic conditions,
operating performance and other relevant factors in the
Philippines, NII Holdings decided to discontinue funding to
its Philippine operating company. In view of the capital
constrained environment and NII Holdings lack of funding
sources, during the fourth quarter of 2001, NII Holdings
undertook an extensive review of its business plan and
determined to pursue a less aggressive growth strategy that
targets conservation of cash resources by slowing enhancement
and expansion of its networks and reducing subscriber growth and
operating expenses. In connection with the implementation of
this plan and the decision to discontinue funding to its
Philippine operating company, during 2001 NII Holdings recorded
non-cash pretax impairment charges and pretax restructuring and
other charges of about $1.75 billion resulting from the
write-down of the carrying values of its long-lived assets and
the restructuring of some of its operations to reduce its
operating costs and improve its operating efficiencies. Because
NII Holdings is one of our substantially wholly owned
subsidiaries, these charges also appear in our consolidated
financial statements.

To provide additional liquidity, in the fourth
quarter of 2001, NII Holdings sold its minority interest in
TELUS Corporation, a Canadian wireless company, for cash
proceeds of $196 million, of which $57 million was
placed into an escrow account as collateral for a portion of NII
Holdings vendor financing facilities with Motorola Credit
Corporation.

NII Holdings currently has outstanding an
aggregate of $2.67 billion of debt that it incurred to
construct its network and fund its operations, including
$800 million in carrying amount, or $857 million in
aggregate principal amount, of notes held by Nextel
Communications as described above. The obligations under this
debt are solely those of NII Holdings and its subsidiaries, and
Nextel Communications is not a party to any of the obligations
in respect of that debt. Since debt service payments are a
significant portion of NII Holdings current and future
commitments and because NII Holdings does not believe that funds
generated from its operating activities or realistically
available from other sources will be sufficient to meet its
expected commitments, NII Holdings began to review various
alternatives to restructure its currently outstanding
indebtedness.

On December 31, 2001, NII Holdings
Argentine operating company failed to make principal payments on
its $108 million Argentine credit facilities, and, on
February 1, 2002, NII Holdings failed to make a
$41 million interest payment on its $650 million
aggregate principal amount 12.75% senior notes, resulting in
defaults under these facilities, as well as under its
$382 million of Motorola vendor financing facilities due to
cross-default provisions. NII Holdings decided not to make these
payments as part of the

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cash preservation process undertaken to
restructure its debts and implement a revised business plan and
does not intend to make additional principal or interest
payments on any of its outstanding debt while continuing its
restructuring activities. As a result of these defaults, the
lenders under the affected facilities are each free to pursue
their respective remedies, including, in the case of vendor and
bank financing facilities, seizing the assets of NII Holdings
and its subsidiaries that are pledged as collateral. In February
2002, one of NII Holdings creditors seized
$8 million, which was pledged under a collateral account as
security for that debt. If any of NII Holdings lenders
accelerate any of these obligations, then as a result of the
operation of cross-default provisions, NII Holdings would be in
default with respect to substantially all of its indebtedness,
all of which would then be callable or subject to acceleration.
In addition, NII Holdings independent auditors have issued
a going concern opinion with respect to NII
Holdings financial statements, which indicates that, in
their opinion, substantial doubt exists about NII Holdings
ability to continue operating.


NII currently is in discussions with its
creditors regarding restructuring its debt obligations. If NII
Holdings is unable to obtain additional funding and negotiate a
successful debt restructuring, it may have to further write-down
its assets, sell strategic assets, reorganize under
Chapter 11 of the United States Bankruptcy Code or take
other measures which could include liquidation of its assets.
Additionally, NII Holdings could experience adverse impacts on
its business, including but not limited to, a loss of customer
accounts, top sales agents, indirect dealers and key management
personnel. NII Holdings also may lose government and regulatory
support for various initiatives that it believes are critical to
its business.

Although we have no legal obligation to make any
investments in, or otherwise advance funds to, NII Holdings, to
the extent NII Holdings is unable to obtain necessary funding
from other sources, we may elect to provide NII Holdings with up
to $250 million, but any such investment will be
conditioned on NII Holdings ability to complete a
satisfactory restructuring of its indebtedness and other
financial obligations, as well as other specific conditions. Any
funding that we elect to provide to NII Holdings may reduce the
amount of funding available for our domestic operations.

F.  Wireless Industry
Overview

1. Development of the wireless
communications industry.Todays wireless communications industry began in 1970 when
the FCC reallocated 115 MHz of radio spectrum in the
800 and 900 MHz bands from the federal government and
UHF television to land mobile service use to provide
high-quality, high-capacity communications services to
vehicle-mounted and hand-held portable telephones and other
two-way radio units. The FCC allocated 50 MHz for cellular
service, which were allocated in equal blocks to two cellular
operators in each metropolitan statistical area or rural
statistical area, and 46 MHz for private radio services,
including specialized mobile radio, or SMR. The remaining
19 MHz were divided among six different services. Because
of regulatory delays, the first commercial cellular systems were
not operational until 1983. Since then, however, growth in the
industry has been rapid, with more than 130 million
wireless handsets consisting of analog cellular, digital
cellular, enhanced specialized mobile radio and personal
communications services, or PCS, units now in service, as
reported by the Cellular Telecommunications and Internet
Association.

2. SMR and cellular/ PCS
telephony.The FCC created the
cellular telephone industry as a regulated common carrier
duopoly. The FCC awarded only two licenses to provide cellular
service in the service area of any given metropolitan
statistical area or rural statistical area. In 1993, the FCC
allocated 120 MHz of spectrum in the 1.8-2.2 GHz band
for the provision of licensed PCS which include mobile wireless
communications services similar to those provided over our
digital mobile network. The FCC has awarded three 30 MHz
and three 10 MHz PCS licenses for this PCS spectrum through
a competitive bidding process. Since August 1996, SMR operators
have been subject to the same common carrier obligations as
cellular and PCS operators. See I. Regulation
for additional information. Within the limitations of available
spectrum and technology, SMR operators are authorized to provide
mobile communications services to business and individual users,
including the bundled products we already offer.

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|   |                                         
|-- | ----------------------------------------
|G. | Our Digital Mobile Network and
	Services

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

Our digital mobile network provides customers
desiring mobile telephone service with access to features
competitive with those offered by other current wireless
communications services, such as the hand-off of
calls from one site to another and in-building
signal penetration for improved portable performance in selected
high usage areas. In addition to offering mobile telephone
service and Nextel Direct Connect, our innovative two-way radio
dispatch function, our digital mobile network has been designed
to include a messaging or paging capability, which also has been
built into each handset, to enable a customer to receive
alphanumeric short-text messages. Our digital mobile network
offers customers additional features, such as voice-mail, call
hold, call waiting, no-answer or busy-signal transfer, call
forwarding, conference calling, and additional line service.
Most of the handsets we currently offer have a speakerphone
capability to allow hands-free conversation.

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

We have built the largest guaranteed all-digital
wireless network in the country covering thousands of
communities across the United States. As of December 31,
2001, we, together with Nextel Partners, served 195 of the top
200 U.S. markets and the major transportation corridors between
these markets. Through recent market launches, Nextel and Nextel
Partners service is available today in areas of the U.S. where
about 230 million people live or work.

NII Holdings, through its subsidiaries, is
constructing and operating digital networks employing iDEN
technology on 800 MHz spectrum holdings in selected major
metropolitan market areas located principally in Latin America.
We have entered into interoperability agreements with NII
Holdings Latin American affiliates to provide for
coordination of customer identification and validation necessary
to facilitate roaming between our domestic markets and NII
Holdings Latin American markets.

We have roaming agreements currently in effect
with Nextel Partners covering all of the U.S. market areas in
which Nextel Partners currently provides, or will in the future
provide, iDEN-based digital mobile services. We also have a
roaming agreement in effect with TELUS in Canadian market areas
where TELUS offers iDEN-based digital mobile services. Our
i2000plus handset is a dual mode handset that operates on both
the iDEN technology used by Nextel and the GSM 900 MHz standard
and allows digital roaming on iDEN 800MHz and GSM 900 MHz
networks in over 80 countries. Our i2000plus handset also has
the ability to access Nextel Wireless Web services.

2. Digital mobile network
technology.Our digital mobile
network combines the advanced iDEN technology developed and
designed by Motorola with a low-power, multi-site
transmitter/receiver configuration that permits frequency reuse.
The iDEN technology shares many common components with the GSM
technology that has been established as the digital cellular
communications standard in Europe and with a variation of that
GSM technology being deployed by certain PCS operators in the
United States. The design of our existing and proposed digital
mobile network currently is premised on dividing a service area
into multiple sites having a typical coverage area of from less
than one mile to up to thirty miles in radius, depending on the
terrain and the power setting. Each site contains a low-power

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transmitter/ receiver and control equipment
referred to as the base station. The base station in each site
is connected by microwave, fiber optic cable or telephone line
to a computer controlled switching center. The switching center
controls the automatic hand-off of cellular calls from site to
site as a subscriber travels, coordinates calls to and from a
handset and connects wireless calls to the public switched
telephone network. Nortel Networks Corporation has supplied most
of the mobile telephone switches for our digital mobile network.
In the case of two-way radio dispatch, a piece of equipment
called a dispatch application processor provides a call setup,
identifies the target radio and connects the subscriber
initiating the call to other targeted subscribers.


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



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

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

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



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

Unlike some other digital transmission
technologies, iDEN can be deployed on non-contiguous frequency
holdings. This benefits us because many of our 800 MHz channel
holdings are composed of non-contiguous channels. Further, iDEN
technology allows us to offer our multi-functional package of
digital mobile services. While iDEN offers a number of
advantages in relation to other technology platforms, unlike
other wireless technologies, it is a proprietary technology that
relies solely on the efforts of Motorola and any future
licensees of this technology for further research and continuing
technology and product development and innovation. Motorola is
also the sole source supplier of iDEN infrastructure and digital
handsets. Our agreements with Motorola impose limitations and
conditions on our ability to use other technologies. These
agreements may delay or prevent us from employing new or
different technologies that perform better or are available at a
lower cost. Furthermore, iDEN technology is not as widely
adopted in relation to other wireless technologies and currently
has fewer subscribers on a worldwide basis.

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3. Technology
commitments.Pursuant to our
equipment purchase agreements with Motorola first entered into
in 1991, as subsequently amended, Motorola provides the iDEN
infrastructure equipment and handsets throughout our markets.
These agreements set forth the prices we must pay to purchase
and license this equipment as well as a structure to develop new
features and make long-term improvements to our network.
Motorola is recognized as the overall integrator of our iDEN
digital mobile network elements and has committed to make some
components of our network available to us. We and Motorola have
also agreed to warranty and maintenance programs and specified
indemnity arrangements. We expect to rely principally on
Motorola for the manufacture of substantially all of our
handsets and a substantial portion of the equipment necessary to
construct our iDEN digital mobile network for the next several
years. See K. Risk Factors  11. Because we rely
on one supplier to implement our digital mobile network, any
failure of that supplier to perform could adversely affect our
operations.

In October 2001, Motorola and we announced an
anticipated significant technology upgrade to our iDEN digital
mobile network, which Motorola is developing for our expected
deployment in 2003. We expect that this upgrade will effectively
double our voice capacity for interconnect calls and leverage
our investment in our existing infrastructure. We also announced
a compression technology enhancement expected to be available
for launch in 2002 to deliver packet data service more
efficiently at perceived higher speeds. We believe these
developments will allow us to increase wireless data speeds and
avoid or delay capacity constraints. See Forward Looking
Statements.

Giving effect to pending acquisitions, we and
Nextel Partners now have about 22 MHz of spectrum in the 800 and
900 MHz bands in virtually all of the top 100 U.S. markets and
about 4 MHz of spectrum in the 700 MHz band in most major
metropolitan markets in the U.S. We continuously review
alternate technologies as they are developed. To date, however,
it has not been regarded as necessary to adapt currently
available alternative technologies to operate on our present
spectrum position. However, after we have successfully completed
the mandatory relocation of incumbent operators out of certain
portions of our spectrum, we will have access to contiguous
channel blocks, similar to our cellular and PCS competitors. The
availability of a significant block of contiguous spectrum would
permit the introduction of a broader range of technology options
than is available to us on non-contiguous spectrum blocks. In
connection with future deployment of 3G technologies, we have
completed tests to assess the operational and commercial
feasibility of constructing and launching an overlay network
using the 3G CDMA2000 technology, on up to an average of 10 MHz
of contiguous spectrum in nearly every major market in the
United States. Additionally, we continue to pursue regulatory
initiatives that would provide us with rights to create and use
other contiguous blocks of spectrum. See 7. Public safety
spectrum initiative and  I. Regulation.

We have entered into several exclusive
development agreements with QUALCOMM and Motorola to preserve
and enhance the development of our unique Nextel Direct Connect
service on various CDMA platforms. We may enter into additional
development agreements of this nature with other infrastructure
or handset vendors.

Our consideration of alternative technologies
would likely be materially affected by our contractual
obligations to Motorola. For example, if we were to determine
that the iDEN technology we use is no longer suited to our
needs, we have agreed to notify Motorola six months prior to any
public announcement or formal contract to purchase equipment
utilizing alternate technology. If Motorola manufactures, or
elects to manufacture, the equipment utilizing the alternate
technology that we elect to deploy, we must give Motorola the
opportunity to supply 50% of our infrastructure requirements for
the alternate technology for three years. See K. Risk
Factors  11. Because we rely on one supplier to
implement our digital mobile network, any failure of that
supplier to perform could adversely affect our operations
and  12. Agreements with Motorola reduce our
operational flexibility and may adversely affect our growth or
operating results.

4. System construction.The first step required to
achieve the build-out of our digital mobile network in a market
is the completion of the radio design plan, which typically
takes about four months. This stage involves the selection of
specific areas in the market for the placement of base station
sites and

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the identification of specific frequencies that
will be employed at each site in the initial configuration.
Sites are selected on the basis of:




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

Site procurement efforts include obtaining leases
and permits, and in many cases, zoning approvals. This site
acquisition process for a systems initial construction in
a market, depending on the number of sites, typically takes from
two to eighteen months. Preparation of each site for equipment
installation, including construction of equipment shelters,
towers and power systems, grounding, ventilation and air
conditioning, typically takes six weeks, while equipment
installation, testing and pre-operational systems optimization
generally take an additional six weeks prior to commencing
system operations. Following commencement of system operations
in a selected market, we expect to add new sites as necessary to
improve coverage and capacity. In 2001 we added about 2,800
transmitter and receiver sites to our digital mobile network,
bringing the total number of sites as of December 31, 2001
to 15,500.

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

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



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

We originally concentrated our sales efforts on a
number of distinct occupational groupings of mobile workers, but
in the past few years we have broadened our primary targeted
customer population to include a much wider group of business
users. In 2002, we intend to target our marketing efforts in
particular to support our newer distribution channels: web
sales, tele-sales and Nextel stores. We are building our brand
image through affiliations with most major sports leagues and
consistently stress the benefits of our unique Nextel Direct
Connect service. As we increase our brand awareness through our
expanded marketing efforts, we believe our Nextel stores, web
sales and tele-sales will be increasingly useful distribution
channels for our services.

We review our business and marketing plans in
light of perceived opportunities, actual experiences in the
marketplace, availability of financial and other resources and
overall economic and competitive considerations. As a result of
these reviews, we may from time to time determine to change,
refine or redirect our plans. Also, from time to time we may
engage in limited scale commercial trials of new services or
products as part of our overall program for developing and
assessing potential new market opportunities.

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6. Competition.We compete principally with five
other national providers of mobile wireless voice
communications: AT&T Wireless Services, Cingular Wireless,
Sprint PCS, Verizon Wireless and VoiceStream Wireless Corp. We
also compete with regional providers of mobile wireless voice
communications, such as Southern LINC. Additional licensees may
enter our markets by operating systems utilizing frequencies
obtained in FCC auction proceedings. A substantial number of the
competitors listed above have financial resources, subscriber
bases and name recognition greater than we do. We believe we
compete based on our differentiated service offerings and
products. Additionally, we expect our current and future
competitors will continue to upgrade their systems to provide
digital wireless communications services competitive with those
available on our digital mobile network. Moreover, cellular
companies have been granted authority to participate in dispatch
services and wireline companies have been granted authority to
participate in SMR services. Several of our competitors have
introduced pricing plans that offer features such as unlimited
mobile to mobile calling, reduced rates for calls placed between
pre-arranged groups of callers or shared minutes between groups
of callers. In the event potential customers regard those
services as equivalent to Nextel Direct Connect or in the event
that our competitors are able to provide dispatch service
comparable to ours, our competitive advantage could be impaired.

We expect further competition as a result of the
consolidation of the wireless communications industry and the
development of new technologies, products and services. The
wireless communications industry has been experiencing
significant consolidation over the past few years. Consolidation
has and may continue to create additional large,
well-capitalized competitors with substantial financial,
technical, marketing and other resources. Some of our
competitors are also creating joint ventures that will fund and
construct a shared infrastructure that both carriers will use to
provide advanced services. By using joint ventures, these
competitors may lower their cost of providing advanced services
to their customers. In addition, we expect that in the future,
providers of wireless communications services may compete more
directly with providers of traditional landline telephone
services and, potentially, energy companies, utility companies
and cable operators that expand their services to offer
communications services. We also expect our digital mobile
network business to face competition from other technologies and
services developed and introduced in the future. See K.
Risk Factors  7. If we are not able to compete
effectively in the highly competitive wireless communications
industry, our future growth and operating results will
suffer.

7. Public safety spectrum initiative.Under the licensing scheme for SMR
spectrum developed by the FCC during the 1970s, SMR licenses for
commercial, business and industrial/land transportation, and
public safety users occupy intermixed channels on adjacent
spectrum in the 800 MHz band. Different types of SMR licensees
successfully coexisted for many years, but changes over the past
few years to the network architecture necessary to support
commercial digital technology have created isolated,
intermittent situations where commercial and non-commercial
licensees experience system interference. In particular, older
analog networks used by public safety entities are experiencing
system problems that have been traced to the digital operations
of nearby commercial SMR and cellular licensees, even though all
licensees are operating within the authorized parameters of
their licenses and in compliance with FCC rules.

In January 2001, the commercial and public safety
wireless industries, in cooperation with the FCC, submitted a
Best Practices Guide that the FCC formally released
in February 2001. The guide provided a broad overview of
practices that can be used to identify and alleviate
interference between public safety and commercial systems. While
it has assisted the industry in finding temporary solutions, the
Best Practices Guide did not provide the industry
with a long-term resolution of the problem. Because the public
safety interference issue is directly linked to the current SMR
license allocations for public safety and commercial users, on
November 21, 2001, we filed a proposal with the FCC seeking
elimination of interference and more efficient use of spectrum
by all parties through the realignment of spectrum licenses and
spectrum allocations in the 700, 800 and 900 MHz bands. If
adopted, the proposal would separate the channel blocks used by
cellular and commercial SMR licensees from the channel blocks
used by public safety licensees so that the realigned licenses,
in conjunction with proposed technical requirements, would no
longer interfere with each other. Under the proposal, we would
maintain our net spectrum allocation, although we would exchange
some of our spectrum in the 700, 800 and 900 MHz bands for
contiguous

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spectrum in the 800 MHz and 2.1 GHz bands. If the
FCC adopts this proposal substantially as submitted, we have
stated that we will contribute up to $500 million in value
to help cover the costs public safety entities may incur in such
a realignment. We also would be required to fund our own
realignment costs.


On March 14, 2002, the FCC announced that it
would seek comment on both the Nextel proposal and a competing
proposal submitted jointly by the National Association of
Manufacturers and MFRAC, Inc., a trade group that provides
frequency coordination for business and industrial private radio
users. Both proposals would realign the 800 MHz band to separate
commercial and public safety licensees, but the
Manufacturers plan would not involve the 700 MHz, 900 MHz
and 2.1 GHz bands. The FCC also invited the submission of
additional proposals that could solve the public safety
interference problem.

We cannot be certain what, if any, long-term
solutions to the public safety interference problem will be
adopted by the FCC. While we are currently working with the
public safety community on a case-by-case basis to solve
interference problems as they are reported, absent FCC action we
may be unable to solve future problems without reducing the
efficiency of our network or restricting service to our
customers. In addition, while the public safety community is
aware of the potential network problems their personnel may
experience, we cannot be certain that we or the wireless
industry in general may not be subject to litigation should a
situation arise in which damage or harm occurs as a result of
commercial interference with a public safety communications
network.

H.     Agreements
with Significant Stockholders

1. Craig O. McCaw and related
entities.In 1995, Mr. McCaw
acquired significant equity interests in Nextel and we agreed to
certain arrangements related to our corporate governance.
Specifically, under the terms of a securities purchase
agreement, as amended, among Nextel, Mr. McCaw and Digital
Radio, and certain other related agreements, Mr. McCaw and
his controlled affiliates have purchased a significant amount of
our equity securities, including:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | shares of our class A common stock;                                               
|
| |  | shares of our class A convertible redeemable
	preferred stock;                    
|
| |  | shares of our class B convertible preferred
	stock; and                           
|
| |  | options to acquire shares of our class A
	common stock at various exercise prices.

The final option to acquire 10.0 million
shares of class A common stock at $10.75 per share,
including about 3.0 million transferred to a related party
of Mr. McCaw in November 1997, was exercised in July 2001
for an aggregate cash purchase price of $108 million.

In connection with these equity investments, we
reached an agreement with Digital Radio and Mr. McCaw on a
number of matters relating to the ownership, acquisition and
disposition of our class A convertible redeemable preferred
stock and our class B convertible preferred stock,
including without limitation, the granting of registration and
antidilutive rights to Digital Radio and specified affiliates
and limitations on investments by Digital Radio and its
affiliates in excess of about 45% of our voting securities. Also
in July 1995, pursuant to agreements between Digital Radio and
Motorola entered into in connection with the original securities
purchase agreement, Digital Radio purchased shares of our
class A common stock from Motorola and Motorola granted to
Digital Radio options to purchase additional shares of our
class A common stock held by Motorola, all of which have
been exercised or have expired.

Concurrently with the execution of the securities
purchase agreement with Digital Radio and Mr. McCaw, we
entered into a management support agreement with Eagle River,
Inc., a controlled affiliate of Digital Radio, pursuant to which
Eagle River provides management and consulting services to us,
our Board of Directors and the Operations Committee from time to
time as requested. In consideration of the services to be
provided to us under the management support agreement, we agreed
to pay Eagle River up to $200,000 per year and entered into an
incentive option agreement granting to Eagle River the option to
purchase an aggregate of 2.0 million shares of our class A
common stock at an exercise price of $6.13 per share. This
option expires in April 2005 and is presently exercisable in
full.

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As a result of distributions, transfers and
option exercises, at December 31, 2001, Mr. McCaw and
his affiliates beneficially owned about 17.4 million shares
of our class A common stock, about 7.7 million shares
of our class A preferred stock convertible into about
46.2 million shares of our class A common stock, 82
shares of our class B preferred stock and options to
purchase up to an aggregate of 2.0 million shares of our
class A common stock at a price of $6.13 per share.
Assuming the exercise of the options held by
Mr. McCaws affiliates and the conversion of the
series A preferred stock into common stock, McCaw and his
affiliates as of December 31, 2001, owned securities
representing about 8% of our class A common stock.

Pursuant to the original securities purchase
agreement, as amended in 2001 (as discussed below), our
certificate of incorporation and our by-laws, we, Digital Radio
and Mr. McCaw have established certain arrangements
relating to our corporate governance associated with those
investments, including, without limitation, matters relating to
Digital Radios right to elect a minimum of three
representatives to our Board of Directors, or that greater
number of directors representing not less than 25% of all of the
members of the Board of Directors. Presently, Mr. McCaw,
Mr. Dennis Weibling and Mr. Timothy Bryan are our
directors appointed pursuant to these rights. We also agreed to
create a five-member Operations Committee of the Board of
Directors, and Digital Radio is entitled to have a majority of
the members of this committee selected from among its
representatives on the Board of Directors.

The Operations Committee has the authority to
formulate key aspects of our business strategy, including
decisions relating to the technology we use, acquisitions,
operating and capital budgets, marketing and strategic plans,
approval of financing plans and endorsement of nominees to the
Board of Directors and its committees, as well as nomination and
oversight of certain executive officers. Currently,
Mr. McCaw is the Chairman of the Operations Committee. If a
majority of the members of the Board of Directors who are
independent of Mr. McCaw vote to override actions taken, or
proposed to be taken, by the Operations Committee, there are no
consequences to us. If the Board of Directors acts to revoke or
terminate the Operations Committee, a $25 million
liquidated damages payment must be made to Digital Radio, except
in specified circumstances.

The securities purchase agreement with
Mr. McCaw, our certificate of incorporation and our by-laws
also delineate a number of circumstances, chiefly involving or
resulting from some events with respect to Digital Radio or
Mr. McCaw, in which the Operations Committee could be
terminated but the liquidated damages payment would not be
required. Upon the occurrence of specified events, including the
failure of Digital Radio, Mr. McCaw and his controlled
affiliates to own at least 5% of the voting power of our equity
securities (assuming conversion of the class A preferred stock),
the shares of class A preferred stock are automatically
converted into shares of class A common stock. In addition,
shares of class A preferred stock are automatically
converted into shares of class C preferred stock on a
one-for one basis upon the occurrence of specified events,
including the reduction of Digital Radios ownership
interest in the class A preferred stock below 51% of
the then outstanding class A preferred stock or foreclosure
by a secured party upon shares of class A preferred stock
pledged to that secured party.

The shares of class A preferred stock are
redeemable at our option, and the shares of class B
preferred stock are mandatorily convertible, in the event of a
change of control of our company, as defined in the terms of
that stock. Further, Mr. McCaw and Digital Radio have
agreed that, subject to limited exceptions, including existing
securities holdings and relationships, until one year after the
termination of the Operations Committee, none of Mr. McCaw,
Digital Radio or their controlled affiliates will participate in
other two-way terrestrial-based mobile wireless communications
systems in any part of North America or South America, unless
those opportunities first have been presented to and waived or
rejected by us in accordance with the provisions of the
securities purchase agreement.

The amendment of the securities purchase
agreement in 2001 involved the elimination of the requirement
that Digital Radio and its affiliates maintain ownership of a
specified amount of the securities they had acquired, as well as
Mr. McCaws commitment to personally serve as a
director until the Operations Committee is terminated. Because
the terms of the class A preferred stock were not amended, and
because Digital Radio no longer meets the ownership maintenance
requirements of the terms of the

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class A preferred stock, if our Board were
to override or terminate the Operations Committee, Digital Radio
could no longer claim any entitlement to dividends on the
class A preferred stock, and the class A preferred
stock also would convert into shares of our class A common
stock. If we had not entered into the amendment, as a result of
distributions by Digital Radio and its affiliates in July 2001,
our Board could have terminated the Operations Committee as
early as October 2001 without triggering the $25 million
payment or the dividend accrual. This action would also have
caused the conversion of the class A preferred stock into
class A common stock. However, one year after we terminate
the Operations Committee, Mr. Caw, Digital Radio and their
controlled affiliates would be able to participate in other
two-way terrestrial-based mobile wireless communications systems
in North America and South America without first
presenting us the opportunity to participate. If our board had
acted to terminate the Operations Committee in October 2001,
Mr. McCaw, Digital Radio and their controlled affiliates
would have been able to exclude us from any such opportunities
from and after October 2002.


2. Motorola.In July 1995, we acquired all of Motorolas 800 MHz
SMR licenses in the continental United States in exchange
for 83.3 million shares of our class A common stock
and 35.7 million shares of our nonvoting class B
common stock. Motorola now owns 72.5 million shares of our
class A common stock and 35.7 million shares of our
nonvoting class B common stock, which together represent
about 14% of our common stock. As a result of the agreement
relating to that acquisition, Motorola has the right to nominate
two persons for election as members of our Board of Directors.
Motorola has exercised this right only with respect to one
director, Mr. Keith Bane. The agreements relating to the
acquisition of Motorolas SMR licenses also provided for
the purchase by us of a portion of Motorolas equity
interest in Clearnet Communications, Inc. We purchased this
equity interest in exchange for 5.0 million shares of our
class A common stock, and we subsequently transferred this
equity interest to NII Holdings. These shares have since
been sold by NII Holdings. See
E. NII Holdings, Inc.

We also are party to agreements with Motorola
pursuant to which we purchase Motorola infrastructure equipment
and handsets and other services. Motorola is the sole source for
all of the handsets used on our digital mobile network and the
principal supplier of the infrastructure equipment used to
provide our communications services. We rely on Motorola for
network maintenance and enhancement. See G. Our Digital
Mobile Network and Services  3. Technology
commitments and K. Risk Factors.

In July 1995, Motorola sold to Digital Radio
shares of our class A common stock and granted Digital
Radio options to purchase additional shares of our class A
common stock. The final tranche of options for 10.0 million
shares expired unexercised in the third quarter of 2001. In
addition, Motorola has granted Digital Radio a right of first
offer or a right of first refusal to purchase shares of common
stock that are owned by Motorola.

I.  Regulation

We are a specialized mobile radio, or SMR,
operator regulated by the FCC. The FCC also regulates in whole
or part the licensing, construction, operation and acquisition
of all other wireless telecommunications systems in the United
States, including cellular and PCS operators.
SMR regulations have undergone significant changes during
the last decade and continue to evolve to become more like
cellular and PCS regulations as new FCC rules are
adopted. We now are generally subject to the same FCC rules
and regulations as cellular and PCS operators. Cellular,
PCS and SMR operators are known collectively as commercial
mobile radio services, or CMRS, providers.

Within the limitations of available spectrum and
technology, SMR operators are authorized to provide mobile
communications services to business and individual users,
including mobile telephone, two-way radio dispatch, paging and
mobile data and Internet services. We use iDEN technology,
developed by Motorola, to deliver these services. Unlike some
other digital transmission technologies, iDEN can be deployed on
non-contiguous frequency holdings. This benefits us because many
of our 800 MHz channel holdings are composed of
non-contiguous channels, which are unavailable for use by PCS or
cellular operators. While iDEN offers a number of advantages in
relation to other technology platforms, unlike

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other wireless technologies, it is a proprietary
technology that relies solely on the efforts of Motorola and any
future licensees of this technology for further research and
continuing technology and product development and innovation.


1. Licensing.We and Nextel Partners currently hold about 26 MHz of
spectrum in the 700, 800 and 900 MHz bands in our
geographic markets, though we primarily operate in 800 MHz
spectrum to provide service to our customers. The FCC regulates
the licensing, construction, operation, acquisition and sale of
our CMRS business and spectrum holdings pursuant to the
Communications Act, as amended from time to time, and the
FCCs associated rules, regulations and policies.
FCC requirements impose operating and other restrictions on
our business that increase our costs. The FCC does not currently
regulate CMRS rates and states are legally preempted from
regulating CMRS rates and entry.

We hold several kinds of licenses to deploy
800 MHz SMR channels in digital mode. We hold thousands of
these licenses, which together allow us to provide coverage
across the continental United States. Our 700, 800 and
900 MHz licenses are subject to requirements that we meet
population coverage benchmarks tied to their initial license
grant dates. For most of our licenses, within three years of the
license grant date, we must provide coverage to one third of the
population in the licensed area, and within five years of the
grant date, we must cover two thirds of the population in the
licensed area or make a showing of substantial
service. Some of our licenses were required to be
operational within one year of license grant. On May 25,
2001, we received an extension of the build-out requirements for
some of our 900 MHz licenses until December 31, 2002.
Our 700 MHz licenses have no specific build-out
requirements but we must show substantial service by the license
expiration date. To date, we have met all of the construction
milestones applicable to our licenses except in the case of
licenses that are not material to our business.

When the FCC initially licensed SMR spectrum
in the 1970s, different channels and parts of the spectrum band
were allocated for commercial, business and industrial/land
transportation, and public safety use. In late 1999, we were
granted a waiver of some of the FCCs rules, which
permitted us to integrate a limited number of business and
industrial/land transportation channels into our digital mobile
network to be used as commercial channels. These channels
provide us additional capacity in some urban markets. This
ability to obtain 800 MHz spectrum from business and
industrial/land transportation licensees was expanded on
November 9, 2000, when the FCC adopted rules effective
March 2, 2001, that allow existing non-commercial
SMR licensees to transfer or assign their channels to
commercial providers like us for use in a commercial system.
This rule change created new opportunities for us to acquire
additional spectrum in the 800 MHz band. The FCC is
considering whether to permit similar assignments from
900 MHz non-commercial licensees to commercial operators.

Our 800 and 900 MHz licenses have a 10-year term
and our 700 MHz licenses have a 15-year term, at the end of
which each must be renewed. The FCC allows renewal
expectancies, which are presumptions that the licenses
will be renewed to a 700, 800 or 900 MHz licensee that has
provided substantial service during its past license term and
has substantially complied with applicable FCC rules and
policies and the Communications Act.

On November 21, 2001, we filed a proposal
with the FCC that would result in a more efficient use of
spectrum through the realignment of spectrum licenses in the
700, 800 and 900 MHz bands. If adopted, the proposal would
separate the channel blocks used by cellular and commercial
SMR licensees from the channel blocks used by public safety
licensees. See G. Our Digital Mobile Network and
Services  7. Public safety spectrum initiative.

In some cases we use common carrier
point-to-point microwave facilities to connect the transmitter,
receiver, and signaling equipment for cell sites, and to link
them to the main switching office. The FCC licenses these
facilities separately and they are subject to regulation as to
technical parameters and service.

Our business is subject to certain Federal
Aviation Administration regulations governing the location,
lighting, and construction of transmitter towers and antennas
and may be subject to regulation under

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Federal environmental laws and the FCCs
environmental regulations. State or local zoning and land use
regulations also apply to our activities.


2. New spectrum opportunities,
spectrum auctions, and third generation wireless
services.In 1997, the FCC
auctioned the upper 200 channels of the SMR band in
three blocks (20 channels, 60 channels and
120 channels) per economic area, or EA,
throughout the U.S. in an auction referred to as the upper
200 channel auction. These licenses permit the licensee to
construct and operate base stations on any authorized channel
throughout the licensed geographic area and to make system
modifications within the licensed area without prior
FCC approval, thus providing the same operational
flexibility provided to cellular and PCS licensees. We were
the high bidder on 475 of the 525 EA licenses auctioned at
the upper 200 channel auction, covering areas in all
50 states. As described above, our system must cover
one-third of the population of each licensed EA within three
years and two-thirds of the population of the economic area
within five years, and we must construct 50% of our
licensed channels in at least one location within each EA within
three years. We met our required benchmarks in 2001 for all of
our material licenses, and given our existing constructed analog
and digital mobile network, our 2003 build-out requirement
already has been achieved in a substantial number of the EAs.

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

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

In January 2002, the FCC auctioned a few licenses
for 800 MHz SMR spectrum that were not awarded in the
December 2000 lower 800 MHz auction. Nextel was the high
bidder on 18 licenses for $1.3 million. These licenses
consist of 25 channel blocks. The build-out requirements on
these 800 MHz licenses are the same as the licenses
purchased in December 2000.

In February 2001, the FCC concluded its auctions
of 6 MHz of spectrum in the 700 MHz band, also
referred to as the guard band. In two 700 MHz
guard band auctions, we paid $346 million for
40 licenses. Each license is for 4 MHz of spectrum.
These FCC licenses are issued for a period of 15 years and
are subject to unique operational requirements, including
eligibility and use restrictions, as well as interference
protection requirements that generally will preclude their use
for CMRS. Additionally, there are FCC restrictions on the amount
of spectrum in this band we can use. We plan to meet all
requirements necessary to secure the retention and renewal of
these FCC licenses and we must report periodically to the FCC
concerning any spectrum use or leasing arrangements we have
executed.

Other spectrum located in the 700 MHz
spectrum band, which can be used for a broad variety of
commercial applications, is presently scheduled for auction by
the FCC beginning June 19, 2002. However, previously
scheduled auctions for this spectrum have already been postponed
and we cannot be sure these auctions will take place as
scheduled. Currently, incumbent television licensees are
operating on both blocks of this 700 MHz band spectrum.
Under current FCC rules, these licensees are not required
to relinquish these channels until 2006 at the earliest,
limiting the usefulness of this spectrum for other purposes,
including CMRS service, until that time or later.

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In January 2001, the FCC completed an auction of
additional spectrum that can be used for providing commercial
mobile radio services. The FCC auctioned reclaimed C and
F block PCS licenses, including those initially awarded to
NextWaveCommunications, Inc. and some of its affiliates
which were cancelled by the FCC after NextWavefailed to
make timely payments of its government installment loans as
required by the terms of the licenses awarded. We participated,
but did not obtain any licenses, in that auction. In June 2001,
the United States Court of Appeals for the District of
Columbia Circuit found that the FCC had improperly cancelled the
NextWavelicenses. The FCC returned the licenses to
NextWaveand sought further judicial review. The Supreme
Court recently agreed to review the issues involved in the
litigation. This likely will further delay a final resolution as
to whether NextWaveor the auction winners will
ultimately hold the licenses, unless a settlement is reached
earlier. These matters are still pending and it is not possible
at this time to predict their impact, if any, on Nextel.

In January 2001, the FCC issued a Notice of
Proposed Rulemaking requesting comment on the use of certain
spectrum bands for third generation or 3G wireless
services. The FCC also sought comment on whether third
generation services could be provided over the frequency bands
currently allocated to cellular, PCS and SMR services. A Further
Notice of Proposed Rulemaking was issued August 20, 2001,
seeking comment on whether additional bands might be suitable
for third generation services. In October 2001, the National
Telecommunications and Information Administration, or NTIA, and
the FCC announced a plan for the assessment of spectrum
available for third generation services. Specifically, the plan
examines the potential use of the 1710-1770 and the 2110-2170
MHz bands.

In January 2002, the FCC released a Report and
Order reallocating 27 MHz of spectrum that was previously
reserved primarily for federal government uses to a variety of
non-federal government uses, including private and commercial
fixed and mobile operations. These reallocations could provide
opportunities for advanced wireless services. Licenses for
operation on three of the spectrum bands comprising the
27 MHz  216-220 MHz, 1432-1435 MHz and
1670-1675 MHz bands  must be auctioned by
September 30, 2002. In February 2002, the FCC released a
Notice of Proposed Rulemaking proposing a flexible licensing,
technical and operating framework, as well as competitive
bidding and interference standards for the 27 MHz of
reallocated spectrum. Generally, the bands identified are
encumbered by existing governmental or commercial users, and
there are substantial unresolved transitional issues related to
the relocation of these incumbents. We cannot predict when or
whether the FCC will conduct any spectrum auctions or if it will
release additional spectrum that might be useful to the wireless
industry in the future.

On August 9, 2001, the FCC adopted a Notice
of Proposed Rulemaking seeking comment on proposals by New ICO
Global Communications (Holdings) Ltd., a controlled affiliate of
Mr. McCaw, and Motient Services, Inc. to allow mobile
satellite service providers to supplement service to their
customers through the incorporation of a wireless ancillary
terrestrial component into their mobile satellite networks. This
proceeding is still pending and it is not possible at this time
to predict the success of this initiative or its impact, if any,
on Nextel.

3. Spectrum caps and secondary
spectrum markets.Under the
FCCs current rules specifying spectrum aggregation limits
applicable to most CMRS providers, no entity may hold
attributable interests in licenses for more than 55 MHz of
applicable spectrum. However, no more than 10 MHz of SMR
spectrum in the 800 and 900 MHz SMR service bands can
be attributed to one entity under existing rules. Moreover,
700 MHz licenses do not count toward the spectrum cap.
Accordingly, only 10 MHz of SMR spectrum is attributed
to us in any one geographic area for purposes of the cap, which
means that in most markets we could acquire up to an additional
45 MHz of CMRS spectrum before reaching the cap.

The FCC has voted to eliminate the spectrum cap
rule effective January 1, 2003. Following the elimination
of the spectrum cap, the FCC will evaluate the spectrum
aggregation caused by commercial wireless transactions on a
case-by-case basis to determine whether a particular transaction
will result in too much concentration in the affected wireless
markets. It is widely believed that the FCCs action may
facilitate consolidation in the commercial wireless industry;
however, it is not known at this point what guidelines or
procedures the FCC will use to evaluate commercial wireless
transactions on a case-by-case

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basis or how such guidelines will affect the
speed with which transaction applications are processed at the
FCC.


In November 2000, the FCC adopted a policy
statement and Notice of Proposed Rulemaking suggesting ways to
promote the development of secondary markets in radio spectrum.
The FCC tentatively concluded that spectrum licensees should be
permitted to enter into leasing agreements with third parties to
encourage greater use of underutilized spectrum. If the FCC
adopts liberal spectrum leasing rules, we may have increased
access to spectrum from parties who are willing to lease, but
not sell, their spectrum.

4. 911
services.Pursuant to a 1996 FCC
Order, CMRS providers, including Nextel, are required to provide
Enhanced 911 or E911 services to their
customers. The Phase I E911 solution, which Nextel
began deploying in April 1998, requires wireless carriers
911 emergency calls to transmit (a) the callers
telephone number and (b) the location of the cell site from
which the call is being made, to the designated public safety
answering point. The Phase II E911 solution, which the
FCC required to be deployed by October 1, 2001, requires
the transmission of a more accurate location using either
network-based or handset-based location technologies.

On November 9, 2000, we informed the FCC
that Nextel would deploy a handset-based location technology
known as assisted global positioning system or A-GPS
technology in order to comply with the Phase II
E911 requirements. However, like every other wireless
carrier, Nextel sought a waiver of the Phase II
E911 requirements because we were unable to comply with the
required deadlines. We asked to begin implementation of our
Phase II capabilities in October 2002, one year after the
FCCs initial deadline. However, wireless callers cannot
benefit from Phase II E911 until public safety answering
points upgrade their networks.

The FCC granted our implementation timetable and
required us to file quarterly reports on the status of our
Phase I and Phase II implementation, the first of
which was filed on February 1, 2002. Pursuant to the
FCCs grant of our waiver request, we are required to
commence deployment of Phase II-capable service on
October 1, 2002. However, as we have selected a
handset-based technology solution, the benefits of these
E911 services will only become available as customers
purchase new location-capable handsets. The FCC required us to
meet interim handset penetration benchmarks to ensure that 95%
of our entire customer base is using an A-GPS-enabled handset by
December 31, 2005. Because the FCC did not mandate carrier
cost recovery for Phase II E911, related technical changes
to the iDEN handset and infrastructure could add significantly
to our costs to the extent we are unable to recover those costs.
In 2002, we began charging some customers an additional amount
to recover some costs associated with Phase II E911.

Motorola is our sole supplier of handsets and we
are dependent on Motorola to provide the handset based location
technology solution. Nonetheless, the FCC appears to have held
Nextel responsible for meeting the Phase II deadlines, even
in the event Motorola is unable to produce the necessary
handsets and infrastructure on a timely basis. As a result, we
have sought reconsideration of that portion of the FCCs
waiver decision.

On December 14, 2000, the FCC released a
decision establishing June 20, 2002, as the deadline by
which digital wireless service providers must be capable of
transmitting 911 calls made by users with speech or hearing
disabilities using text telephone devices. We believe we will be
able to comply with this requirement.

5. Numbering.The FCC and state communications commissions have been
increasingly aggressive in their efforts to conserve the
telephone numbers that carriers assign to their customers. These
efforts may disproportionately impact wireless service providers
by imposing additional costs or limiting access to telephone
numbers. Like other telecommunications carriers, we must have
access to telephone numbers to serve our new customers. In order
to promote the efficient allocation and use of telephone numbers
by all

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telecommunications carriers, in March and
December 2000 and in December 2001, the FCC adopted the
following rules:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Carriers must meet specified handset number usage
	thresholds before they can obtain additional telephone numbers.
	The threshold for 2001 required carriers to show that they were
	using 60% of all numbers assigned to them in a particular
	geographic area. This threshold will increase by 5% a year until
	it reaches 75% in 2004. The FCC has adopted a safety
	valve mechanism that could permit carriers to obtain new
	telephone numbers under certain circumstances even if they do
	not meet the usage thresholds.                                                                                                                                                                                         
|
| |  | Carriers must share blocks of telephone numbers,
	a requirement known as number pooling. Under number
	pooling, numbers previously assigned in blocks of 10,000 will be
	assigned in blocks of 1,000, which significantly increases the
	efficiency of number assignment. This requirement applies to all
	carriers, but wireless providers have until November 24,
	2002 to comply. The FCCs December 2001 order denied a
	request to defer this deadline. In connection with the number
	pooling requirement, the FCC also adopted rules intended to
	increase the availability of blocks of 1,000 numbers, including
	a requirement that numbers be assigned sequentially within
	existing blocks of 10,000 numbers.
|
| |  | Carriers must provide detailed reports on their
	number usage, and the reports will be subject to third-party
	audits. Carriers that do not comply with reporting requirements
	are ineligible to receive new telephone numbers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

The FCC also has shown a willingness to delegate
to the states a larger role in number conservation. Examples of
state conservation methods include number pooling and number
rationing. The FCCs number conservation rules could
benefit or harm us and other telecommunications carriers, either
individually or in the aggregate, by causing increased costs and
regulatory expense.

Wireless providers also are subject to a
requirement that they implement telephone number portability,
which enables customers to maintain their telephone numbers when
they change carriers. Number portability already is available to
most landline customers and the FCC has set a deadline of
November 24, 2002, for wireless providers to implement
portability for their customers in certain markets.
Implementation of these requirements will cause significant
network upgrade costs for all wireless carriers; however, the
competitive effect of number portability is unknown. Verizon
Wireless has filed a petition seeking elimination of the number
portability requirement for wireless services. This petition
remains pending at the FCC. In 2002, we began charging some
customers an additional amount to recover some costs associated
with number portability.

6. Motor vehicle
restrictions.A number of states
and localities are considering banning or restricting the use of
wireless phones while driving a motor vehicle. In 2001, New York
enacted a statewide ban on driving while holding a wireless
phone and similar legislation is pending in other states.
Officials in a handful of communities have enacted ordinances
banning or restricting the use of wireless phones by drivers.
Should this become a nationwide initiative, all wireless
carriers could experience a decline in the number of minutes of
use by subscribers. States continue to consider restrictions on
wireless phone use while driving, and some states also are
beginning to collect data on whether wireless phone use
contributes to traffic accidents. On the federal level, the
National Transportation Safety Board is considering whether it
should recommend limiting the use of mobile phones in vehicles.

7. Health
concerns.On January 10,
2001, the United States Supreme Court denied a petition for
review of the FCC guidelines for health and safety standards of
radio frequency radiation. The guidelines, which were adopted by
the FCC in 1996, limit the permissible human exposure to radio
frequency radiation from wireless transmission equipment and
handset facilities. On December 11, 2001, the FCCs
Office of Engineering and Technology or OET
dismissed a Petition for Inquiry filed by EMR Network to
initiate a proceeding to revise the FCCs radio frequency
guidelines. On January 10, 2002, EMR petitioned the FCC to
overturn the OETs decision and open an inquiry. The
Institute of Electrical and

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Electronics Engineers currently is preparing a
new radio frequency standard, but it has not yet been made
public.


Media reports have suggested that, and studies
are currently being undertaken to determine whether, certain
radio frequency emissions from wireless handsets may be linked
to various health problems, including cancer, and may interfere
with various electronic medical devices, including hearing aids
and pacemakers. Concerns over radio frequency emissions may have
the effect of discouraging the use of wireless handsets, which
would decrease demand for our services. However, various studies
have found no evidence that cell phones cause cancer, although
one of the reports indicated that further study might be
appropriate as to one rare form of cancer. The National Cancer
Institute, nonetheless, cautioned that the studies have
limitations, given the relatively short amount of time cellular
phones have been widely available. Conversely, most recently, in
January 2002, one study concluded that under extended exposure
conditions, certain radio frequency emissions are capable of
inducing chromosomal damage in certain human cells. Additional
studies of radio frequency emissions are ongoing, including a
federal government funded research program in North Carolina.
The ultimate findings of these studies will not be known until
they are completed and made public. Class-action lawsuits are
also pending against several wireless carriers, including us,
and manufacturers to force wireless carriers to supply
hands-free devices with phones and to compensate customers who
have purchased radiation-reducing devices. See
Item 3. Legal Proceedings.

8. Electronic
surveillance.In 1994, Congress
enacted the Communications Assistance for Law Enforcement Act,
known as CALEA. CALEA requires telecommunications
carriers, including us, to upgrade their networks so the Federal
Bureau of Investigation and other law enforcement agencies can
continue performing lawful wiretaps of telecommunications users
as the carriers transition from analog to digital technology.
For example, it required carriers to give law enforcement the
capability of determining a wireless callers geographic
location at the beginning and end of a wireless call. The FCC
has granted several industry-wide extensions of the deadline
governing the core phase of CALEA compliance.

We have signed two cooperative agreements with
the Federal Bureau of Investigation to bring our interconnect
and dispatch networks into compliance with CALEA. The agreements
essentially confirm the validity of our CALEA software
solutions, arrange for the deployment of the solutions in our
networks, and provide cost recovery for some of our CALEA
hardware costs. We have already installed and deployed the
required core CALEA capabilities in our interconnect network
pursuant to the interconnect cooperative agreement and are now
working to enhance our interconnect network with certain
additional required capabilities. As a result, we are in full
compliance with CALEA for purposes of our interconnect network.
We have also installed and deployed all required CALEA
capabilities in our digital dispatch network pursuant to a
digital dispatch cooperative agreement and have therefore
brought our digital dispatch network into full compliance with
CALEA. Additional wireless carrier obligations to assist law
enforcement agencies were adopted in response to the
September 11 terrorist attacks as part of the USA Patriot
Act. We are in compliance with these additional requirements.

On September 28, 2001 the FCC issued a
public notice governing the CALEA compliance deadlines for those
carriers such as Nextel that operated packet mode communications
networks. Pursuant to the public notice, we filed to extend the
packet mode compliance deadline to November 19, 2003, and
the extension was automatically granted pending FBI approval of
the installation and deployment schedule. We are now working
with our primary equipment vendor, Motorola, to design and
implement a compliant packet mode solution. We will probably
bear all the costs of development, installation and deployment
of this solution because the FBI does not interpret CALEA as
mandating government cost recovery for bringing packet mode
networks into compliance.

9. Transfers and assignments of SMR
licenses.The Communications Act
and FCC rules require the FCCs prior approval of the
assignment or transfer of control of an FCC license.
Non-controlling interests in an entity that holds a FCC license
generally may be bought or sold without FCC approval, subject to
the FCCs spectrum aggregation limits. However, we may be
required to seek approval of the Federal

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Trade Commission and the Department of Justice,
as well as state or local regulatory authorities having
jurisdiction, if we sell or acquire spectrum interests over a
certain size.


10. Truth in
Billing.The FCCs Truth in
Billing rules generally require CMRS licensees such as us to
provide full and fair disclosure of all charges on their
wireless bills, display a toll-free phone number to call for
billing questions, and identify any third-party service
providers whose charges appear on the bill.

Twenty-two states have commenced inquiries
examining the billing and advertising practices of certain
nationwide wireless carriers. On October 29, 2001, North
Carolina served Nextel with a letter inquiry requesting certain
documents related to our billing and advertising practices in
that state. Nextel fully complied with the informational request
and the inquiry remains pending.

11. Foreign
ownership.Under existing law, no
more than 20% of an FCC licensees capital stock may be
owned, directly or indirectly, or voted by non-U.S. citizens or
their representatives, by a foreign government or its
representatives or by a foreign corporation. In certain
corporate structures, like ours, up to 25% of a
corporations capital stock may be owned or voted by non-US
citizens or their representatives, by a foreign government or
its representatives or by a foreign corporation. Foreign
ownership above the 25% level may be allowed should the FCC find
such higher levels not inconsistent with the public interest.
The FCC has ruled that higher levels of foreign ownership, even
up to 100%, are presumptively consistent with the public
interest with respect to investors from certain nations. If our
foreign ownership were to exceed the permitted level, the FCC
could revoke our FCC licenses, although we could seek a
declaratory ruling from the FCC allowing the foreign ownership
or take other actions to reduce our foreign ownership percentage
to avoid the loss of our licenses. We have no knowledge of any
present foreign ownership in violation of these restrictions.

12. Miscellaneous federal
regulations.Each of the following
existing and potential regulatory obligations could increase the
costs of our, and our competitors, operations.

As is true for cellular and PCS operators, the
interconnection of subscriber calls from our network with the
public switched telephone network requires us to obtain certain
exchange and interexchange services from telephone companies. In
1996, the FCC established, and the U.S. Supreme Court generally
upheld, a national regulatory framework that sets pricing
standards and negotiation and arbitration guidelines for
interconnection agreements with incumbent local exchange
carriers, known as ILECs. Most significantly, the agreements
entitle interconnecting carriers such as us to reciprocal
compensation for local calls originated on an ILEC network
and terminated on our network. Previously, we were forced to
compensate the ILECs for their termination services but ILECs
refused to pay us for terminations of their local traffic. We
have renegotiated our interconnection agreements with all major
ILECs to take advantage of these reciprocal compensation rights.

On April 27, 2001, the FCC released a Notice
of Proposed Rule Making to reexamine the current
telecommunications intercarrier compensation scheme, including
the reciprocal compensation arrangements between ILECs and CMRS
carriers. The proposed rules would essentially create a
bill and keep arrangement in which each carrier
would bill its own customers for interconnection services rather
than collect payments from interconnecting carriers. Nextel
filed comments supporting the bill and keep proposal. If
adopted, the new system could potentially reduce Nextels
interconnection costs, as well as the costs of administering the
current system. The proceeding remains pending.

On November 8, 2001, the FCC issued a public
notice inviting comments on an intercarrier compensation dispute
between a CMRS carrier and long-distance company that could have
broad implications for both industries. The CMRS carrier seeks
express FCC approval to collect access charges from the
long-distance company, just as local exchange carriers currently
collect from long-distance companies, for the transport and
termination of interexchange calls. Nextel filed comments
supporting the CMRS carriers position, and the proceeding
remains pending. If the FCC upholds the right to impose CMRS
access charges, CMRS carriers such as Nextel could add to their
intercarrier compensation revenue.

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Under the FCCs rules, wireless providers
are potentially eligible to receive universal service subsidies;
however, they are also required to contribute to both federal
and state universal service funds. The rules adopted by the FCC
in its universal service orders require telecommunications
carriers generally (subject to limited exemptions) to fund
existing universal service programs for high cost carriers and
low income customers and to fund new universal service programs
to support services to schools, libraries and rural health care
providers. On January 25, 2002 and February 26, 2002,
respectively, the FCC initiated two universal service
proceedings relevant to all telecommunications providers,
including us: one concerns what services universal service funds
can be used to support and the other addresses how universal
service mandatory contributions from customers are assessed and
recovered by carriers. Regardless of our ability to receive
universal service funding for the supported services we provide,
we are required to fund these Federal programs based on our
end-user telecommunications revenue and also are required to
contribute to some state universal service programs.

Section 255 of the Communications Act
requires telecommunications carriers such as Nextel, and
manufacturers of telecommunications equipment such as Motorola,
to make their products and services accessible to and usable by
person with disabilities to the extent these measures are
readily achievable. Pursuant to this mandate, Nextel and
Motorola have developed and marketed a variety of products and
services to facilitate access to Nextels wireless network
by persons with disabilities. If the FCC requires the wireless
industry to improve accessibility on a unilateral basis by
redesigning their digital phones, Motorola has advised us that
the requirements may not be technologically feasible and that
any related technical changes to the iDEN handset could add
significantly to its cost of production.

In addition, a Notice of Proposed Rulemaking
currently is pending at the FCC regarding whether mobile phones
should be hearing aid compatible. Although no technical
standards have been developed for wireless hearing aid
compatibility, the FCC solicited comments on what technical
standards should be adopted if the FCC decides that mobile
phones must be hearing aid compatible. We are unable at this
point to predict the outcome of this proceeding.

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

The issue of wireless subscriber privacy,
particularly relating to location tracking, has been implicated
in some of the FCCs wireless proceedings, including those
relating to its E911 and CALEA mandates. The FCC has adopted
rules limiting the use of customer proprietary network
information by telecommunications carriers, including us, in
marketing a broad range of telecommunications and other services
to their customers and the customers of affiliated companies.
For example, we are prohibited from using customer account
information to market non-wireless products and services to our
customers without their consent. While the rules require that
carriers notify their customers regarding their privacy
policies, the rules give wireless carriers discretion to use
customer proprietary network information, without customer
approval, to market all information services used in the
provision of wireless services. The FCC is seeking, through a
new proceeding, additional information regarding customer
privacy interests and whether FCC rules should require
affirmative opt-in or opt-out approvals by customers for
customer proprietary network information use beyond the scope of
the existing service relationship.

The FCC has determined that the interstate,
interexchange offerings (commonly referred to as
long-distance) of wireless carriers are subject to
the interstate, interexchange rate averaging and integration
provisions of the Communications Act. Rate averaging and
integration requires carriers to average interstate
long-distance CMRS rates between high cost and urban areas, and
to offer comparable rates to all customers, including those
living in Alaska, Hawaii, Puerto Rico, and the U.S. Virgin
Islands. The U.S. Court of Appeals for the District of Columbia
Circuit, however, rejected the FCCs application of these
requirements to wireless carriers, remanding the issue to the
FCC to consider further whether wireless

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carriers should be required to average and
integrate their long-distance rates across all U.S. territories.
This proceeding remains pending, but the FCC has stated that the
rate averaging and integration rules will not be applied to
wireless carriers during the pendency of the proceeding.


13. State regulation and local
approvals.The Communications Act
preempts state and local regulation of the entry of, or the
rates charged by, any provider of private mobile radio service
or of CMRS. The Communications Act permits states to regulate
the other terms and conditions of CMRS. The FCC has
not clearly defined what is meant by the other terms and
conditions of CMRS, but has upheld the legality of state
universal service requirements on CMRS carriers. The FCC also
has held that private lawsuits based on state law claims
concerning how wireless rates are promoted or disclosed may not
be preempted by the Communications Act.

State and local governments are permitted to
manage public rights of way and can require fair and reasonable
compensation from telecommunications providers so long as the
compensation required is publicly disclosed by the government.
The siting of cells and base stations also remains subject to
state and local jurisdiction, although proceedings are pending
at the FCC relating to the scope of that authority. States also
may impose competitively neutral requirements that are necessary
for universal service or to defray the costs of state E911
services programs, to protect the public safety and welfare, to
ensure continued service quality and to safeguard the rights of
customers.

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

J.  Employees

At February 28, 2002, we had about 13,400
full-time domestic employees, and about 3,600 full-time
employees of NII Holdings and its subsidiaries. None of our
employees are covered by a collective bargaining agreement, and
we believe that our relationship with our employees is good.

K.  Risk Factors



| |    |                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------
| | 1. | We have a history of net losses and
	negative cash flow and may never be able to generate net
	income.

Since we began operations in 1987, we have never
generated sufficient cash flow from operations to fund our
business and its expansion. If we cannot achieve profitability,
we may not be able to meet our debt service, working capital,
capital expenditure or other cash needs. Based on our current
business plan, we expect that losses will continue through 2003
as we build, expand and enhance our digital mobile network. See
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations 
E. Future Capital Needs and Resources. We cannot know
when, if ever, our cash flows from our internal business
operations will support our growth and continued operations. We
had losses attributable to common stockholders of
$2.86 billion during 2001. Our accumulated deficit was
$9.18 billion at December 31, 2001.



| |    |                                                                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | We have substantial indebtedness and if we
	cannot obtain additional funds when needed, we may not be able
	to implement our long-term business plan.

Our long-term cash needs may be much greater than
our cash on hand and availability under our existing financing
agreements. The level of our outstanding debt greatly exceeds
the level of our revenues and stockholders equity. As of
December 31, 2001, we had about $14.87 billion of
total domestic long-term debt outstanding, including
$9.35 billion of senior notes, $4.5 billion under our
bank credit facility

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and $1.0 billion under capital lease and
finance obligations. Also outstanding at December 31, 2001
were $2.11 billion in mandatorily redeemable preferred
stock obligations.


We may not be able to raise additional financing
when needed, on acceptable terms or at all. As a result, we
cannot be sure that we will have adequate capital to:



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | implement future expansion and enhancement of our
	digital mobile network, including any enhanced iDEN services to
	expand wireless voice capacity, enhanced data services or any
	deployment of third generation or 3G
	mobile wireless services;
|
| |  | maintain our anticipated levels of growth;                                                                                                                                                                                                            
|
| |  | meet our debt service requirements; or                                                                                                                                                                                                                
|
| |  | pursue strategic acquisitions or other
	opportunities to increase our spectrum holdings, including those
	that may be necessary to support or provide 3G mobile wireless
	services.                                                                   

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

Our bank credit facility as in effect on
December 31, 2001 provided for total secured financing
capacity of up to $6.0 billion, provided we satisfy
financial and other conditions. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations  E. Future Capital
Needs and Resources. As of December 31, 2001, we had
borrowed $4.5 billion of this secured financing. The
continued availability of funds under our term loans and our
ability to access the remaining availability under our revolving
loan commitment is limited by various financial covenants and
ratios, including the ratio of our total debt to operating cash
flow, as defined under the bank credit facility. Our ability to
access the remaining availability is also subject to the
satisfaction of covenants under indentures relating to our
public notes and other conditions. Our access to additional
funds also may be limited by:



| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | the terms of our existing financing agreements,
	including restrictive covenants;                                        
|
| |  | existing debt service requirements;                                                                                      
|
| |  | market conditions affecting the
	telecommunications industry in general;                                                 
|
| |  | the terms of options and other convertible
	securities issued to others, that may make equity financings
	more difficult;
|
| |  | the potential commercial opportunities and risks
	associated with implementation of our business plan;                   
|
| |  | the markets perception of our performance
	and assets; and                                                              
|
| |  | the actual amount of cash we need to pursue our
	business strategy.                                                      



| |    |                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------
| | 3. | Reorganization efforts at our subsidiary,
	NII Holdings, Inc., may cause us to experience adverse
	results.

Our substantially wholly owned subsidiary, NII
Holdings, Inc., is currently in default under several of its
material debt agreements as a result of its failure to make
scheduled interest and principal payments and is attempting to
restructure its currently outstanding indebtedness. NII Holdings
provides wireless communication services under the Nextel brand
name primarily in selected Latin American markets. At
December 31, 2001, NII Holdings had available cash
resources of $250 million and total aggregate debt of
$2.67 billion. NII Holdings has announced that it does not
intend to make additional principal or interest payments under
any of its outstanding debt while continuing its restructuring
activities. NII Holdings creditors currently are free to
pursue their respective remedies against NII Holdings as a
result of the defaults under the affected agreements, including,
in the case of vendor and bank financing facilities, seizing the
assets of NII Holdings and its subsidiaries that are pledged as
collateral. The obligations under

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this indebtedness are solely those of NII
Holdings and its subsidiaries. Nextel Communications is not a
party to any of these obligations.


Our 2001 consolidated financial statements
reflect charges in the amount of about $1.75 billion
resulting principally from the write-down of the carrying value
of long-lived assets of NII Holdings as a result of its revised
capital-constrained business plan and its decision to
discontinue funding to its Philippine operating company. In
addition, NII Holdings independent auditors have issued a
going concern opinion with respect to NII
Holdings financial statements, which indicates that, in
their opinion, substantial doubt exists about NII Holdings
ability to continue operating. NII Holdings currently is in
discussions with its creditors regarding restructuring its debt
obligations. If NII Holdings is unable to obtain additional
funding and negotiate a successful debt restructuring, NII
Holdings may have to further write-down its assets, sell
strategic assets, reorganize under Chapter 11 of the U.S.
Bankruptcy Code or take other measures, including liquidation of
its assets. Any of these could have a material adverse effect on
us. In addition, public relations aspects of any NII Holdings
bankruptcy proceeding may adversely affect our ability to add
new customers or other aspects of our operating performance.

Under certain circumstances, we may elect to
provide up to an additional $250 million to NII Holdings.
See E. NII Holdings, Inc. This may increase our
overall cash needs and will result in a lesser amount of cash
availability to us for domestic use.



| |    |                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. | NII Holdings foreign operations are
	subject to foreign regulation and international economic forces,
	which presents risks to our consolidated financial
	results.

NII Holdings international operations are
subject to foreign regulation and depend upon foreign economies,
which presents additional risks relating to:



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | political, economic and social conditions in the
	foreign countries where NII Holdings conducts operations;                                                                               
|
| |  | currency risks and exchange controls, for
	example, the continuing devaluation of the Brazilian and
	Argentine currencies and the ongoing debt restructuring by the
	Argentine government;
|
| |  | potential inflation in the applicable foreign
	economies;                                                                                                                                 
|
| |  | the impact of import duties on the cost or prices
	of infrastructure equipment and handsets;                                                                                              
|
| |  | foreign taxation of earnings and payments
	received by NII Holdings from its operating subsidiaries; and                                                                                  
|
| |  | regulatory changes affecting the
	telecommunications industry and wireless communications.                                                                                                



| |    |                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------
| | 5. | Our existing financing agreements contain
	covenants and financial tests that limit how we conduct
	business.

As a result of restrictions contained in our
financing agreements, we may be unable to raise additional
financing, compete effectively or take advantage of new business
opportunities. This may affect our ability to generate revenues
and profits. Among other matters, we are restricted in our
ability to:



| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | incur or guarantee additional indebtedness,
	including additional borrowings under existing financing
	arrangements;
|
| |  | pay dividends and make other distributions;                                                                         
|
| |  | pre-pay subordinated indebtedness;                                                                                  
|
| |  | make investments and other restricted payments;
	and                                                                
|
| |  | sell assets.                                                                                                        

Under our bank credit facility, we also are
required to maintain specified financial ratios and satisfy
financial tests. Borrowings under the bank credit facility are
secured by liens on assets of substantially all of our domestic
subsidiaries. Our inability to meet these ratios and other tests
may result in a default

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under our bank credit facility, which would have
material adverse effect on us because, if were unable to
negotiate an amendment or a waiver, we would be required to
repay all amounts then outstanding.




| |    |                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | We may not be able to obtain additional or
	contiguous spectrum, which may adversely impact our ability to
	implement our long-term business plan.

We may seek to acquire additional or contiguous
spectrum through negotiated purchases, in government-sponsored
auctions of spectrum or otherwise. We may not be able to
accomplish any spectrum acquisition or the necessary additional
capital for that spectrum may not be available on acceptable
terms, or at all. If sufficient additional capital is not
available, to the extent we are able to complete any spectrum
acquisition, the amount of funding available to us for our
existing businesses would be reduced. Even if we are able to
acquire spectrum, we still may require additional capital to
finance the pursuit of any new business opportunities associated
with our acquisitions of additional spectrum, including those
necessary to support or provide third generation or
3G wireless services. This additional capital may not be
available.

We cannot be sure that any government-sponsored
spectrum auctions will occur or, if so, on their currently
announced schedules. We also cannot be sure whether we will be a
successful bidder and will be awarded spectrum licenses in any
auction or what amounts would be required to be bid to prevail
in any auction.



| |    |                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 7. | If we are not able to compete effectively
	in the highly competitive wireless communications industry, our
	future growth and operating results will suffer.

There are currently six national wireless
communications services providers, including Nextel. Our ability
to compete effectively with these providers and other
prospective wireless communications service providers depends on
the following factors, among others.



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

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



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



| |    |                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | B. | Our channels of distribution for our digital
	mobile network products and services are not as extensive as
	some of our competitors, which may limit our ability to compete
	effectively.

Since many of our competitors have established
long-standing extensive networks of retail locations and
multiple distribution channels, they have access to more
potential customers than we do. Although in 2001 we acquired a
substantial number of the distribution outlets previously
operated by Lets Talk Cellular & Wireless, Inc., at
this early stage of our ownership and operation of these and
other Nextel stores, we cannot predict what proportion of our
new customers will come through this new distribution channel.
We also cannot guarantee that we will achieve the anticipated
benefits of this new distribution channel to the degree or on
the schedule that we hope to achieve them.

In addition, as we have expanded our subscriber
base by increased handset sales through indirect distribution
channels, as price competition in the wireless industry has
intensified and as our product and service offerings have begun
to attract increasing numbers of individual and non-business
customers, our average revenue per handset has decreased and may
continue to decrease and our customer retention has been and in
the future may be adversely affected.

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| |    |                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------
| | C. | We may be limited in our ability to grow
	unless we expand system capacity and improve the efficiency of
	our business systems and processes.

Our subscriber growth and operating performance
may be adversely affected unless we are able to timely and
efficiently meet the demands for our services and address
increased demands on our customer service, billing and accounts
receivable collection functions. While we believe our new
customer care and billing system, expected to be fully
implemented in 2002, will assist us in these processes, we
cannot be sure that this new system will provide us with the
improvements we expect. To increase our number of subscribers,
we must:



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | expand the capacity of our digital mobile network;                                                                               
|
| |  | potentially obtain additional spectrum in some or
	all of our markets;                                                           
|
| |  | 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.                                

The risk that we are unable to obtain sufficient
equipment is exacerbated by our agreement to proportionally
allocate this equipment with NII Holdings and Nextel Partners if
there is an equipment shortage. Additionally, customer reliance
on our customer care functions will increase as we add customers
through channels not involving direct face-to-face contact with
a sales representative, such as web sales or tele-sales. We
recently outsourced many aspects of our customer care function
and cannot be sure that this outsourcing will not exacerbate
these risks.



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

Because of their resources and, in some cases,
ownership by larger companies, some of our competitors may be
able to offer services to customers at prices that are below the
prices that we can offer for comparable services. If we cannot
compete effectively based on the price of our service offerings,
our revenues and growth may be adversely affected.



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

Over the past several years, as the intensity of
competition among wireless communications providers has
increased, our and our competitors prices have generally
decreased. If this trend continues, it may be increasingly
difficult for us to remain competitive. We may encounter further
market pressures to:



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to migrate existing customers to lower
	priced service offering packages;                                                                                          
|
| |  | restructure our digital 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.



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

We currently market multi-function digital
handsets only available from one supplier. The higher cost of
these handsets, as compared to analog handsets and digital
handsets that do not incorporate a similar multi-function
capability and are available from multiple suppliers, may make
it more difficult or less profitable for us to attract
customers. In addition, the higher cost of our handsets requires
us to absorb part of the cost of offering handsets to new and
existing customers. These increased costs and handset subsidy
expenses may reduce our growth and profitability.

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

Our digital mobile network uses scattered,
non-contiguous spectrum frequencies. Because of their fragmented
character, these frequencies traditionally were only usable for
two-way radio calls, such as those used to dispatch taxis and
delivery vehicles. We became able to use these frequencies to
provide a wireless telephone service competitive with cellular
carriers only when Motorola developed a proprietary technology
called iDEN. We are currently the only national U.S. wireless
service provider utilizing iDEN technology, and iDEN handsets
are not currently designed to roam onto other domestic wireless
networks.

The wireless telecommunications industry is
experiencing significant technological change. Future
technological advancements may enable other wireless
technologies to equal or exceed our current levels of service
and render iDEN technology obsolete. If Motorola is unable or
unwilling to upgrade or improve iDEN technology or develop other
technology to meet future advances in competing technologies on
a timely basis, or at an acceptable cost, we may not be able to
compete effectively and could lose customers to our competitors.
In addition, competition among the differing wireless
communications technologies could:



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



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

Our digital mobile network does not provide the
extensive roaming coverage that is available through some of our
competitors. The coverage areas of these other providers include
areas where our network, or that of our affiliate Nextel
Partners, has not been built or will not be built. In addition,
some of our competitors provide their customers with handsets
with both digital and analog capability, which expands their
coverage, while we have only digital capability. We may not,
either alone or together with Nextel Partners, be able to
achieve comparable system coverage with some of our competitors.
If a sufficient number of customers or potential customers are
not willing to accept system coverage limitations as a trade-off
for our multi-function wireless communications package, our
operating results will be adversely affected.



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

We offer our subscribers access to wireless data
and Internet services, marketed under the brand name Nextel
Wireless Web. Unless these services perform satisfactorily, are
utilized by a sufficient number of our subscribers and produce
sufficient levels of customer satisfaction, our results may be
adversely affected. Because we have less spectrum than some of
our competitors and because we have elected to defer the
deployment of third generation or 3G technology, any wireless
data and Internet services that we offer could be significantly
limited compared to those services offered by other wireless
communications providers.

We expect that our wireless data and Internet
capabilities will allow us to perform fulfillment and other
customer support services more economically, differentiate
ourselves from our competitors and realize a source of future
incremental revenue. However, these benefits may not counter the
impact of increasing competition in our markets and the related
pricing pressure on basic wireless voice services. We also may
not successfully realize these goals if:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | we are unable to offer these new services
	profitably;                                                     
|
| |  | these new service offerings adversely impact the
	performance or reliability of our digital mobile network;
|
| |  | we or third-party developers fail to develop new
	applications for our customers; or                       

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| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | we otherwise do not achieve a satisfactory level
	of customer acceptance and utilization of these services.

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



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

Based on our current outlook, we anticipate
eventually deploying advanced digital technology that will allow
high capacity wireless voice and higher speed data transmission,
and potentially other advanced digital services. The technology
that we would deploy to provide these types of broadband
wireless services is sometimes referred to as third generation
or 3G. We are currently engaging in activities that we believe
will enhance our flexibility and preparedness to deliver 3G
capabilities while seeking to maximize the return on our
investment by continuing to fully utilize our iDEN digital
mobile network.

Significant capital requirements are involved in
implementing third generation technology. However, we may not
have sufficient capital to deploy this technology. There also
can be no guarantee that this technology will provide the
advantages that we expect. The actual amount of the funds
required to finance and implement this technology may
significantly exceed managements current estimate.
Further, any future implementation could require additional
unforeseen capital expenditures in the event of unforeseen
delays, cost overruns, unanticipated expenses, regulatory
changes, engineering design changes, equipment unavailability
and technological or other complications. Finally, as there are
several types of third generation technologies that may not be
fully compatible with each other or with other currently
deployed digital technologies, if the type of technology that we
choose to deploy does not gain widespread acceptance or perform
as expected, our business may be adversely affected.



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

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



| |    |                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------
| | L. | If Nextel Partners experiences financial or
	operational difficulties, our business may be adversely
	affected.

Nextel Partners operates a digital mobile network
compatible with ours in numerous mid-sized and tertiary markets.
If Nextel Partners experiences financial or operational
difficulties in its portion of the digital mobile network, the
ability of our customers to roam on their network may be
impaired. In that event, our ability to attract and retain
customers who want to access subscribers on Nextel
Partners portion of the network may be adversely affected.



| |    |                                                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 8. | Regulatory and other factors could delay or
	prevent us from offering services in new market areas, which
	could limit our access to new customers and affect our
	growth.

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

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| |    |                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------
| | 9. | Government regulations determine how we
	operate, which could increase our costs and limit our growth and
	strategy plans.

The Federal Communications Commission regulates
the licensing, operation, acquisition and sale of our business.
We must meet build-out requirements within specified time
limitations to retain our licenses. Future changes in regulation
or legislation and Congress and the Federal Communications
Commissions continued allocation of additional spectrum
for CMRS, which include SMR, cellular or PCS, could impose
significant additional costs on us either in the form of direct
out of pocket costs or additional compliance obligations. For
example, compliance with regulations requiring us to provide
public safety organizations with caller location information
could materially increase our cost of doing business to the
extent that we are unable to recover some or all of these costs
from our customers. Further, if we fail to comply with
applicable regulations, we may be subject to sanctions, which
may have a material adverse effect on our business. These
regulations also can have the effect of introducing additional
competitive entrants to the already crowded wireless
communications marketplace. It is possible that we may face
additional regulatory prohibitions or limitations on our
services. If any new regulations prohibit us from providing
planned services, it could be more difficult for us to compete.
Finally, we cannot be certain that we or the wireless industry
in general may not be subject to litigation should a situation
arise in which damage or harm occurs as a result of interference
between a commercial licensee like us and a public safety
licensee, such as a 911 emergency operator.

Further, some state and local jurisdictions have
adopted legislation restricting or prohibiting the use of
portable communications devices while driving motor vehicles.
For example, the State of New York has enacted a statute that
makes it unlawful to use a handheld mobile telephone while
driving. If similar laws are enacted in other jurisdictions, we
may experience reduced subscriber usage and demand for our
services which could have a material adverse effect on our
results of operations.



| |     |                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------
| | 10. | We are susceptible to control by
	significant stockholders, whose interests may conflict with
	ours.

Motorola and entities controlled by
Mr. McCaw hold significant blocks of our outstanding stock
and have the ability to exert significant influence over our
affairs. An affiliate of Mr. McCaw may designate at least
one fourth of our Board of Directors, including a majority of
the Operations Committee of our Board, which has significant
authority relating to our business strategy, budgets, financing
arrangements and in the nomination and oversight of specified
executive officers. Presently, three of the ten members of our
Board of Directors are designees of Mr. McCaws
affiliates. Under its agreements with us, Motorola may nominate
two directors to our Board.

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

If Mr. McCaw and Motorola act together, they
have a sufficient number of members on our Board of Directors
and voting interest in us to exert significant influence over
various aspects of our business, as well as over:



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

As a result, this concentration of ownership may
have the effect of delaying or preventing an attempt to acquire
us, even if that would be in the best interests of our
stockholders.

Mr. McCaw and his affiliates have, and may,
subject to some limitations, acquire additional, investments in
entities that provide wireless telecommunications services that
could potentially compete with us. However, under relevant
agreements, Mr. McCaw and his controlled affiliates may
not, until one

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year after the termination of our Operations
Committee, participate in other two-way terrestrial-based mobile
wireless communications systems in any part of North America or
South America unless these opportunities have first been
presented to and waived or rejected by us.




| |     |                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | 11. | Because we rely on one supplier to
	implement our digital mobile network, any failure of that
	supplier to perform could adversely affect our
	operations.

Motorola is currently our sole source for most of
the digital mobile network equipment and all of the handsets we
use. If Motorola fails to deliver system infrastructure and
handsets or enhancements on a timely, cost-effective basis, we
may not be able to adequately service our existing subscribers
or add new subscribers. Furthermore, in the event Motorola
determined not to continue manufacturing, supporting or
enhancing our iDEN based infrastructure and handsets, we may be
materially adversely affected. We expect to continue rely
principally on Motorola or its licensees for the manufacture of
a substantial portion of the equipment necessary to construct,
enhance and maintain our iDEN digital mobile network and handset
equipment for the next several years. We are also relying on
Motorola to provide us with technology improvements and
enhancements designed to expand our wireless voice capacity,
which are expected to become available beginning in 2003. These
enhancements and improvements are necessary to maintain the
competitiveness of and the necessary capacity on our digital
network. However, Motorola may not deliver these enhancements
and improvements within our anticipated timeframe if at all or
they may not provide the advantages that we expect.



| |     |                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------
| | 12. | Agreements with Motorola reduce our
	operational flexibility and may adversely affect our growth or
	operating results.

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

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



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

Portable communications devices have been alleged
to pose health risks, including cancer, due to radio frequency
emissions from these devices. Purported class actions and other
lawsuits have been filed against numerous wireless carriers,
including us, seeking not only damages but also remedies that
could increase our cost of doing business. While we cannot
predict the outcome of this litigation and intend to vigorously
defend against these claims, we cannot be sure that our business
and financial condition will not be adversely affected by this
litigation or public perception. The actual or perceived risk of
mobile communications devices could adversely affect us through
a reduction in subscribers, reduced network usage per
subscriber, or reduced financing available to the mobile
communications industry. Further research and studies are
ongoing, and we cannot be sure that these studies will not
demonstrate a link between radio frequency emissions and health
concerns.

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

We have entered into a contractual joint venture
regarding our ownership interests in and arrangements with
Nextel Partners, and may enter into other joint ventures or
similar arrangements in the future. These arrangements are
subject to uncertainties, including risks that:



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



| |     |                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 15. | Our commitments to issue additional common
	stock and general conditions in the wireless communications
	industry may affect the price of our common stock and impair our
	ability to raise capital.

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

In addition, general conditions in the wireless
communications industry or specific competitors results,
including potential slowing of new subscriber additions,
declining average revenue per subscriber or increased customer
dissatisfaction, may adversely affect the market price of our
common stock and, as a result, could impair our ability to raise
additional capital through the sale of our equity securities or
convertible securities.



| |     |                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------
| | 16. | We have significant intangible assets,
	which may not be adequate to satisfy our obligations in the
	event of a liquidation.

If we default on debt or if we were liquidated,
the value of our assets may not be sufficient to satisfy our
obligations. We have a significant amount of intangible assets,
such as licenses granted by the FCC. The value of these licenses
will depend significantly upon the success of our digital mobile
network business and the growth of the specialized mobile radio
and wireless communications industries in general. We had a net
tangible book value deficit of $6.6 billion as of
December 31, 2001.



| |     |                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | 17. | Our forward looking statements are subject
	to a variety of factors that could cause actual results to
	differ materially from current beliefs.

Safe Harbor Statement under the
Private Securities Litigation Reform Act of
1995:A number of statements made in,
or incorporated by reference into, this annual report are not
historical or current facts, but deal with potential future
circumstances and developments. They can be identified by the
use of forward looking words such as believes,
expects, plans, may,
will, would, could,
should, or anticipates or other
comparable words, or by discussions of strategy that may involve
risks and uncertainties. We caution you that these forward
looking statements are only predictions, which are subject to
risks and uncertainties including technological uncertainty,
financial variations, changes in the regulatory environment,
industry growth and trend predictions. The operation and results
of our wireless

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communications business may be subject to the
effect of other risks and uncertainties in addition to those
outlined in the above Risk Factors section,
including, but not limited to:




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




Item 2.     Properties

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

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has an initial lease term of 10 years,
expiring July 10, 2009, with four five-year renewal
options. A summary of our major leased facilities as of
December 31, 2001 is as follows:


|                        |  |             |         |                    |  |  |               | 
|----------------------- |  | ----------- | ------- | ------------------ |  |  | ------------- | 
|Location                |  | Square feet |         | Year of Expiration
|                        |  |             |         |                   
|Reston, Virginia        |  |             | 330,000 |                    |  |  | 2009          | 
|Denver, Colorado        |  |             | 114,000 |                    |  |  | 2004          | 
|Englewood, Colorado     |  |             | 140,000 |                    |  |  | 2008          | 
|Hampton Roads, Virginia |  |             | 160,000 |                    |  |  | 2009 and 2010 | 
|Herndon, Virginia       |  |             | 132,000 |                    |  |  | 2013          | 
|McLean, Virginia        |  |             | 129,000 |                    |  |  | 2006          | 
|Irvine, California      |  |             | 117,000 |                    |  |  | 2005          | 
|Rutherford, New Jersey  |  |             | 116,000 |                    |  |  | 2008          | 
|Temple, Texas           |  |             | 109,000 |                    |  |  | 2015          | 
|Farmington, Michigan    |  |             | 108,000 |                    |  |  | 2008          | 
|Norcross, Georgia       |  |             | 105,000 |                    |  |  | 2005          | 

None of the expiration dates for these leases
include extensions related to the exercise of renewal options.
Under our customer relationship management agreement with IBM
and Teletech, we expect to transition some of our customer care
operations to different locations and therefore expect to vacate
or sublease some of the facilities mentioned above. We also
lease smaller office facilities for sales, maintenance and
administrative operations in our markets. We have about 220 of
these leases in effect at December 31, 2001, generally with
terms ranging from 1 to 15 years, not including
extensions related to the exercise of renewal options.

As of December 31, 2001, we also leased
facilities for about 55 mobile switching offices. These
leases all have at least ten-year initial terms, typically with
renewal options, and range between 15,000 and 45,000 square
feet. In 2001, we initiated operations in about
200 locations. These kiosks and small store locations
typically have leases of less than five years and involve less
than 1,000 square feet.

We lease transmitter and receiver sites for the
transmission of our radio service under various individual site
leases as well as master site lease agreements. The terms of
these leases generally range from month-to-month to
20 years. As of December 31, 2001, we had about 15,500
constructed sites at leased locations in the United States for
our digital mobile network. We also own properties and a limited
number of transmission towers where management considers it
advisable.




Item 3.     Legal
Proceedings

On April 19, 2001, a purported class action
lawsuit was filed in the Circuit Court in Baltimore, Maryland by
the Law Offices of Peter Angelos, and subsequently in other
state courts in Pennsylvania, New York and Georgia by
Mr. Angelos and other firms, alleging that wireless
telephones pose a health risk to users of those telephones and
that the defendants failed to disclose these risks. We, along
with numerous other companies, are defendants in these cases.
The defendants have removed the cases to federal court, and the
plaintiffs have filed motions to remand back to state court in
some of the cases. Mr. Angelos firm has also
participated in the filing of an amended complaint in a similar
suit pending in federal court in Louisiana, in which we are also
named. These suits seek to require the defendants to provide
headsets, or reimburse the cost of headsets, for use with
wireless telephones, as well as attorneys fees and
punitive damages. The cases have been transferred to Federal
court in Baltimore, Maryland by the judicial panel on
Multi-district Litigation. While we cannot predict the outcome
of this litigation, we believe that the claims against us are
without merit and intend to vigorously defend against them.

Beginning in 2000, allegations against us of
employment discrimination and harassment were reported in the
press, and thereafter, a group of current and former employees
filed some related complaints with the Equal Employment
Opportunity Commission. Those complaints were subsequently
withdrawn. In September 2000, as a result of negotiations with
counsel for the claimants, we agreed on a mutually acceptable
arrangement for processing and resolving all of the claims. We
have resolved or settled

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substantially all of these claims, which has
involved payments in an aggregate amount that was not material
to us.


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




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

No matters were submitted to a vote of our
security holders during the fourth quarter of 2001.

Executive Officers of the Registrant

The following people are serving as our executive
officers as of March 28, 2002. These executive officers
were elected to serve until their successors have been elected.
There is no family relationship between any of our executive
officers or between any of these officers and any of our
directors.

Timothy M. Donahue.Mr. Donahue is 53 years old
and has served as our Chief Executive Officer since July 1999.
Mr. Donahue also has served as President since joining us
in February 1996 and also served as Chief Operating Officer from
February 1996 until July 1999. Mr. Donahue has served as
one of our directors since June 1996. From 1986 to January 1996,
Mr. Donahue held various senior management positions with
AT&T Wireless Services, Inc., including Regional President
for the Northeast. Mr. Donahue serves as a director of NII
Holdings, Nextel Partners, SpectraSite Holdings, Inc., and
Eastman Kodak Company.

James F. Mooney.Mr. Mooney is 47 years old
and has served as Executive Vice President and Chief Operating
Officer since April 2001. From January 2000 until joining
Nextel, Mr. Mooney was Chief Executive Officer of Tradeout
Inc, an Internet based business-to-business asset management
company. From April 1999 to January 2000, Mr. Mooney served
as Senior Vice President and Chief Financial Officer of Baan
Company. From May 1996 to March 1999, Mr. Mooney served as
Chief Financial Officer of IBM, Americas, a subsidiary of
International Business Machines Corporation.

Paul N. Saleh.Mr. Saleh is 45 years old and has served as Executive
Vice President and Chief Financial Officer since September 2001.
From June 1999 to August 2001, Mr. Saleh served as Senior
Vice President and Chief Financial Officer of Disney
International, a subsidiary of The Walt Disney Company. From
April 1997 to June 1999, Mr. Saleh served as Senior Vice
President and Treasurer of The Walt Disney Company. Prior to
joining The Walt Disney Company, Mr. Saleh worked for
twelve years with Honeywell Inc., where he was most recently
Vice President and Treasurer.

Morgan E. OBrien.Mr. OBrien is 57 years
old and has served as Vice Chairman of our Board of Directors
since March 1996. Mr. OBrien also has been one of our
directors since co-founding Nextel in 1987. From 1987 to March
1996, Mr. OBrien served as Chairman of our Board of
Directors and from 1987 to October 1994, Mr. OBrien
also served as our General Counsel. Mr. OBrien serves
as a director of Williams Communications Group, Inc.

Thomas N. Kelly, Jr.Mr. Kelly is 54 years old,
joined us in April 1996 and serves as Executive Vice President,
Marketing & Strategic Planning. Between 1993 and 1996,
Mr. Kelly was Regional Vice President of Marketing for
AT&T Wireless. Prior to joining AT&T Wireless,
Mr. Kelly worked for twelve years with the marketing
consulting firm of Howard Bedford Nolan, where he was most
recently an Executive Vice President.

Barry J. West.Mr. West is 56 years old,
joined us in March 1996 and serves as Executive Vice President
and Chief Technology Officer. Previously, Mr. West served
in various senior positions with British Telecom plc for more
than five years, most recently as Director of Value-Added
Services and Corporate Marketing at Cellnet, a cellular
communications subsidiary of British Telecom.

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Leonard J. Kennedy.Mr. Kennedy is 50 years old
and since January 2001 has served as Senior Vice President and
General Counsel. From 1995 until January 2001, Mr. Kennedy
was a member of the law firm Dow, Lohnes & Albertson,
specializing in telecommunications law and regulatory policy.

William G. Arendt.Mr. Arendt is 44 years old
and has served as our Vice President and Controller since
joining us in May 1997. From June 1996 until joining us,
Mr. Arendt was Vice President and Controller for Pocket
Communications, Inc., a PCS company. From September 1992 until
June 1996, he was Controller for American Mobile Satellite
Corporation. Previously, Mr. Arendt worked for thirteen
years at Ernst & Young LLP.

Steven M. Shindler.Mr. Shindler is 39 years
old, and since March 2000 has served as the Chief Executive
Officer of NII Holdings. From May 1996 until December 2000,
Mr. Shindler served as our Executive Vice President and
Chief Financial Officer. Between 1987 and 1996,
Mr. Shindler was an officer with Toronto Dominion Bank,
where most recently he was a Managing Director in its
Communications Finance Group. Mr. Shindler also serves as a
director of NII Holdings and SpectraSite.

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PART II




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

A.  Market for Common
Stock

Our class A common stock is traded on the
Nasdaq National Market under the trading symbol
NXTL. The following table lists, on a per share
basis for the periods indicated, the high and low sale prices
for the common stock as reported by the Nasdaq National Market
for the periods indicated:

|              |  |                                     |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|------------- |  | ----------------------------------- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|              |  |                                    
|              |  | Quarterly Common Stock Price Ranges
|              |  | Year Ended December 31,            
|              |  |                                    
|              |  |                                     |       |     
|              |  | 2001                                |       | 2000
|              |  |                                     |       |     
|Quarter Ended |  | High                                |       | Low  |  | High |       | Low
|              |  |                                     |       |      |  |      |       |    
|March 31      |  | $                                   | 38.63 |      |  | $    | 11.75 |     |  | $ | 82.94 |  |  | $ | 45.63 | 
|June 30       |  |                                     | 20.35 |      |  |      | 11.19 |     |  |   | 75.22 |  |  |   | 37.47 | 
|September 30  |  |                                     | 18.40 |      |  |      | 7.85  |     |  |   | 73.00 |  |  |   | 41.31 | 
|December 31   |  |                                     | 12.31 |      |  |      | 6.87  |     |  |   | 46.75 |  |  |   | 22.63 | 

B.     Number of
Stockholders of Record

As of March 15, 2002, there were about 3,700
holders of record of our class A common stock. We have the
authority to issue shares of nonvoting common stock, which are
convertible on a share-for-share basis into shares of
class A common stock. As of March 15, 2002, there was
a single stockholder of record holding all of the 35,660,000
outstanding shares of nonvoting common stock.

C.     Dividends

We have not paid any dividends on our common
stock and do not plan to pay dividends on our common stock for
the foreseeable future. The indentures governing our public
notes and our bank credit agreement and other financing
documents prohibit us from paying dividends, except in
compliance with specified financial covenants, and limit our
ability to dividend cash from the subsidiaries that operate our
digital mobile network to Nextel Communications. While these
restrictions are in place, any profits generated by these
subsidiaries may not be available to us for payment of dividends.

We anticipate that for the foreseeable future any
cash flow generated from our operations will be used to develop
and expand our business and operations. Any future determination
as to the payment of dividends on our common stock will be at
the discretion of our Board of Directors and will depend upon
our operating results, financial condition and capital
requirements, contractual restrictions, general business
conditions and other factors that our Board of Directors deems
relevant. There can be no assurance that we will pay dividends
on our common stock at any time in the future. After specified
dates, we will be obligated to pay cash dividends on our
series D preferred stock and series E preferred stock.




Item 6.  Selected Financial
Data

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

Change in accounting
principle.On January 1,
2000, we changed our revenue recognition policy in accordance
with the Securities and Exchange Commissions Staff
Accounting Bulletin, or SAB, No. 101, Revenue
Recognition in Financial Statements. We have accounted for
the adoption of SAB No. 101 as a change in accounting
principle effective January 1, 2000, and therefore have not
restated the financial statements of years prior to 2000.
Additional information regarding this accounting change can be
found in note 1 to the consolidated financial statements
appearing at the end of this annual report on Form 10-K.

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

Restructuring and impairment
charges.As more fully discussed
in note 3 to the consolidated financial statements appearing at
the end of this annual report on Form 10-K, restructuring
and impairment charges in 2001 represent:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $22 million domestic restructuring charge
	in the second quarter of 2001 related to a 5% workforce
	reduction and streamlining of operations; and                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | for NII Holdings, aggregate charges of about
	$1.75 billion, including $147 million in non-cash
	pretax asset impairment charges in the third quarter of 2001
	related to discontinued funding to NII Holdings Philippine
	operating company and about $1.6 billion in non-cash pretax
	asset impairment charges and pretax restructuring and other
	charges in the fourth quarter of 2001 related to NII
	Holdings revised business plan to pursue a less aggressive
	growth strategy that targets conservation of cash resources.

Other (expense) income,
net.As more fully discussed in
note 5 to the consolidated financial statements appearing at the
end of this annual report on Form 10-K, other
(expense) income, net in 2000 includes a $275 million
gain realized from the exchange of our stock in Clearnet for
stock in TELUS as a result of the acquisition of Clearnet by
TELUS. Other income (expense), net in 2001 includes a
$188 million charge related to the other-than-temporary
reduction in the fair value of our investment in TELUS offset by
a $42 million gain realized on our subsequent sale of this
investment. Other (expense) income, net in 2001 also includes a
$70 million foreign currency transaction loss primarily
related to the weakening of the Brazilian real relative to the
U.S. dollar.

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

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

|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |        |  
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------- | ------ | ------ | - | ---- | ----- | ------ | - | ---- | ----- | ------ | - | - | ----- | ------ | - | - | ----- | ------ | -
|                                                                                       |                                                                     |                                        
|                                                                                       |                                                                     | Year Ended December 31,                
|                                                                                       |                                                                     |                                        
|                                                                                       |                                                                     | 2001                                    |        | 2000   |   | 1999 |       | 1998   |   | 1997
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |     
|                                                                                       |                                                                     |                                        
|                                                                                       |                                                                     | (in millions, except per share amounts)
|STATEMENT OF OPERATIONS DATA:                                                          |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|Operating revenues                                                                     |                                                                     | $                                       | 7,689  |        |   | $    | 5,714 |        |   | $    | 3,786 |        |   | $ | 2,295 |        |   | $ | 985   |       
|Cost of revenues                                                                       |                                                                     |                                         | 2,869  |        |   |      | 2,172 |        |   |      | 1,579 |        |   |   | 1,218 |        |   |   | 686   |       
|Selling, general and administrative                                                    |                                                                     |                                         | 3,020  |        |   |      | 2,278 |        |   |      | 1,672 |        |   |   | 1,297 |        |   |   | 711   |       
|Restructuring and impairment charges                                                   |                                                                     |                                         | 1,769  |        |   |      |      |        |   |      |      |        |   |   |      |        |   |   |      |       
|Depreciation and amortization                                                          |                                                                     |                                         | 1,746  |        |   |      | 1,265 |        |   |      | 1,004 |        |   |   | 832   |        |   |   | 526   |       
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|                                                                                       | Operating loss                                                      |                                         |        | (1,715 | ) |      |       | (1     | ) |      |       | (469   | ) |   |       | (1,052 | ) |   |       | (938   | )
|Interest expense, net                                                                  |                                                                     |                                         | (1,196 | )      |   |      | (849  | )      |   |      | (782  | )      |   |   | (622  | )      |   |   | (378  | )     
|Other (expense) income, net                                                            |                                                                     |                                         | (318   | )      |   |      | 106   |        |   |      | (47   | )      |   |   | (37   | )      |   |   | 7     |       
|Income tax benefit (provision)                                                         |                                                                     |                                         | 135    |        |   |      | 33    |        |   |      | 28    |        |   |   | 192   |        |   |   | (259  | )     
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|                                                                                       | Loss before extraordinary item                                      |                                         |        | (3,094 | ) |      |       | (711   | ) |      |       | (1,270 | ) |   |       | (1,519 | ) |   |       | (1,568 | )
|Extraordinary item  gain
	(loss) on early retirement of debt, net of income tax of $0 |                                                                     |                                         | 469    |        |   |      | (104  | )      |   |      | (68   | )      |   |   | (133  | )      |   |   | (46   | )     
|Mandatorily redeemable preferred stock dividends                                       |                                                                     |                                         | (233   | )      |   |      | (209  | )      |   |      | (192  | )      |   |   | (149  | )      |   |   | (29   | )     
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|                                                                                       | Loss attributable to common stockholders                            |                                         | $      | (2,858 | ) |      | $     | (1,024 | ) |      | $     | (1,530 | ) |   | $     | (1,801 | ) |   | $     | (1,643 | )
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|Loss per share attributable to common
	stockholders, basic and diluted:                |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|                                                                                       | Loss before extraordinary item attributable to
	common stockholders |                                         | $      | (4.27  | ) |      | $     | (1.21  | ) |      | $     | (2.29  | ) |   | $     | (2.99  | ) |   | $     | (3.21  | )
|                                                                                       | Extraordinary item                                                  |                                         |        | 0.60   |   |      |       | (0.14  | ) |      |       | (0.10  | ) |   |       | (0.24  | ) |   |       | (0.09  | )
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|                                                                                       |                                                                     | $                                       | (3.67  | )      |   | $    | (1.35 | )      |   | $    | (2.39 | )      |   | $ | (3.23 | )      |   | $ | (3.30 | )     
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       
|Weighted average number of common shares
	outstanding                                  |                                                                     |                                         | 778    |        |   |      | 756   |        |   |      | 639   |        |   |   | 557   |        |   |   | 498   |       
|                                                                                       |                                                                     |                                         |        |        |   |      |       |        |   |      |       |        |   |   |       |        |   |   |       |       

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|                                                                                           |  |               |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |       | 
|------------------------------------------------------------------------------------------ |  | ------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ----- | 
|                                                                                           |  |              
|                                                                                           |  | December 31, 
|                                                                                           |  |              
|                                                                                           |  | 2001          |        | 2000 |  | 1999 |        | 1998 |  | 1997
|                                                                                           |  |               |        |      |  |      |        |      |  |     
|                                                                                           |  |              
|                                                                                           |  | (in millions)
|BALANCE SHEET DATA:                                                                        |  |               |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |       | 
|Cash, cash equivalents and short-term
	investments, including restricted portion           |  | $             | 3,801  |      |  | $    | 4,674  |      |  | $    | 5,808  |  |  | $ | 321    |  |  | $ | 433   | 
|Property, plant and equipment, net                                                         |  |               | 9,274  |      |  |      | 8,791  |      |  |      | 6,152  |  |  |   | 4,915  |  |  |   | 3,226 | 
|Intangible assets, net                                                                     |  |               | 6,067  |      |  |      | 5,982  |      |  |      | 4,889  |  |  |   | 5,183  |  |  |   | 4,875 | 
|Total assets                                                                               |  |               | 22,064 |      |  |      | 22,686 |      |  |      | 18,410 |  |  |   | 11,573 |  |  |   | 9,228 | 
|Debt of NII Holdings, nonrecourse to and not held
	by parent(1)                            |  |               | 1,865  |      |  |      | 2,519  |      |  |      | 1,549  |  |  |   | 1,257  |  |  |   | 600   | 
|Domestic long-term debt, capital lease and
	finance obligations, including current portion |  |               | 14,865 |      |  |      | 12,212 |      |  |      | 9,954  |  |  |   | 6,462  |  |  |   | 4,446 | 
|Mandatorily redeemable preferred stock                                                     |  |               | 2,114  |      |  |      | 1,881  |      |  |      | 1,770  |  |  |   | 1,578  |  |  |   | 529   | 
|Stockholders (deficit) equity                                                             |  |               | (582   | )    |  |      | 2,028  |      |  |      | 2,574  |  |  |   | 230    |  |  |   | 1,913 | 



---



|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | 2001 balance is in default and callable or
	subject to acceleration by third parties and classified in
	current liabilities.






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

A.  Overview

The following is a discussion and analysis of:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | our consolidated financial condition and results
	of operations for each of the three years in the period ended
	December 31, 2001; and
|
| |  | significant factors that could affect our
	prospective financial condition and results of operations.                                  

Historical results may not indicate future
performance. See Part I, Item
1. Business  K. Risk Factors  17. Our
forward looking statements are subject to a variety of factors
that could cause actual results to differ materially from
current beliefs.

Our consolidated financial statements include the
accounts of NII Holdings and its consolidated subsidiaries. On
December 31, 2001, NII Holdings Argentine operating
company failed to make scheduled principal payments under its
Argentine credit facilities. On February 1, 2002, NII
Holdings failed to make an interest payment on its 12.75% senior
notes. These defaults resulted in defaults under NII
Holdings $382 million of Motorola vendor financing
facilities due to cross default provisions. As a result of these
defaults, the lenders under the affected facilities are each
free to pursue their respective remedies, including, in the case
of vendor and bank financing facilities, seizing the assets of
NII Holdings and its subsidiaries that are pledged as
collateral. If any of NII Holdings lenders accelerates any
of these obligations, then as a result of the operation of
cross-default provisions, NII Holdings would be in default with
respect to substantially all of its indebtedness. The
indebtedness is therefore classified in current liabilities in
our consolidated financial statements. More detailed information
relating specifically to NII Holdings may be found in the
periodic and other reports filed by NII Holdings with the
Securities and Exchange Commission pursuant to the rules under
the Securities Exchange Act of 1934.

Critical and Significant Accounting
Policies.

We consider the following accounting policies to
be the most important to our financial position and results of
operations or policies which require the exercise of significant
judgment and/or estimates.

Revenue
Recognition.While our revenue
recognition policy does not require the exercise of significant
judgment or use of significant estimates, we believe that our
policy is significant as revenue is a key component of our
results of operations.

Operating revenues primarily consist of wireless
service revenues and revenues generated from the sale of digital
handsets and accessories. Service revenues primarily include
fixed monthly access charges for digital mobile telephone,
digital two-way radio and other services and variable charges
for airtime and digital two-way radio usage in excess of plan
minutes and long-distance charges derived from calls placed by
our customers.

44



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##### Table of Contents



We recognize revenue for access charges and other
services charged at fixed amounts ratably over the service
period, net of credits and adjustments for service discounts. We
recognize excess usage and long distance revenue at contractual
rates per minute as minutes are used. We recognize revenue from
accessory sales when title passes, upon delivery of the
accessory to the customer.

We recognize revenue from handset sales on a
straight-line basis over the expected customer relationship
periods of up to four years, starting when the customer has
taken title. We recognize revenue from activation fees on a
straight-line basis over the expected customer relationship
periods of up to four years, starting when wireless service is
activated. Our wireless service is essential to the
functionality of our handsets due to the fact that the handsets
can, with very limited exceptions, only be used on our digital
mobile network. Accordingly, this multiple element arrangement
is not accounted for separately.

Allowance for Doubtful
Accounts.We establish an
allowance for doubtful accounts receivable sufficient to cover
probable and reasonably estimated losses. Our methodology for
determining our allowance for doubtful accounts receivable
requires significant estimates. Since we have well over one
million accounts, it is impracticable to review the
collectibility of all individual accounts when we determine the
amount of our allowance for doubtful accounts receivable each
period. Therefore, we consider a number of factors in
establishing the allowance, including historical collection
experience, current economic trends, estimates of forecasted
write-offs, agings of the accounts receivable portfolio and
other factors. While we believe that the estimates we use are
reasonable, actual results could differ from those estimates.

Valuation of Long-Lived
Assets.We review long-lived
assets such as property, plant and equipment, identifiable
intangibles and goodwill for impairment whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable. While our domestic digital business has had
no indicators of impairment to date, NII Holdings undertook a
review of its long-lived assets for each of its operating
companies due to its deteriorating financial condition in the
latter half of 2001.

This review for each of NII Holdings
operating companies required NII Holdings to make estimates of
the undiscounted future cash flows of those operating companies
in order to determine if the long-lived assets used by those
operating companies were impaired. If the total of the expected
undiscounted future cash flows, estimated in the aggregate by
country, is less than the carrying amount of the assets, we are
required to make estimates of the fair value of long-lived
assets in order to calculate the loss, if any, equal to the
difference between the fair value and carrying value of the
assets. NII Holdings was required to make significant
assumptions and estimates for each of its operating companies in
this process regarding matters that are inherently uncertain,
such as future cash flows, remaining useful lives, discount
rates, growth rates and terminal values. The resulting cash
flows are computed over an extended period of time, which
subjects those assumptions and estimates to an even larger
degree of uncertainty. When known and available, we also use
comparable values of similar businesses in lieu of or to
corroborate the results from the discounted cash flows approach,
although this is generally not entirely comparable since our
network technology is proprietary, not widely adopted and relies
on the efforts of primarily one vendor for infrastructure,
handsets, development and maintenance activities. While we
believe that the estimates used were reasonable, different
assumptions regarding these cash flows could materially affect
NII Holdings valuations.

Depreciation of Property, Plant and
Equipment.Our business is capital
intensive because of our nationwide digital mobile network. We
record at cost our digital network assets and other improvements
that in managements opinion extend the useful lives of the
underlying assets and depreciate the assets over their estimated
useful lives. Our digital mobile network is highly complex and,
due to constant innovation and enhancements, certain components
of the network may lose their utility faster than anticipated.
We periodically reassess the economic lives of these components
and make adjustments to their expected lives after considering
historical experience and capacity requirements, consulting with
the vendor and assessing new product and market demands and
other factors. When these factors indicate network components
may not be useful for as long as anticipated, we depreciate the
remaining book values over the remaining useful lives. Further,
the timing and deployment of any new technologies could affect

45



---



##### Table of Contents



the estimated remaining useful lives of our
digital network assets, which could have a significant impact on
our results of operations in the future.


Amortization Lives for FCC
Licenses.Our FCC licenses are
recorded at historical cost and are amortized using the
straight-line method based on estimated useful lives of
40 years, the current maximum amortization period allowed
for intangible assets under generally accepted accounting
principles. Our FCC licenses and the requirements to maintain
the licenses are similar to other licenses granted by the FCC,
including PCS and cellular licenses, in that they are subject to
renewal after the initial term. Historically, the renewal
process associated with these FCC licenses has been perfunctory.
We believe that we have met and will continue to meet all
requirements necessary to retain and secure renewal of our FCC
licenses.

In connection with the adoption of certain
provisions of Statement of Financial Accounting Standards, or
SFAS, No. 142, Goodwill and Other Intangible
Assets effective January 1, 2002, we have concluded
that our portfolio of FCC licenses represents an intangible
asset with an indefinite useful life. Accordingly, we ceased
amortizing FCC license costs effective January 1, 2002.

B.  Results of Operations

Operating revenues primarily consist of wireless
service revenues and revenues generated from the sale of digital
handsets and accessories. Service revenues primarily include
fixed monthly access charges for digital mobile telephone,
digital two-way radio and other services and variable charges
for airtime and digital two-way radio usage in excess of plan
minutes and long-distance charges derived from calls placed by
our customers.

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

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

Since NII Holdings revised business plan
contemplates a less aggressive growth strategy that targets
conservation of cash resources by slowing enhancement and
expansion of its networks and reducing subscriber growth and
operating expenses, NII Holdings consolidated operating
revenues and expenses are not expected to continue to grow at
the same rate as they have in the past. In addition, NII
Holdings plan to focus substantially all of its available
funding towards continuing growth of its Mexican operations will
significantly reduce the growth of its other operations. As a
result, NII Holdings consolidated operating revenues and
expenses in 2002 are expected to be less than amounts reported
in 2001. See Forward Looking Statements.

46



---



##### Table of Contents





| |    |                                                               
| | -- | --------------------------------------------------------------
| | 1. | Year ended December 31, 2001 vs. year
	ended December 31, 2000

a. Operating
revenues.

|                                                                                       |                    |                       |       |              |       |              |    |              |   |               |       |         |       |  |    |     |   |   |       |       |       |  |     |    |    |  
|-------------------------------------------------------------------------------------- | ------------------ | --------------------- | ----- | ------------ | ----- | ------------ | -- | ------------ | - | ------------- | ----- | ------- | ----- |  | -- | --- | - | - | ----- | ----- | ----- |  | --- | -- | -- | -
|                                                                                       |                    |                       |       |              |       |              |    |              |   |              
|                                                                                       |                    |                       |       | % of         |       |              |    | % of         |   | Change from  
|                                                                                       |                    |                       |       | Consolidated |       |              |    | Consolidated |   | Previous Year
|                                                                                       |                    | December 31,          |       | Operating    |       | December 31, |    | Operating    |   |              
|                                                                                       |                    | 2001                  |       | Revenues     |       | 2000         |    | Revenues     |   | Dollars       |       | Percent
|                                                                                       |                    |                       |       |              |       |              |    |              |   |               |       |        
|                                                                                       |                    |                      
|                                                                                       |                    | (dollars in millions)
|Domestic                                                                               |                    | $                     | 7,014 |              |       |              | 91 | %            |   | $             | 5,385 |         |       |  | 94 | %   |   | $ | 1,629 |       |       |  | 30  | % 
|International                                                                          |                    |                       | 680   |              |       |              | 9  | %            |   |               | 330   |         |       |  | 6  | %   |   |   | 350   |       |       |  | 106 | % 
|Intercompany eliminations                                                              |                    |                       | (5    | )            |       |              |   |              |   |               | (1    | )       |       |  |   |     |   |   | (4    | )     |       |  | NM  |   
|                                                                                       |                    |                       |       |              |       |              |    |              |   |               |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|                                                                                       | Operating revenues |                       | $     | 7,689        |       |              |    | 100          | % |               | $     | 5,714   |       |  |    | 100 | % |   | $     | 1,975 |       |  |     | 35 | % 
|                                                                                       |                    |                       |       |              |       |              |    |              |   |               |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|Digital handsets in service at year end for
	consolidated subsidiaries
	(in thousands) |                    |                       |       |              |       |              |    |              |   |               |       |         |       |  |    |     |   |   |       |       |       |  |     |   
|                                                                                       |                    | Domestic              |       |              | 8,667 |              |    |              |  |               |       |         | 6,678 |  |    |     |  |   |       |       | 1,989 |  |     |    | 30 | %
|                                                                                       |                    | International         |       |              | 1,216 |              |    |              |  |               |       |         | 783   |  |    |     |  |   |       |       | 433   |  |     |    | 55 | %




NM  Not Meaningful

The increase in domestic operating revenues from
the year ended December 31, 2000 to the year ended
December 31, 2001 consists of a $1.58 billion or 32%
increase in wireless service revenues to $6.56 billion and
a $49 million or 12% increase in revenues from digital
handset and accessory sales to $454 million.

Domestic service
revenues.Domestic service
revenues increased 32% principally as a result of a 30% increase
in domestic handsets in service. Average monthly revenue per
domestic handset decreased from about $74 during 2000 to about
$71 during 2001. Additionally, as compared to the same periods
in 2000, average monthly minutes of use per subscriber increased
20% in the year ended December 31, 2001 to about 565
minutes. We attribute both the decrease in average monthly
revenue per domestic handset and the increase in minutes of use
per subscriber to the introduction of more competitive pricing
plans providing more minutes of use at a lower price to the
subscriber. These plans typically include a fixed amount of
interconnect minutes combined with an unlimited or fixed amount
of digital two-way radio service, unlimited Nextel Wireless Web
services, free incoming calls or free long distance service, all
for a stated package price.

The growth in handsets in service is the result
of a number of factors, principally:



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;
|
| |  | our differentiated products and services,
	including Nextel Direct Connect and Nextel Wireless Web;                                                                                                                                 
|
| |  | increased brand name recognition through
	increased advertising and marketing campaigns;                                                                                                                                            
|
| |  | aggressive handset pricing promotions and
	increased handset choices;                                                                                                                                                               
|
| |  | increased sales force and marketing staff and
	selling efforts targeted at specific vertical markets; and                                                                                                                           
|
| |  | improved quality of service.                                                                                                                                                                                                        

Our average monthly revenue per domestic handset
may decrease in the future:



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | as we continue to migrate existing customers to
	lower priced service offering packages;
|
| |  | if competitive pressures require us to:                                                 



| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | further restructure our service offering packages
	to offer more value;
|
| |  | reduce our service offering prices; or                                 

47



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | respond to particular short-term, market specific
	situations, such as special introductory pricing or packages
	that may be offered by providers launching their service, or
	particular new product or service offerings, in a particular
	market; or



| |   |                                                            
| | - | -----------------------------------------------------------
| |  | as we continue to attract non-business users as
	customers.

Any decrease in our average monthly revenue per
domestic handset is expected to be partially offset by
additional charges to customers beginning in 2002, which will
recover some costs of government mandated telecommunications
services such as E911 and number portability.

Domestic handset and accessory
revenues.Domestic handset and
accessory revenues increased primarily due to the increase in
the number of handsets sold to new and existing customers,
including sales of new feature rich and higher priced handsets
primarily in the second half of 2001. Due to the recent
competitive environment, this increase was partially offset by
continued reliance on various customer inducements, including
reductions in the sales prices of handset models and
volume-based handset promotions. We continue to rely on these
inducements to attract new customers, and we continue to offer
handset upgrades and other retention inducements to existing
customers.

International
revenues.The increase in
international operating revenues from the year ended
December 31, 2000 to the year ended December 31, 2001
consists of a $342 million or 111% increase in wireless
service revenues to $651 million and an $8 million or
38% increase in revenues from digital handset and accessory
sales to $29 million. Operating revenues increased
primarily as a result of a 55% increase in the number of digital
handsets in service in NII Holdings consolidated markets
from December 31, 2000 to December 31, 2001,
particularly in the Mexican and Brazilian markets. Additionally,
the successful introduction of higher priced service plans,
primarily in Mexico, contributed to the increase, but was
partially offset by more competitive pricing plans in Argentina
offering lower per-minute rates.

b. Cost
of revenues.

|                          |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------------------- | ---------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                          |                  |                       |       |              |  |              |    |              |   |              
|                          |                  |                       |       | % of         |  |              |    | % of         |   | Change from  
|                          |                  |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year
|                          |                  | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |              
|                          |                  | 2001                  |       | Revenues     |  | 2000         |    | Revenues     |   | Dollars       |       | Percent
|                          |                  |                       |       |              |  |              |    |              |   |               |       |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Domestic                  |                  | $                     | 2,538 |              |  |              | 33 | %            |   | $             | 1,991 |         |  |  | 35 | %  |   | $ | 547 |     |  |  | 27 | % 
|International             |                  |                       | 336   |              |  |              | 4  | %            |   |               | 182   |         |  |  | 3  | %  |   |   | 154 |     |  |  | 85 | % 
|Intercompany eliminations |                  |                       | (5    | )            |  |              |   |              |   |               | (1    | )       |  |  |   |    |   |   | (4  | )   |  |  | NM |   
|                          |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                          | Cost of revenues |                       | $     | 2,869        |  |              |    | 37           | % |               | $     | 2,172   |  |  |    | 38 | % |   | $   | 697 |  |  |    | 32 | %
|                          |                  |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   




NM  Not Meaningful

The increase in cost of revenues from the year
ended December 31, 2000 to the year ended December 31,
2001 for our domestic operations consists of a $337 million or
35% increase in cost of providing wireless services to
$1.29 billion and a $210 million or 20% increase in
cost of digital handset and accessory sales to
$1.25 billion.

Domestic cost of service
revenues.Domestic cost of service
revenues increased primarily as a result of a 68% increase in
costs incurred related to variable interconnect fees on higher
minutes of use and a 31% increase in costs incurred related to
direct switch and transmitter and receiver site costs including
rent, utility and fixed interconnection costs. Total system
minutes of use grew 65% from the year ended December 31,
2000 to the year ended December 31, 2001 principally due to
the larger number of handsets in service as well as the 20%
increase in average monthly minutes of use per subscriber in
2001 compared to 2000. The direct switch and transmitter and
receiver site costs increased primarily due to a 22% increase in
transmitter and receiver sites and related equipment and an 8%
increase in the number of switches we placed in service from
December 31, 2000 to December 31, 2001.

48



---



##### Table of Contents



We expect the cost of domestic service revenues
in 2002 to increase as subscriber usage of our digital mobile
network increases and as we place more sites and switches into
service to add capacity and coverage to our network.

Domestic cost of handset and accessory
sales.Cost of digital handset and
accessory sales increased primarily due to the increase in the
number of handsets sold to new and existing customers, and to a
lesser extent, the increase in the percentage of higher cost
handsets sold.

International cost of revenues.The increase in international cost
of revenues from the year ended December 31, 2000 to the
year ended December 31, 2001 consists of a $99 million
or 122% increase in cost of providing wireless services to
$180 million, and a $55 million or 55% increase in
cost of digital handset and accessory sales to
$156 million. The increase in international cost of digital
handset and accessory sales is primarily due to the increase in
the number of digital handsets sold primarily in Mexico and
Brazil, partially offset by a decrease in the average cost
NII Holdings paid for the handsets sold.

The increase in the cost of providing
international wireless services is primarily attributable to:



| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in costs related to variable
	interconnect fees on significantly increased minutes of use; and                                                                                                                            
|
| |  | an increase in site ground lease and utility
	expenses incurred due to a 52% increase in the number of
	international transmitter and receiver sites placed in service
	by NII Holdings from December 31, 2000 to
	December 31, 2001.

c. Selling,
general and administrative expenses.

|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|----------------------------------- | -------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                                    |                            |                       |       |              |  |              |    |              |   |              
|                                    |                            |                       |       | % of         |  |              |    | % of         |   | Change from  
|                                    |                            |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year
|                                    |                            | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |              
|                                    |                            | 2001                  |       | Revenues     |  | 2000         |    | Revenues     |   | Dollars       |       | Percent
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |        
|                                    |                            |                      
|                                    |                            | (dollars in millions)
|Selling, general and administrative |                            | $                     | 3,020 |              |  |              | 39 | %            |   | $             | 2,278 |         |  |  | 40 | %  |   | $ | 742 |     |  |  | 33 | % 
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 1,244 |              |  |              | 16 | %            |   | $             | 1,003 |         |  |  | 18 | %  |   | $ | 241 |     |  |  | 24 | % 
|International                       |                            |                       | 210   |              |  |              | 3  | %            |   |               | 143   |         |  |  | 2  | %  |   |   | 67  |     |  |  | 47 | % 
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 1,454        |  |              |    | 19           | % |               | $     | 1,146   |  |  |    | 20 | % |   | $   | 308 |  |  |    | 27 | %
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 1,331 |              |  |              | 17 | %            |   | $             | 996   |         |  |  | 18 | %  |   | $ | 335 |     |  |  | 34 | % 
|International                       |                            |                       | 234   |              |  |              | 3  | %            |   |               | 138   |         |  |  | 2  | %  |   |   | 96  |     |  |  | 70 | % 
|Intercompany eliminations           |                            |                       | 1     |              |  |              |   |              |   |               | (2    | )       |  |  |   |    |   |   | 3   |     |  |  | NM |   
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 1,566        |  |              |    | 20           | % |               | $     | 1,132   |  |  |    | 20 | % |   | $   | 434 |  |  |    | 38 | %
|                                    |                            |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   




NM  Not Meaningful

Domestic selling and marketing.The increase in domestic selling
and marketing expenses from the year ended December 31,
2000 to the year ended December 31, 2001 primarily reflects
increased costs incurred in connection with growing our customer
base, including:



| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $90 million or 47% increase in advertising
	expenses due to aggressive marketing campaigns, including
	sports-related sponsorships and television commercials directed
	at increasing brand awareness, as well as promoting our
	differentiated services, including the enhancements being made
	to Nextel Direct Connect and Nextel Wireless Web;
|
| |  | $70 million or 16% increase in commissions
	and residuals earned by indirect dealers and distributors as a
	result of increased handset sales through these channels;                                                                                                                                                                             
|
| |  | $59 million or 20% increase in sales and
	marketing payroll and related expenses, including costs
	associated with our Nextel stores acquired and opened in 2001
	and increased commissions attributable to increased volume
	through our direct distribution channels; and                                                                       

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| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $22 million increase in other general
	marketing expenses, including $10 million in facilities
	costs related to our Nextel stores acquired and opened in 2001.

International selling and marketing.The $67 million increase in
international selling and marketing expenses from the year ended
December 31, 2000 to the year ended December 31, 2001
is primarily attributable to increased commissions from higher
levels of digital handset sales in Mexico and increased
advertising in Mexico.

Domestic general and administrative.Domestic general and
administrative expenses increased from the year ended
December 31, 2000 to the year ended December 31, 2001
primarily as a result of activities to support a larger customer
base, specifically:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $166 million or 102% increase in bad debt
	expense, which has increased as a percentage of domestic
	operating revenues primarily due to the impact of a slowing
	economy and aggressive promotions in late 2000 and early 2001 to
	less creditworthy customers;                                                                                                                                                                                                                                                                                
|
| |  | $159 million or 44% increase in expenses
	related to billing, collection, customer retention and customer
	care activities, including the costs associated with our fifth
	customer care center which commenced operations in January 2001
	and our sixth customer care center which commenced operations in
	July 2001, as well as costs associated with the implementation
	of our new billing and customer care system, which was put into
	production in the first quarter of 2002 and is expected to be
	fully operational by mid-2002; and
|
| |  | $10 million increase in personnel,
	facilities and general corporate expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

The increase in bad debt has resulted in an
ongoing increased focus on and strengthening of our credit
policies and procedures, including modifying credit scoring
models and requiring more forms of identification and deposits
from more customers, limiting account sizes for designated high
risk accounts and suspending accounts earlier than in the past.

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



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing aggressive marketing and advertising
	as we introduce and continue strategic television product
	placement and national print advertising campaigns designed to
	increase brand awareness in our markets;                                            
|
| |  | costs associated with operating our Nextel stores
	acquired as part of the Lets Talk Cellular acquisition in
	2001 and the planned opening of additional Nextel stores in
	2002; and                                                                           
|
| |  | costs associated with billing, collection, bad
	debt, customer retention and customer care activities to support
	a growing customer base partially offset by savings expected
	from our new outsourcing arrangements and new billing and
	customer care system.

International general and administrative.International general and
administrative expenses increased from the year ended
December 31, 2000 to the year ended December 31, 2001
primarily due to an increase in billing and customer care,
information technology, facilities and other general corporate
expenses to support a growing customer base. Additionally,
international bad debt expense increased $25 million or
156% from the year ended December 31, 2000 to the year
ended December 31, 2001, largely in Brazil and Mexico, and
has been increasing as a percentage of revenues primarily as a
result of a weakening Brazilian economy.

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d. Segment
earnings (losses).

|                          |                           |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------------------- | ------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                          |                           |                       |       |              |  |              |    |              |   |              
|                          |                           |                       |       | % of         |  |              |    | % of         |   | Change from  
|                          |                           |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year
|                          |                           | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |              
|                          |                           | 2001                  |       | Revenues     |  | 2000         |    | Revenues     |   | Dollars       |       | Percent
|                          |                           |                       |       |              |  |              |    |              |   |               |       |        
|                          |                           |                      
|                          |                           | (dollars in millions)
|Domestic earnings         |                           | $                     | 1,901 |              |  |              | 25 | %            |   | $             | 1,395 |         |  |  | 24 | %  |   | $ | 506 |     |  |  | 36 | % 
|International losses      |                           |                       | (100  | )            |  |              | (1 | )%           |   |               | (133  | )       |  |  | (2 | )% |   |   | 33  |     |  |  | 25 | % 
|Intercompany eliminations |                           |                       | (1    | )            |  |              |   |              |   |               | 2     |         |  |  |   |    |   |   | (3  | )   |  |  | NM |   
|                          |                           |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                          | Segment earnings (losses) |                       | $     | 1,800        |  |              |    | 24           | % |               | $     | 1,264   |  |  |    | 22 | % |   | $   | 536 |  |  |    | 42 | %
|                          |                           |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   




NM  Not Meaningful

We define segment earnings as earnings before
interest, taxes, depreciation and amortization and other charges
determined to be non-recurring in nature, such as restructuring
and impairment charges. Based on the current stage of
development of each of our reportable segments, most of our
operating revenues and identifiable assets as well as all of our
segment earnings pertain to our domestic operations.

Domestic segment earnings.Domestic segment earnings as a
percentage of consolidated revenues have remained relatively
flat. We attribute this mostly to increased revenues due to a
larger customer base offset by the losses incurred by selling
handsets at a loss and by the operating costs to support this
larger customer base. We expect domestic segment earnings to
increase in 2002 as compared to 2001 partially as a result of,
among other things, cost savings we expect to achieve through
operating efficiencies such as the outsourcing of our customer
care and information technology desktop support functions and an
increased percentage of our sales coming from our lower cost
distribution channels. However, as the percentage growth rate of
our domestic customer base has been declining, reflecting the
larger customer base, continued improvement in domestic segment
earnings as a percentage of consolidated operating revenues may
be dependent in part on our abilities to achieve increased
economies of scale and cost savings such as those mentioned
above. If general economic conditions worsen, if competitive
conditions in the wireless telecommunications industry worsen or
if our new handset or service offerings are not well received,
we may see declines in demand for our product and service
offerings, which may adversely affect our domestic segment
earnings. See Forward Looking Statements.

International segment losses.International segment losses
improved due to increased operating revenues from growth in NII
Holdings customer base partially offset by increased costs
attributable to:



| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the build-out of the international digital mobile
	networks and higher customer minutes of use;                                                                                  
|
| |  | increased aggregate amounts of digital handset
	costs and related commissions resulting from increased handset
	sales; and                                                       
|
| |  | increased general corporate expenses to support a
	growing customer base, including advertising expense primarily
	in Mexico and bad debt expense primarily in Brazil and Mexico.

e. Depreciation
and amortization.

|             |                               |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------ | ----------------------------- | --------------------- | ----- | ------------ |  | ------------ | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|             |                               |                       |       |              |  |              |    |              |   |              
|             |                               |                       |       | % of         |  |              |    | % of         |   | Change from  
|             |                               |                       |       | Consolidated |  |              |    | Consolidated |   | Previous Year
|             |                               | December 31,          |       | Operating    |  | December 31, |    | Operating    |   |              
|             |                               | 2001                  |       | Revenues     |  | 2000         |    | Revenues     |   | Dollars       |       | Percent
|             |                               |                       |       |              |  |              |    |              |   |               |       |        
|             |                               |                      
|             |                               | (dollars in millions)
|Depreciation |                               | $                     | 1,508 |              |  |              | 20 | %            |   | $             | 1,063 |         |  |  | 19 | %  |   | $ | 445 |     |  |  | 42 | % 
|Amortization |                               |                       | 238   |              |  |              | 3  | %            |   |               | 202   |         |  |  | 3  | %  |   |   | 36  |     |  |  | 18 | % 
|             |                               |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|             | Depreciation and amortization |                       | $     | 1,746        |  |              |    | 23           | % |               | $     | 1,265   |  |  |    | 22 | % |   | $   | 481 |  |  |    | 38 | %
|             |                               |                       |       |              |  |              |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   

Depreciation increased from the year ended
December 31, 2000 to the year ended December 31, 2001
primarily as a result of placing into service, as well as
modifying, additional switches and transmitter and receiver
sites in existing domestic and international markets primarily
to enhance the coverage and

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capacity of our digital mobile networks. During
the fourth quarter of 2001, we shortened the useful lives of
some assets located in the information technology data center
and the customer care locations as a result of our customer care
and information technology outsourcing arrangements. We also
changed the lives of some network assets. We recorded an
additional $21 million, or $0.03 per share, in depreciation
expense for the fourth quarter of 2001 as a result of these
changes in estimates.


The increase in amortization during 2001 is
primarily attributable to international acquisition activities
completed during the second half of 2000. Domestic licenses
acquired in auctions in late 2000 as well as acquisitions
occurring in 2001 also contributed to the increase.

We expect the amount of domestic depreciation to
continue to increase as we place additional switches and
transmitter and receiver sites into service and as we begin to
depreciate our new billing and customer care system in the first
quarter of 2002. We expect the amount of international
depreciation and amortization to decrease as a result of NII
Holdings write-down of its long-lived assets.
Additionally, we expect domestic amortization to decrease as a
result of implementing the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets. See G.
Effect of New Accounting Standards for additional
information.

f. Restructuring
and impairment charges, interest and other.

|                                                          |  |                       |        |              |  |              |     |              |  |               |        |         |  |  |     |    |  |   |        |   |  |  |      |   
|--------------------------------------------------------- |  | --------------------- | ------ | ------------ |  | ------------ | --- | ------------ |  | ------------- | ------ | ------- |  |  | --- | -- |  | - | ------ | - |  |  | ---- | --
|                                                          |  |                       |        |              |  |              |     |              |  |              
|                                                          |  |                       |        | % of         |  |              |     | % of         |  | Change from  
|                                                          |  |                       |        | Consolidated |  |              |     | Consolidated |  | Previous Year
|                                                          |  | December 31,          |        | Operating    |  | December 31, |     | Operating    |  |              
|                                                          |  | 2001                  |        | Revenues     |  | 2000         |     | Revenues     |  | Dollars       |        | Percent
|                                                          |  |                       |        |              |  |              |     |              |  |               |        |        
|                                                          |  |                      
|                                                          |  | (dollars in millions)
|Restructuring and impairment charges                      |  | $                     | (1,769 | )            |  |              | (23 | )%           |  | $             |       |         |  |  |    |    |  | $ | (1,769 | ) |  |  |     |   
|Interest expense                                          |  |                       | (1,403 | )            |  |              | (18 | )%           |  |               | (1,245 | )       |  |  | 22  | %  |  |   | (158   | ) |  |  | (13  | )%
|Interest income                                           |  |                       | 207    |              |  |              | 3   | %            |  |               | 396    |         |  |  | 7   | %  |  |   | (189   | ) |  |  | (48  | )%
|Equity in losses of unconsolidated affiliates             |  |                       | (95    | )            |  |              | (1  | )%           |  |               | (152   | )       |  |  | (3  | )% |  |   | 57     |   |  |  | 38   | % 
|Foreign currency transaction losses, net                  |  |                       | (70    | )            |  |              | (1  | )%           |  |               | (25    | )       |  |  |    |    |  |   | (45    | ) |  |  | (180 | )%
|Realized gain on investments, net                         |  |                       | 47     |              |  |              | 1   | %            |  |               | 275    |         |  |  | 5   | %  |  |   | (228   | ) |  |  | (83  | )%
|Reduction in fair value of available-for-sale
	securities |  |                       | (188   | )            |  |              | (2  | )%           |  |               |       |         |  |  |    |    |  |   | (188   | ) |  |  |     |   
|Other, net                                                |  |                       | (12    | )            |  |              |    |              |  |               | 8      |         |  |  |    |    |  |   | (20    | ) |  |  | NM   |   
|Income tax benefit                                        |  |                       | 135    |              |  |              | 2   | %            |  |               | 33     |         |  |  | 1   | %  |  |   | 102    |   |  |  | NM   |   
|Extraordinary gain (loss)                                 |  |                       | 469    |              |  |              | 6   | %            |  |               | (104   | )       |  |  | 2   | %  |  |   | 573    |   |  |  | NM   |   
|Loss attributable to common stockholders                  |  |                       | (2,858 | )            |  |              | (37 | )%           |  |               | (1,024 | )       |  |  | (18 | )% |  |   | (1,834 | ) |  |  | (179 | )%




NM  Not Meaningful

In May 2001, we announced a domestic
restructuring to reduce payroll and other operating costs by
implementing a 5% workforce reduction and streamlining our
operations. The workforce reduction, completed during the second
quarter, affected about 800 employees across the entire domestic
organization. As a result of the restructuring, we recorded a
$22 million charge in the second quarter of 2001 consisting
of $15 million related to severance and fringe benefits and
$7 million related to the write-off of information
technology development projects that we abandoned as a result of
the reduced headcount.

In connection with the information technology and
customer care outsourcing agreements discussed in Part I,
Item 1. Business  B. 2001 Goals
Update and 2002 Goals  4. Increasing
Efficiencies and Reducing Costs, we expect to record a
restructuring charge in the first quarter of 2002 related to
vacating unneeded facilities and other matters.

During the third quarter of 2001, following NII
Holdings review of the economic conditions, operating
performance and other relevant factors in the Philippines, NII
Holdings decided to discontinue funding to its Philippine
operating company. In view of the capital constrained
environment and NII

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Holdings lack of funding sources, during
the fourth quarter of 2001, NII Holdings undertook an extensive
review of its business plan and determined to pursue a less
aggressive growth strategy that targets conservation of cash
resources by slowing enhancement and expansion of its networks
and reducing subscriber growth and operating expenses. In
connection with the implementation of this plan and the decision
to discontinue funding to its Philippine operating company, NII
Holdings recorded non-cash pretax asset impairment charges and
pretax restructuring and other charges of about
$1.75 billion in 2001, consisting of write-offs of
property, plant and equipment of $1,089 million, licenses
of $476 million, goodwill of $144 million, intangible
and other assets of $32 million and restructuring charges
of $6 million. For more detailed information, see
note 3 to the consolidated financial statements appearing
at the end of this annual report on Form 10-K.


During the first quarter of 2002, NII
Holdings Argentine and Brazilian operating companies as
well as its corporate headquarters further restructured their
operations, which included reductions in workforces. NII
Holdings anticipates that it will record a restructuring charge
in the first quarter of 2002 related to these actions.

The increase in interest expense from the year
ended December 31, 2000 to the year ended December 31,
2001 resulted primarily from the issuance of our senior notes in
January 2001 and our convertible notes in May 2001 and NII
Holdings issuance of its senior notes in August 2000, as
well as a higher average level of outstanding borrowings under
our credit facilities, offset by a reduction in the weighted
average interest rate for our domestic bank credit facility.

The decrease in interest income from the year
ended December 31, 2000 to the year ended December 31,
2001 is primarily due to a decrease in interest rates during
2001 as well as a lower average cash balance in 2001.

The decrease in equity in losses of
unconsolidated affiliates from the year ended December 31,
2000 to the year ended December 31, 2001 is due to
$3 million of decreased losses attributable to our equity
method investment in Nextel Partners. The remaining decrease is
attributable to our Philippine affiliate, which we began
consolidating in the third quarter of 2000, and to our Japanese
investment, which was written off in the fourth quarter
of 2000.

The foreign currency transaction loss in 2001 is
due primarily to the weakening of the Brazilian real relative to
the U.S. dollar as a result of the current economic environment
in both Brazil and Argentina. During the third quarter of 2001,
NII Holdings recorded a translation adjustment of
$11 million as part of the cumulative translation
adjustment related to intercompany loans between a subsidiary of
NII Holdings and its Brazilian operating company as a result of
NII Holdings determination that these intercompany loans
are of a long-term investment nature. Prior to August 2001, the
effect of exchange rate changes on these intercompany loans was
reported as foreign currency transaction losses in our
consolidated statements of operations. The foreign currency
transaction loss in 2000 is primarily attributable to the
weakening of the Brazilian real and Philippine peso relative to
the U.S. dollar in the fourth quarter of 2000.

The realized gain on investment in 2001 primarily
consists of a $42 million gain related to the sale of NII
Holdings investment in TELUS in the fourth quarter. The
realized gain on investment in 2000 resulted from the exchange
of our stock in Clearnet for stock in TELUS as a result of the
acquisition of Clearnet by TELUS in October 2000. On
September 30, 2001, NII Holdings recognized a
$188 million reduction in fair value of its investment in
TELUS, as NII Holdings determined the decline in fair value of
this investment to be other-than-temporary.

The increase in the income tax benefit from the
year ended December 31, 2000 to December 31, 2001 is
primarily attributable to the write-off of deferred tax
liabilities related to NII Holdings asset impairment
charges in 2001.

The extraordinary gain in 2001 relates to Nextel
Communications purchase of some of NII Holdings
senior notes during the third quarter of 2001. While these notes
are held by Nextel Communications and remain outstanding
obligations of NII Holdings, an extraordinary gain is recognized
in our consolidated

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financial statements in accordance with generally
accepted accounting principles. The extraordinary loss in 2000
relates to the early retirement of some of our senior notes
during the first quarter of 2000.


In the first quarter of 2002, we are required to
adopt SFAS No. 142. In connection with the adoption of SFAS
No. 142, we expect to incur a non-cash charge of about
$350 million to tax expense to increase the valuation
allowance related to our net operating loss. For more detailed
information, see note 1 to the consolidated financial
statements appearing at the end of this annual report on
Form 10-K.

During the first quarter of 2002, as a result of
the devaluation of the Argentine peso due to the recent adverse
economic developments in Argentina, NII Holdings expects to
record significant foreign currency transaction losses primarily
related to NII Holdings $108 million U.S. dollar
denominated Argentine credit facilities, as well as a
significant foreign currency translation adjustment.



|   |                                                               
|-- | --------------------------------------------------------------
|2. | Year ended December 31, 2000 vs. year
	ended December 31, 1999

a. Operating
revenues.

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




NM  Not Meaningful

The increase in domestic operating revenues in
2000 consisted primarily of a 55% increase in wireless service
and other revenues of $1.76 billion to $4.98 billion
offset by a net decrease in revenues from digital handset and
accessory sales of $35 million to $405 million.

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



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | declining digital handset prices, reflecting both
	reductions in our costs of acquiring handsets and increases in
	our subsidization of the resale prices of our handsets,
	including through two-for-one promotions;              
|
| |  | the introduction of more competitive service
	pricing plans targeted at meeting more of our customers needs,
	including a variety of fixed-rate plans offering bundled monthly
	minutes and other integrated services and features;

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| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | expanded network coverage and capacity;                                            
|
| |  | differentiated products and services, including
	our Nextel Direct Connect feature;
|
| |  | the increased number of indirect distributors;                                     
|
| |  | increased advertising and marketing campaigns; and                                 
|
| |  | increased sales force and marketing staff.                                         

Domestic handset and accessory revenues.As a result of the adoption of SAB
No. 101, we changed our revenue recognition method for
digital handset sales effective January 1, 2000. The
adoption of SAB No. 101 resulted in a $40 million
reduction to revenues from digital handset and accessory sales
in 2000. Had we adopted SAB No. 101 effective
January 1, 1999, revenues from domestic digital handset and
accessory sales in 2000 would have increased by $87 million
or 27%. We continued to sell digital handsets at prices below
our cost to attract new customers and as a retention inducement
for existing customers. Additionally, as competition has
intensified, the prices at which we sell digital handsets to our
new and existing customers have declined. Accordingly, revenues
from domestic digital handset and accessory sales have not
increased in proportion to the increase in number of digital
handsets sold.

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

b. Cost
of revenues.

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




NM  Not Meaningful

The increase in cost of revenues for our domestic
operations in 2000 consisted of a 46% increase in cost of
providing wireless services of $300 million to
$956 million and an increase in cost of digital handset and
accessory sales of $208 million to $1.03 billion.

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

Domestic cost of handset and accessory
sales.Cost of digital handset and
accessory sales increased due to the increase in the number of
digital handsets sold to new and existing customers, offset, in
part, by a decrease in the average cost we paid for the digital
handsets sold and by the deferral of $40 million of digital
handset costs attributable to the adoption of SAB No. 101
in 2000. Had SAB No. 101 been implemented effective
January 1, 1999, the domestic cost of digital handset and
accessory sales would have increased by $330 million or 47%.

55



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##### Table of Contents



International cost of revenues.The increase in international cost
of revenues in 2000 consisted of an increase in cost of
providing wireless services of $40 million or 96% and an
increase in cost of digital handset and accessory sales of
$46 million or 84%. Had SAB No. 101 been implemented
effective January 1, 1999, the cost of digital handset and
accessory sales in our international operations would have
increased by $53 million or 112%. The increase in
international cost of digital handset and accessory sales in
2000 is primarily due to the increase in the number of digital
handsets sold partially offset by the deferral of
$21 million of digital handset costs attributable to the
adoption of SAB No. 101 in 2000. The increase in the cost
of providing international wireless service is primarily
attributable to:



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

c. Selling,
general and administrative expenses.

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




NM  Not Meaningful

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



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

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

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



| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $132 million or 58% increase in expenses
	related to billing, collection, customer retention and customer
	care activities, including the costs associated with our fourth
	customer care center which became fully operational in 2000;

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##### Table of Contents





| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $95 million or 25% increase in personnel,
	facilities and general corporate expenses primarily reflecting
	increased staffing for information technology and other
	administrative activities; and
|
| |  | $44 million or 37% increase in bad debt
	expense.                                                                                                                                                 

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

d. Segment
earnings (losses).

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




NM  Not Meaningful

We define segment earnings as earnings before
interest, taxes, depreciation and amortization and other charges
determined to be non-recurring in nature, such as restructuring
and impairment charges. Based on the current stage of
development of each of our reportable segments, most of our
operating revenues and identifiable assets, and all of our
segment earnings, pertain to our domestic operations. In 2000,
domestic segment earnings improved significantly and increased
as a percentage of consolidated operating revenues. This
improvement was primarily due to a 47% increase in domestic
operating revenues, which exceeded the 35% increase in domestic
operating expenses. In 2000, our increasing customer base
generated higher operating revenues resulting in lower operating
expenses as a percentage of revenues due to the economies of
scale achieved as a result of increased system usage.
International segment losses improved slightly in 2000,
primarily due to the decrease in bad debt expense and increasing
revenues from growth in digital handset sales.

e. Depreciation
and amortization.

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

Depreciation and amortization increased in 2000
primarily due to the increase in depreciation as a result of
placing into service, as well as modifying, additional switches
and transmitter and receiver sites in both existing domestic and
international markets primarily to enhance the coverage and
capacity of our digital mobile networks. During 2000, we changed
the estimated useful lives of some of our digital mobile network
and non-network assets. These changes in estimates resulted in
additional depreciation expense of $69 million during 2000.

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##### Table of Contents



Amortization decreased $27 million in 2000
as some of our domestic intangible assets were fully amortized
in 1999. This decrease was offset by a $16 million increase
in amortization attributable to international acquisition
activities during 2000.

f. Interest expense,
interest income and other.

|                                              |  |                       |        |              |  |              |     |              |  |               |        |         |  |  |     |    |  |   |      |   |  |  |      |   
|--------------------------------------------- |  | --------------------- | ------ | ------------ |  | ------------ | --- | ------------ |  | ------------- | ------ | ------- |  |  | --- | -- |  | - | ---- | - |  |  | ---- | --
|                                              |  |                       |        |              |  |              |     |              |  |              
|                                              |  |                       |        | % of         |  |              |     | % of         |  | Change from  
|                                              |  |                       |        | Consolidated |  |              |     | Consolidated |  | Previous Year
|                                              |  | December 31,          |        | Operating    |  | December 31, |     | Operating    |  |              
|                                              |  | 2000                  |        | Revenues     |  | 1999         |     | Revenues     |  | Dollars       |        | Percent
|                                              |  |                       |        |              |  |              |     |              |  |               |        |        
|                                              |  |                      
|                                              |  | (dollars in millions)
|Interest expense                              |  | $                     | (1,245 | )            |  |              | (22 | )%           |  | $             | (878   | )       |  |  | (23 | )% |  | $ | (367 | ) |  |  | (42  | )%
|Interest income                               |  |                       | 396    |              |  |              | 7   | %            |  |               | 96     |         |  |  | 3   | %  |  |   | 300  |   |  |  | 313  | % 
|Equity in losses of unconsolidated affiliates |  |                       | (152   | )            |  |              | (3  | )%           |  |               | (73    | )       |  |  | (2  | )% |  |   | (79  | ) |  |  | (108 | )%
|Foreign currency transaction losses, net      |  |                       | (25    | )            |  |              |    |              |  |               | (61    | )       |  |  | (2  | )% |  |   | 36   |   |  |  | 59   | % 
|Realized gain on investments                  |  |                       | 275    |              |  |              | 5   | %            |  |               | 70     |         |  |  | 2   | %  |  |   | 205  |   |  |  | NM   |   
|Other income, net                             |  |                       | 8      |              |  |              |    |              |  |               | 17     |         |  |  |    |    |  |   | (9   | ) |  |  | (53  | )%
|Income tax benefit                            |  |                       | 33     |              |  |              | 1   | %            |  |               | 28     |         |  |  | 1   | %  |  |   | 5    |   |  |  | 18   | % 
|Extraordinary loss                            |  |                       | (104   | )            |  |              | (2  | )%           |  |               | (68    | )       |  |  | (2  | )% |  |   | (36  | ) |  |  | (53  | )%
|Loss attributable to common stockholders      |  |                       | (1,024 | )            |  |              | (18 | )%           |  |               | (1,530 | )       |  |  | (40 | )% |  |   | 506  |   |  |  | 33   | % 




NM  Not Meaningful

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

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



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

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

The foreign currency transaction loss in 2000 was
due primarily to the weakening of the Brazilian real and
Philippine peso relative to the U.S. dollar during the
fourth quarter of 2000. The 1999 foreign currency transaction
loss was primarily due to the devaluation of the Brazilian real
relative to the U.S. dollar during the early part of 1999.

The realized gain on investment in 2000 resulted
from the exchange of our stock in Clearnet for stock in TELUS as
a result of the acquisition of Clearnet by TELUS in
October 2000. The realized gain on investment in 1999
primarily related to the $70 million gain recognized on the
sale of our interest in a joint venture.

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

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##### Table of Contents



C.     Related Party
Transactions

Motorola.We
have had and expect to continue to have significant transactions
with our largest stockholder Motorola. As of December 31,
2001, Motorola was the beneficial owner of about 14% of our
common stock, assuming the conversion of shares of our
class B nonvoting common stock, all of which is owned by
Motorola. We have a number of important strategic and commercial
relationships with Motorola. Motorola, as the sole supplier,
provides the iDEN infrastructure equipment and handsets used
throughout our domestic markets and in the international markets
served by NII Holdings subsidiaries. We paid Motorola
about $2.68 billion during 2001 for these goods and
services and net payables to Motorola were $290 million at
December 31, 2001. Motorola also is the lender of
$418 million in vendor financing and credit facilities to
our subsidiary, NII Holdings, all of which is currently in
default. We also work closely with Motorola to improve existing
products and develop new technologies for use in our digital
mobile network. See Part I, Item 1.
Business  H. Agreements with Significant
Stockholders  2. Motorola.

Nextel Partners.In 1999, we entered into
agreements with Nextel Partners, and other parties, including
Motorola and Eagle River Investments, L.L.C., an affiliate of
Mr. McCaw, relating to the capitalization, governance,
financing and operation of Nextel Partners. Nextel Partners is
constructing and operating a digital mobile network utilizing
the iDEN technology used in our digital mobile network. In
addition, these agreements establish circumstances in which we
will have the right or obligation to purchase the equity
interests in Nextel Partners at specified prices. Subject to
certain limitations, we will have the right to purchase the
outstanding shares of Nextel Partners class A common
stock on January 29, 2008. In connection with a series of
transactions in 1999, we sold assets and transferred specified
FCC licenses to Nextel Partners. We currently own a 32% equity
interest in Nextel Partners.

Under a roaming agreement between one of our
wholly owned subsidiaries and a wholly owned subsidiary of
Nextel Partners, we were charged $36 million during 2001
for our roaming expenses related to Nextel Partners
digital mobile network, net of roaming revenues earned of
$21 million. Our wholly owned subsidiary provides specified
telecommunications switching services to Nextel Partners under a
switch sharing agreement. For these services, we earned
$49 million in 2001, which we recorded as a reduction to
cost of revenues. We charged Nextel Partners $5 million in
2001 for administrative services provided under a transition
services agreement. We recorded these amounts as a reduction to
selling, general and administrative expenses. We have a net
receivable due from Nextel Partners of $5 million as of
December 31, 2001.

XO Communications.Two members of our board of
directors serve on the board of directors of
XO Communications, Inc. Additionally, Mr. McCaw holds
rights to shares representing a majority of the voting interest
of XO Communications. In July 2001, we entered into a
multi-year agreement with XO Communications under which it
will provide us with telecommunications services. We paid
$21 million to XO Communications during 2001 for
telecommunications services. Additionally, in September 2001, we
purchased an aircraft from XO Communications for a total
consideration of $24 million.

D.     Liquidity and
Capital Resources

In 2001, we had losses attributable to common
stockholders of $2.86 billion, including asset impairment and
restructuring and other charges of about $1.77 billion. In
2000, we had losses attributable to common stockholders of
$1.02 billion. The operating expenses and capital
expenditures associated with developing, enhancing and operating
our digital mobile network have more than offset operating
revenues. Our operating expenses, debt service obligations and
anticipated capital expenditures are expected to continue to
more than offset operating revenues through 2003. We have
consistently used external sources of funds, primarily from debt
incurrences and equity issuances, to fund operations, capital
expenditures, acquisitions and other nonoperating needs.

Cash flows.Net cash provided by operating
activities of $1.13 billion during 2001 improved by
$553 million compared to net cash provided by operating
activities of $576 million during 2000. This

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##### Table of Contents



improvement in net cash provided by operating
activities is primarily attributable to domestic operations,
reflecting improved domestic performance resulting from
economies of scale achieved from the growth in our customer base.


Capital expenditures to fund the continued
expansion and enhancement of our digital mobile networks
continued to represent the largest use of our funds for
investing activities. Net cash used in investing activities of
$3.51 billion during 2001 decreased by $1.96 billion
as compared to $5.47 billion during 2000 primarily due to:



| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $1.74 billion increase in net proceeds
	from short-term investing activities as compared to
	$851 million in net cash used to purchase short-term
	investments in 2000;                                             
|
| |  | a $196 million decrease in cash paid for
	purchases of licenses, acquisitions, investments and other;                                                                                                                 
|
| |  | $142 million in proceeds from sales of
	investments by NII Holdings, excluding $57 million
	that was placed directly into an escrow account as collateral
	for a portion of NII Holdings vendor financing facilities;

offset by a $124 million increase in cash
paid for capital expenditures.

Cash payments for capital expenditures totaled
$3.42 billion during 2001 and $3.29 billion during
2000, including $645 million during 2001 and
$369 million during 2000 for NII Holdings. Cash
payments for capital expenditures increased due to an increase
in network construction activity resulting in an increase in the
number of switches and transmitter and receiver sites and
related equipment we placed in service in 2001 compared to 2000.
Cash payments for licenses, acquisitions, investments and other
totaled $1.15 billion during 2001 and consisted primarily
of $461 million paid in 2001 to Arch Wireless, Mobex,
Motorola and Pacific Wireless for the acquisition of
800 MHz and 900 MHz licenses and related assets,
$547 million for other licenses, $52 million for
escrow deposits for future domestic acquisitions and licenses
purchases and $34 million to Lets Talk Cellular &
Wireless for the purchase of retail stores.

Net cash provided by financing activities of
$2.26 billion during 2001 consisted primarily of
$2.22 billion in net proceeds from the private placement of
our 9.5% senior serial redeemable notes due 2011 and our 6%
convertible senior notes due 2011. Net cash provided by
financing activities of $2.8 billion during 2000 was primarily
attributable to $1.75 billion in net proceeds from the sale
of debt securities and $1.85 billion in proceeds from
borrowings under our domestic credit facility, offset by
$1.21 billion used for the retirement of debt securities.

E.     Future Capital
Needs and Resources

1. Capital resources.

As of December 31, 2001, our consolidated
capital resources included $3.8 billion of cash, cash
equivalents and short-term investments; however,
$334 million of those amounts were not available to fund
any of the cash needs of our domestic operations due to the
terms of NII Holdings debt agreements. Therefore, we
had available about $3.47 billion of cash, cash equivalents
and short-term investments to fund our domestic operations. At
December 31, 2001, we also had available to us about
$1.5 billion of the revolving loan commitment under our
domestic bank credit facility as discussed below. Our resulting
total amount of liquidity to fund our domestic operations at
December 31, 2001 was almost $5.0 billion.

Our ongoing capital needs depend on a variety of
factors, including the extent to which we are able to fund the
cash needs of our business from segment earnings. Since our
inception, we have been unable to fund our capital expenditures,
spectrum acquisition costs, cash investment activities and debt
service payments with the segment earnings generated by our
operating activities. Therefore, we have met the cash needs of
our business principally by raising capital from issuances of
debt and equity securities. To the extent we can generate
greater segment earnings from our business operations, we will
be able to use less of our available liquidity and will have
less need to raise capital, if any, from the capital markets. To
the extent we generate less segment earnings from our business
operations, we will be required to use more of our available
liquidity to fund operations or raise additional capital from
the capital markets. We may

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be unable to raise additional capital on
acceptable terms, if at all. Our ability to generate segment
earnings is dependent upon, among other things:




| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the amount of revenue we are able to generate
	from our customers;                                                                        
|
| |  | the amount of operating expenses required to
	provide our services;                                                                       
|
| |  | the cost of acquiring and retaining customers,
	including the subsidy we incur to provide handsets to our new
	and existing customers; and
|
| |  | our ability to continue to grow our customer base.                                                                                        

As of December 31, 2001, our domestic bank
credit facility provided for total secured financing capacity of
up to $6.0 billion, subject to the satisfaction or waiver
of applicable borrowing conditions. This facility consists of a
$1.5 billion revolving loan commitment and
$4.5 billion in term loans that have already been fully
accessed. Principal repayment begins on the term loans in
limited amounts in late 2002, and the several tranches that make
up the term loans mature over a period from December 31,
2007 to March 31, 2009, as set forth in the table below.
The amounts available under the revolving loan commitment
decrease in limited amounts beginning at the end of 2002 and
continuing until late 2007, when no amounts will remain
available under the revolving loan commitment.

The bank credit agreement requires compliance
with financial ratio tests, including total indebtedness to
operating cash flow, secured indebtedness to operating cash
flow, operating cash flow to interest expense and operating cash
flow to specified charges, each as defined under the bank credit
agreement. Some of these tests become more stringent over time.
The maturity dates of the loans may accelerate if we do not
comply with the financial ratio tests, which could have a
material adverse effect on our financial condition. Borrowings
under the bank credit facility are secured by liens on assets of
substantially all of our domestic subsidiaries. As of
December 31, 2001, we were in compliance with all financial
ratio tests required under our bank credit facility.

In addition, the loans under the bank credit
facility can accelerate if the aggregate amount of our public
notes that mature within the succeeding six months of any date
before June 30, 2009, or the aggregate amount of our
redeemable stock that is mandatorily redeemable within the
succeeding six months of any date before June 30, 2009,
exceed amounts specified in our bank credit facility. However,
no such acceleration would occur if the long-term rating for our
public notes is at least BBB- by Standard & Poors
Ratings Services or Baa3 by Moodys Investors Service, Inc.
There is no provision under any of our indebtedness that
requires repayment in the event of a downgrade by any ratings
service.

Our ability to access additional amounts under
the bank credit facility may be restricted by provisions
included in some of our public notes and preferred stock that
limit the incurrence of additional indebtedness in certain
circumstances. The availability of borrowings under this
facility also is subject to the satisfaction or waiver of
specified borrowing conditions. In March 2001, we amended this
bank credit facility to modify certain financial covenants to
better reflect our anticipated financial performance and to
permit ongoing compliance with the financial covenants during
2001. As of December 31, 2001, we were able to access
substantially all of the remaining $1.5 billion available
under the bank credit facility.

The bank credit facility also contains covenants
which limit our ability and some of our subsidiaries
ability to incur additional indebtedness; create liens; pay
dividends or make distributions in respect of our or their
capital stock or make specified other restricted payments;
consolidate, merge or sell all or substantially all of our or
their assets; guarantee obligations of other entities; enter
into hedging agreements; enter into transactions with affiliates
or related persons or engage in any business other than the
telecommunications business. Finally, except for distributions
for specified limited purposes, these covenants limit the
distribution of substantially all of our subsidiaries net
assets.

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2. Capital needs.

We currently anticipate that our future capital
needs will principally consist of funds required for:



| |   |                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | capital expenditures to expand and enhance our
	digital mobile network, including payments in connection with
	contemplated enhancements to our existing iDEN technology to
	increase voice capacity and to deliver packet data service at
	higher speeds;
|
| |  | operating expenses relating to our domestic
	digital mobile network;                                                                                                                                                                                      
|
| |  | future investments, including potential spectrum
	purchases and investments in new business opportunities;                                                                                                                                                
|
| |  | a potential $500 million payment in
	connection with the currently proposed public safety spectrum
	realignment;                                                                                                                                          
|
| |  | a potential investment of up to $250 million
	in NII Holdings;                                                                                                                                                                                            
|
| |  | debt service requirements; and                                                                                                                                                                                                                            
|
| |  | other general corporate expenditures.                                                                                                                                                                                                                     

A.     Capital
expenditures.Our 2001 domestic
capital expenditures were $2.47 billion. In the future, our
domestic capital spending is expected to be driven by several
factors including:



| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the contemplated construction of additional
	transmitter and receiver sites to increase system capacity and
	maintain system quality and the installation of related
	switching equipment in the existing domestic market coverage
	areas;
|
| |  | the contemplated enhancement of our digital
	mobile network coverage around most major domestic market areas;                                                                                                                             
|
| |  | the contemplated enhancements to our existing
	iDEN technology to increase voice capacity and deliver packet
	data service at higher speeds; and                                                                                          
|
| |  | any potential future enhancement of our digital
	mobile network by deploying new technologies.                                                                                                                                            

Our future capital expenditures are significantly
affected by future technology improvements and technology
choices. In October 2001, Motorola and we announced an
anticipated significant technology upgrade to our iDEN digital
mobile network, which Motorola is developing for our expected
deployment in 2003. We expect that this upgrade will effectively
double our voice capacity for interconnect calls and leverage
our investment in our existing infrastructure. See Forward
Looking Statements. Technological developments like this
would allow us to significantly reduce the amount of capital
expenditures we would need to make for our current digital
mobile network in future years. However, any anticipated
reductions could be more than offset to the extent we deploy 3G
technologies. However, we will only deploy a new technology when
it is warranted by expected customer demand, we have sufficient
capital to deploy the technology and the anticipated benefits of
services requiring third generation technology outweigh the
costs of providing those services.

B.     Future
domestic contractual obligations.The
following table sets forth the amounts and timing of contractual
payments for our most significant domestic contractual
obligations determined as of December 31, 2001. The
information in the table reflects future unconditional payments
and is based upon, among other things, the current terms of the
relevant agreements, appropriate classification of items under
generally accepted accounting principles currently in effect and
certain assumptions, such as future interest rates. Future
events could cause actual payments to differ significantly from
these amounts. See

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Forward Looking Statements. Except as
required by applicable law, we disclaim any obligation to modify
or update the information contained in the table.


|                              |  |               |        |      |  |      |     |      |  |      |     |      |  |      |     |            |  |   |     |  |  |   |     |  |  |   |       |  |  |   |       | 
|----------------------------- |  | ------------- | ------ | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | - | --- |  |  | - | --- |  |  | - | ----- |  |  | - | ----- | 
|Future Domestic               |  |               |        |      |  |      |     |      |  |      |     |      |  |      |     | 2008 and  
|Contractual Obligations       |  | Total         |        | 2002 |  | 2003 |     | 2004 |  | 2005 |     | 2006 |  | 2007 |     | Thereafter
|                              |  |               |        |      |  |      |     |      |  |      |     |      |  |      |     |           
|                              |  |              
|                              |  | (in millions)
|Public senior notes           |  | $             | 15,522 |      |  | $    | 479 |      |  | $    | 760 |      |  | $    | 841 |            |  | $ | 841 |  |  | $ | 841 |  |  | $ | 3,164 |  |  | $ | 8,596 | 
|Domestic credit facility(1)   |  |               | 6,678  |      |  |      | 296 |      |  |      | 528 |      |  |      | 699 |            |  |   | 795 |  |  |   | 782 |  |  |   | 675   |  |  |   | 2,903 | 
|Capital lease obligations     |  |               | 400    |      |  |      | 74  |      |  |      | 74  |      |  |      | 74  |            |  |   | 74  |  |  |   | 64  |  |  |   | 40    |  |  |   |      | 
|Preferred stock cash payments |  |               | 4,364  |      |  |      | 30  |      |  |      | 231 |      |  |      | 268 |            |  |   | 268 |  |  |   | 268 |  |  |   | 268   |  |  |   | 3,031 | 
|Tower finance obligation      |  |               | 837    |      |  |      | 65  |      |  |      | 66  |      |  |      | 61  |            |  |   | 52  |  |  |   | 41  |  |  |   | 41    |  |  |   | 511   | 
|Operating leases(2)           |  |               | 1,514  |      |  |      | 353 |      |  |      | 320 |      |  |      | 278 |            |  |   | 197 |  |  |   | 110 |  |  |   | 128   |  |  |   | 128   | 
|Other                         |  |               | 1,318  |      |  |      | 139 |      |  |      | 153 |      |  |      | 165 |            |  |   | 170 |  |  |   | 187 |  |  |   | 161   |  |  |   | 343   | 



---

|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts include estimated interest payments
	based on managements expectation as to future interest
	rates, assume the current payment schedule and exclude the
	revolving loan commitment.
|   
|(2) | These amounts principally include future lease
	costs relating to transmitter and receiver sites and switches
	and office facilities as of December 31, 2001.                                     

The above table excludes amounts that may be paid
or will be paid in connection with interest rate swap agreements
and spectrum acquisitions. Specifically, we have committed,
subject to closing conditions which may not be met, to pay up to
$327 million for domestic spectrum acquisitions entered
into and outstanding as of December 31, 2001, without
giving effect to transactions in which we may elect to issue
equity rather than paying cash. Since December 31, 2001, we
paid $130 million in cash to Chadmoore Wireless Group for
800 MHz and 900 MHz specialized mobile radio licenses
and related assets. Included in the Other caption
are minimum amounts due under our most significant service
contracts. Amounts actually paid under some of these agreements
will likely be higher due to variable components of these
agreements. The more significant variable components that
determine the ultimate obligation owed include items such as
hours contracted, subscribers, interest rates and other factors.
In addition, we are party to various arrangements that are
conditional in nature and obligate us to make payments only upon
the occurrence of certain events, such as the delivery of
functioning software or products. Because it is not possible to
predict the timing or amounts that may be due under these
conditional arrangements, no amounts have been included in the
table above. Significant amounts expected to be paid to Motorola
for infrastructure, handsets and related services are not shown
above due to the uncertainty surrounding the timing and extent
of these payments and because minimum contractual amounts under
our agreements with Motorola are not significant. See
note 14 of the consolidated financial statements appearing
at the end of this annual report on Form 10-K for amounts
paid to Motorola in 2001. In addition, current year and future
cash obligations on behalf of our subsidiary, NII Holdings,
are not included in this table as those obligations are solely
those of NII Holdings and its subsidiaries, nor is any future
potential investment by us in NII Holdings. Finally, the amounts
in the table do not contemplate any future refinancing of
indebtedness, although managements current expectation is
to refinance a significant portion of this indebtedness.

C.     NII Holdings.Historically, cash investments made in
our subsidiary, NII Holdings, have been a significant use of our
capital. In April and July 2001, through a wholly owned
subsidiary, we contributed an aggregate of $500 million to
NII Holdings in exchange for 5,000 shares of its
series A exchangeable redeemable preferred stock. During
the fourth quarter of 2001, in view of the capital constrained
environment and NII Holdings lack of funding sources,
NII Holdings undertook an extensive review of its business
plan and determined to pursue a less aggressive growth strategy
that targets conservation of cash resources by slowing
enhancement and expansion of its networks and reducing
subscriber growth and operating expenses.

NII Holdings currently has outstanding an
aggregate of $2.67 billion of debt that it incurred to
construct its network and fund its operations, including
$800 million in carrying amount, or $857 million in
aggregate principal amount, of notes held by Nextel
Communications as described under Part I,
Item 1. Business 
E. NII Holdings, Inc. The obligations under this
debt are solely those of

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NII Holdings and its subsidiaries, and
Nextel Communications is not a party to any of the obligations
in respect of that debt. Since debt service payments are a
significant portion of NII Holdings current and
future commitments and because NII Holdings does not
believe that funds generated from its operating activities or
realistically available from other sources will be sufficient to
meet its expected commitments, NII Holdings is reviewing
various alternatives to restructure its currently outstanding
indebtedness. As part of its cash preservation plan, NII
Holdings Argentine operating company failed to make
principal payments on its $108 million Argentine credit
facilities and NII Holdings failed to make an interest
payment on its $650 million aggregate principal amount
12.75% senior notes, resulting in defaults under these
facilities, as well as under its $382 million of Motorola
vendor financing facilities due to cross-default provisions.


As a result of these defaults, the lenders under
these facilities are free to pursue their respective remedies,
including, in the case of vendor and bank financing facilities,
seizing the assets of NII Holdings and its subsidiaries that are
pledged as collateral. If any of NII Holdings lenders
accelerates any of these obligations, then, as a result of the
operation of cross-default provisions, NII Holdings would
be in default with respect to substantially all of its
indebtedness, all of which would then be callable or subject to
acceleration. In addition, NII Holdings independent
auditors have issued a going concern opinion with
respect to NII Holdings financial statements, which
indicates that, in their opinion, substantial doubt exists about
NII Holdings ability to continue operating. If
NII Holdings is unable to obtain additional funding and
negotiate a successful debt restructuring, it may have to
further write down its assets, sell strategic assets, reorganize
under Chapter 11 of the United States Bankruptcy Code or
take other measures, which could include liquidation of assets.

Although we have no legal obligation to make any
investments in, or otherwise advance funds to,
NII Holdings, to the extent NII Holdings is unable to
obtain necessary funding from other sources, we may elect to
provide NII Holdings with up to $250 million, but any
such investment will be conditioned on NII Holdings
ability to complete a satisfactory restructuring of its
indebtedness and other financial obligations, as well as other
specific conditions. Any funding that we elect to provide to NII
Holdings will reduce the amount of funding available for our
domestic operations.

D.     Future
Outlook.Based on our available cash
resources and our anticipated cash needs as outlined above and
the anticipated segment earnings of our domestic wireless
business, under our current business plan, we believe that we
will be able to fully fund our domestic operations through 2003.
See Forward Looking Statements. In addition, based
on these same factors, we believe that our operations will
become free cash flow positive in 2004. In other
words, we believe our anticipated segment earnings from domestic
operating activities will be sufficient to fund our anticipated
capital expenditures, spectrum acquisition costs, currently
expected investment activities and scheduled debt service
payments in 2004. See Forward Looking Statements.

In making these assessments, we have considered:



| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cash, cash equivalents and short-term investments
	on hand and available for our domestic operations as of
	December 31, 2001 of $3.47 billion;                                                                           
|
| |  | the availability of about $1.5 billion of
	incremental funding over the amounts outstanding under our
	domestic bank credit facility;                                                                                     
|
| |  | the anticipated level of domestic capital
	expenditures through 2004, including a significant positive
	impact associated with our anticipated receipt of the
	contemplated iDEN technology upgrade from Motorola in 2003;
|
| |  | our scheduled domestic debt service requirements
	through 2004; and                                                                                                                                                       
|
| |  | a potential investment of up to $250 million
	in NII Holdings.                                                                                                                                                            

If our business plans change, including as a
result of changes in technology, or if economic conditions in
any of our markets generally or competitive practices in the
mobile wireless telecommunications industry change materially
from those currently prevailing or from those now anticipated,
or if other presently unexpected circumstances are encountered
that have a material effect on the cash flow or

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profitability of our mobile wireless businesses,
the anticipated cash needs of our businesses, as well as the
conclusions as to the adequacy of the available sources and
timing or ability to achieve free cash flow positive
status, could change significantly.


Our conclusions that we will be able to fully
fund our domestic operations through 2003 and that our domestic
operations will achieve free cash flow positive
status in 2004 also do not take into account:



| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the impact of our participation in any auctions
	for the purchase of licenses other than those already concluded;                                                             
|
| |  | any significant acquisition transactions or the
	pursuit of any significant new business opportunities other than
	those currently being pursued by us;                       
|
| |  | deployment of third generation technologies;                                                                                                                                  
|
| |  | costs of compliance with FCC or state regulations
	to the extent we are unable to recover those costs; and                                                                    
|
| |  | potential material changes to our business plan
	which could result from the proposed spectrum realignment, if
	effected, including a potential related $500 million
	payment.

Any of these events or circumstances could
involve significant additional funding needs in excess of the
identified currently available sources, and could require us to
raise additional capital to meet those needs. However, our
ability to raise additional capital, if necessary, is subject to
a variety of additional factors that we cannot presently predict
with certainty, including:



| |   |                                                       
| | - | ------------------------------------------------------
| |  | the commercial success of our operations;             
|
| |  | the volatility and demand of the capital markets;
	and
|
| |  | the market price of our common stock.                 

We have had and may in the future have
discussions with third parties regarding potential sources of
new capital to satisfy actual or anticipated financing needs. At
present, other than the existing arrangements that have been
consummated or are described in this annual report, we have no
legally binding commitments or understandings with any third
parties to obtain any material amount of additional capital.

Finally, the above discussion concerning adequacy
of financing and our achievement of free cash flow
positive status is premised on and considers only the cash
on hand and available under existing financing facilities of our
domestic operations, and anticipated domestic segment earnings
over the relevant periods. Additionally, the achievement of
free cash flow positive status does not imply that
we will choose or be able to maintain such status for any
particular period, nor does it imply the presence or likelihood
of accounting profits, reported earnings, taxable income or
other measures of financial performance, substantially all of
which are calculated by taking into consideration non-cash
charges, such as depreciation and amortization. The entirety of
the above discussion also is subject to the risk factors and
other cautionary and qualifying factors set forth under
Forward Looking Statements.

Forward Looking Statements

Safe Harbor Statement under the
Private Securities Litigation Reform Act of 1995.A number of statements made in the
foregoing Managements Discussion and Analysis of
Financial Condition and Results of Operations are not
historical or current facts, but deal with potential future
circumstances and developments. They can be identified by the
use of forward looking words such as believes,
expects, plans, may,
will, would, could,
should or anticipates or other
comparable words, or by discussions of strategy that may involve
risks and uncertainties. We caution you that these forward
looking statements are only predictions, which are subject to
risks and uncertainties including technological uncertainty,
financial variations, changes in the regulatory environment,
industry growth and trend predictions. The operation and results
of our wireless communications business may be subject to the
effect of other risks and uncertainties in addition to the
relevant qualifying factors identified in the foregoing
Managements Discussion and Analysis of Financial
Condition and Results of Operations and those outlined
under Part I, Item 1. Business 
K. Risk Factors.

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F.     Effect of
Inflation and Foreign Currency Exchange

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

The net assets of the subsidiaries of
NII Holdings are subject to foreign currency exchange risks
since they are primarily maintained in local currency.
Additionally, the debt of NII Holdings and its subsidiaries
is almost entirely denominated in U.S. dollars, which
exposes such entities to foreign currency exchange risks.
Certain subsidiaries conduct business in countries in which the
rate of inflation is significantly higher than that of the
United States. Further, the recent economic developments in
Argentina, including the devaluation of the Argentine peso, have
increased NII Holdings foreign currency exchange risk.
NII Holdings seeks to protect its earnings from inflation
and possible currency devaluation by trying to periodically
adjust the local currency prices charged by the relevant
subsidiary for sales of handsets and services to its customers.
However, NII Holdings may not be able to offset the
devaluation of a foreign currency against the U.S. dollar by a
corresponding price increase. While it routinely assesses its
foreign currency exposure, NII Holdings has not entered
into any hedging transactions.

During the first quarter of 2002, as a result of
the devaluation of the Argentine peso due to the recent adverse
economic developments in Argentina, NII Holdings expects to
record significant foreign currency transaction losses primarily
related to NII Holdings $108 million
U.S. dollar denominated Argentine credit facilities as well
as a significant foreign currency translation adjustment.

G.     Effect of New
Accounting Standards

In June 2001, the Financial Accounting Standards
Board, or FASB, issued SFAS No. 141, Business
Combinations, which addresses the accounting and reporting
for business combinations and broadens the criteria for
recording intangible assets separate from goodwill. On
July 1, 2001, we adopted SFAS No. 141, which
eliminates the pooling of interest method and requires us to use
the purchase method of accounting for all business combinations
initiated after June 30, 2001.

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 requires goodwill and intangible assets with
indefinite useful lives to no longer be amortized but to be
tested for impairment at least annually. Intangible assets that
have finite lives will continue to be amortized over their
useful lives. The amortization and nonamortization provisions of
SFAS No. 142 were applicable to all goodwill and intangible
assets acquired after June 30, 2001. Effective
January 1, 2002, we began applying the provisions of SFAS
No. 142 to all goodwill and intangible assets recognized on
our financial statements at that date. Goodwill amortization was
$38 million for the year ended December 31, 2001.

We believe that our portfolio of FCC licenses
represents an intangible asset with an indefinite useful life
due to the fact that spectrum is a reusable resource that does
not deplete or exhaust over time and that FCC rules entitle
licensees to a renewal expectancy that is designed to provide
carriers with a high level of assurance that their licenses will
be renewed. Accordingly, we ceased amortizing FCC license costs
effective January 1, 2002. FCC license amortization was
$109 million for the year ended December 31, 2001.

In connection with the adoption of SFAS
No. 142, we expect to incur a non-cash charge of about
$350 million in the first quarter of 2002 to income tax
expense to increase our valuation allowance related to our net
operating loss. This charge will be required because we have
significant deferred tax liabilities related to FCC licenses
with no tax basis. Historically, we did not need a valuation
allowance for the portion of our net operating loss equal to the
amount of license amortization expected to occur during the
carryforward period of our net operating loss. Since we ceased
amortizing licenses on January 1, 2002, we can no longer
estimate the amount, if any, of deferred tax liabilities related
to our FCC licenses, which will reverse during the carryforward
period. Accordingly, we need to increase the valuation allowance.

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In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which requires that one accounting
model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. It also
broadens the presentation of discontinued operations to include
more disposal transactions. The adoption of SFAS No. 144 on
January 1, 2002 did not have a material impact on our
financial position or results of operations.




Item 7A.     Quantitative
and Qualitative Disclosures about Market Risk

We primarily use senior notes, bank and vendor
credit facilities and mandatorily redeemable preferred stock to
finance our obligations. We are exposed to market risk from
changes in interest and foreign currency exchange rates and
equity prices. Our primary interest rate risk results from
changes in the U.S. LIBOR, U.S. prime and Eurodollar
rates, which are used to determine the interest rates applicable
to our borrowings. Interest rate changes expose our fixed rate
long-term borrowings to changes in fair value and expose our
variable rate long-term borrowings to changes in future cash
flows. We use derivative instruments primarily consisting of
interest rate swap agreements to manage this interest rate
exposure by achieving a desired proportion of fixed rate versus
variable rate borrowings. All of our derivative transactions are
entered into for non-trading purposes.

NII Holdings revenues are denominated
in foreign currencies while a significant portion of its
operations are financed through senior notes and bank and vendor
credit facilities, which are denominated in U.S. dollars.
As a result, fluctuations in exchange rates relative to the
U.S. dollar expose us to foreign currency exchange rate
risks.

As of December 31, 2001, we held
$1.24 billion of short-term investments consisting of debt
securities in the form of commercial paper and corporate bonds.
As the weighted average maturity from the date of purchase was
less than five months, these short-term investments do not
expose us to a significant amount of interest rate risk.

As of December 31, 2001, the fair value of
our investment in the common stock of SpectraSite, a publicly
traded company, totaled $50 million. This investment is
reported at its fair value in our financial statements. Negative
fluctuations in the stock price of SpectraSite expose us to
equity price risk. A 10% decline in its stock price would result
in a $5 million decrease in the fair value of our
investment in SpectraSite.

The table below summarizes our market risks as of
December 31, 2001 in U.S. dollars. Since our financial
instruments expose us to interest rate and foreign currency
exchange rate risks, these instruments are presented within each
market risk category. The table presents principal cash flows
and related interest rates by year of maturity for our senior
notes, bank and vendor credit facilities, capital lease and
finance obligations and mandatorily redeemable preferred stock
in effect at December 31, 2001. In the case of the
mandatorily redeemable preferred stock and senior notes, the
table excludes the potential exercise of the relevant redemption
or conversion features. This table also assumes that we will
refinance our indebtedness to levels necessary to avoid an
earlier repayment obligation with respect to our domestic bank
credit agreement. See Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations  E. Future Capital Needs and
Resources. For interest rate swap agreements, the table
presents notional amounts and the related interest rates by year
of maturity. Fair values included in this section have been
determined based on:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | quoted market prices for senior notes and
	mandatorily redeemable preferred stock;                                                         
|
| |  | estimates from bankers for our domestic bank
	credit facility;                                                                             
|
| |  | carrying value for NII Holdings bank and
	vendor credit facilities as interest rates are reset
	periodically;                             
|
| |  | present value of future cash flows for capital
	lease and finance obligations using a discount rate available
	for similar obligations; and
|
| |  | estimates from bankers to settle interest rate
	swap agreements.                                                                           

67



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##### Table of Contents



Notes 7, 8 and 11 to the consolidated financial
statements at the end of this annual report on Form 10-K
contain descriptions and significant changes in outstanding
amounts of our senior notes, bank and vendor credit facilities,
capital lease and finance obligations, interest rate swap
agreements and mandatorily redeemable preferred stock and should
be read together with the following table.

|                                                                                                   |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | ----- | --- | ----- |  | ----- | --- | ----- |  | - | ------ | - |  | - | ------ | - |  | - | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                   |  |                       |       |      |  |     
|                                                                                                   |  | Year of Maturity      |       | 2001 |  | 2000
|                                                                                                   |  |                       |       |      |  |     
|                                                                                                   |  |                       |       |      |  | Fair |     |      |  | Fair
|                                                                                                   |  | 2002                  |       | 2003 |  | 2004 |     | 2005 |  | 2006 |     | Thereafter |  | Total |     | Value |  | Total |     | Value
|                                                                                                   |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |      
|                                                                                                   |  |                      
|                                                                                                   |  | (dollars in millions)
|I. Interest Rate Sensitivity                                                                       |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|Mandatorily Redeemable Preferred Stock,
	Long-term Debt and Capital Lease and Finance
	Obligations |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|Fixed Rate(1)                                                                                      |  | $                     | 1,570 |      |  | $    | 106 |      |  | $    | 110 |            |  | $     | 106 |       |  | $     | 90  |       |  | $ | 12,635 |   |  | $ | 14,617 |   |  | $ | 8,978 |   |  | $ | 13,159 |   |  | $ | 10,039 |  
|Average Interest Rate                                                                              |  |                       | 12    | %    |  |      | 9   | %    |  |      | 9   | %          |  |       | 9   | %     |  |       | 9   | %     |  |   | 9      | % |  |   | 10     | % |  |   |       |   |  |   | 9      | % |  |   |        |  
|Variable Rate(2)                                                                                   |  | $                     | 538   |      |  | $    | 200 |      |  | $    | 327 |            |  | $     | 433 |       |  | $     | 466 |       |  | $ | 3,045  |   |  | $ | 5,009  |   |  | $ | 4,426 |   |  | $ | 5,023  |   |  | $ | 5,023  |  
|Average Interest Rate                                                                              |  |                       | 7     | %    |  |      | 4   | %    |  |      | 4   | %          |  |       | 4   | %     |  |       | 4   | %     |  |   | 5      | % |  |   | 5      | % |  |   |       |   |  |   | 10     | % |  |   |        |  
|Interest Rate Swaps                                                                                |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|Variable to Fixed(3)                                                                               |  | $                     |      |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $     | 570 |       |  | $ |       |   |  | $ | 570    |   |  | $ | (83   | ) |  | $ | 570    |   |  | $ | (60    | )
|Average Pay Rate                                                                                   |  |                       |      |      |  |      |    |      |  |      |    |            |  |       |    |       |  |       | 8   | %     |  |   |       |   |  |   | 8      | % |  |   |       |   |  |   | 8      | % |  |   |        |  
|Average Receive Rate                                                                               |  |                       |      |      |  |      |    |      |  |      |    |            |  |       |    |       |  |       | 3   | %     |  |   |       |   |  |   | 3      | % |  |   |       |   |  |   | 7      | % |  |   |        |  
|Variable to Variable                                                                               |  | $                     |      |      |  | $    | 400 |      |  | $    |    |            |  | $     |    |       |  | $     |    |       |  | $ |       |   |  | $ | 400    |   |  | $ | (13   | ) |  | $ | 500    |   |  | $ | (5     | )
|Average Pay Rate                                                                                   |  |                       |      |      |  |      | 5   | %    |  |      |    |            |  |       |    |       |  |       |    |       |  |   |       |   |  |   | 5      | % |  |   |       |   |  |   | 7      | % |  |   |        |  
|Average Receive Rate                                                                               |  |                       |      |      |  |      | 2   | %    |  |      |    |            |  |       |    |       |  |       |    |       |  |   |       |   |  |   | 2      | % |  |   |       |   |  |   | 7      | % |  |   |        |  
|Fixed to Variable                                                                                  |  | $                     |      |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $     |    |       |  | $ | 500    |   |  | $ | 500    |   |  | $ | 26    |   |  | $ |       |   |  | $ |       |  
|Average Pay Rate                                                                                   |  |                       |      |      |  |      |    |      |  |      |    |            |  |       |    |       |  |       |    |       |  |   | 5      | % |  |   | 5      | % |  |   |       |   |  |   |       |   |  |   |        |  
|Average Receive Rate                                                                               |  |                       |      |      |  |      |    |      |  |      |    |            |  |       |    |       |  |       |    |       |  |   | 10     | % |  |   | 10     | % |  |   |       |   |  |   |       |   |  |   |        |  
|II. Foreign Currency Exchange Rate
	Sensitivity                                                    |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|Long-Term Debt                                                                                     |  |                       |       |      |  |      |     |      |  |      |     |            |  |       |     |       |  |       |     |       |  |   |        |   |  |   |        |   |  |   |       |   |  |   |        |   |  |   |        |  
|Fixed Rate                                                                                         |  | $                     | 1,475 |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $     |    |       |  | $ |       |   |  | $ | 1,475  |   |  | $ | 52    |   |  | $ | 2,333  |   |  | $ | 1,521  |  
|Average Interest Rate                                                                              |  |                       | 13    | %    |  |      |    |      |  |      |    |            |  |       |    |       |  |       |    |       |  |   |       |   |  |   | 13     | % |  |   |       |   |  |   | 13     | % |  |   |        |  
|Variable Rate                                                                                      |  | $                     | 490   |      |  | $    |    |      |  | $    |    |            |  | $     |    |       |  | $     |    |       |  | $ |       |   |  | $ | 490    |   |  | $ | 490   |   |  | $ | 523    |   |  | $ | 523    |  
|Average Interest Rate                                                                              |  |                       | 7     | %    |  |      |    |      |  |      |    |            |  |       |    |       |  |       |    |       |  |   |       |   |  |   | 7      | % |  |   |       |   |  |   | 12     | % |  |   |        |  



---

|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Fixed rate amounts maturing in 2002 include
	$1,475 million of debt of NII Holdings, nonrecourse to
	and not held by parent, callable or subject to acceleration by
	third parties.
|   
|(2) | Variable amounts maturing in 2002 include
	$490 million of debt of NII Holdings, nonrecourse to
	and not held by parent, callable or subject to acceleration by
	third parties.    
|   
|(3) | This interest rate swap requires a cash
	settlement in October 2003.                                                                                                               




Item 8.     Financial
Statements and Supplementary Data

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




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

None.

68



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##### Table of Contents






PART III






|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the
	Registrant

Information regarding our directors is
incorporated by reference to the information set forth under the
caption Election of Directors in our proxy statement
relating to our 2002 annual meeting of stockholders, which will
be filed with the Securities and Exchange Commission in
definitive form before April 18, 2002. Information
regarding our executive officers is set forth in Part I of
this report under the caption Executive Officers of the
Registrant. Information regarding compliance with
Section 16(a) of the Securities and Exchange Act of 1934 by
our directors, executive officers and holders of ten percent of
a registered class of our equity securities is incorporated by
reference to the information set forth under the caption
Section 16(a) Beneficial Ownership Reporting
Compliance in our proxy statement relating to our 2002
annual meeting of stockholders.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information regarding compensation of executive
officers and directors is incorporated by reference to the
information set forth under the captions Election of
Directors-Compensation of Directors and
  Compensation Committee Interlocks and
Insider Participation and Executive
Compensation in our proxy statement relating to our 2002
annual meeting of stockholders, which will be filed with the
Securities and Exchange Commission in definitive form before
April 18, 2002.






|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
	Owners and Management and Related Stockholders Matters

Information required by this item is incorporated
by reference to the information set forth under the caption
Securities Ownership of Certain Beneficial Owners and
Management in our proxy statement relating to our 2002
annual meeting of stockholders, which will be filed with the
Securities and Exchange Commission in definitive form before
April 18, 2002.






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

Information required by this item is incorporated
by reference to the information set forth under the caption
Certain Relationships and Related Transactions in
our proxy statement relating to our 2002 annual meeting of
stockholders, which will be filed with the Securities and
Exchange Commission in definitive form before April 18,
2002.

69



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##### Table of Contents






PART IV




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



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

|                                                                                                                             |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                             |  | Page
|                                                                                                                             |  |     
|Independent Auditors Report                                                                                                 |  |      | F-2 | 
|Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                                                |  |      | F-3 | 
|Consolidated Statements of Operations for the
	Years Ended December 31, 2001, 2000 and 1999                                  |  |      | F-4 | 
|Consolidated Statements of Changes in
	Stockholders (Deficit) Equity for the Years Ended
	December 31, 2001, 2000 and 1999. |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999                                  |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                                   |  |      | F-7 | 



| |     |                                                                                              
| | --- | ---------------------------------------------------------------------------------------------
| | (2) | The following Financial Statement Schedules are
	included in this annual report on Form 10-K.

|                                                            |  |  |      | 
|----------------------------------------------------------- |  |  | ---- | 
|Schedule I  Condensed Financial
	Information of Registrant |  |  | F-47 | 
|Schedule II  Valuation and
	Qualifying Accounts            |  |  | F-51 | 



| |     |                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------
| | (3) | List of Exhibits: The exhibits filed as part of
	this report are listed in the Exhibit Index, beginning on
	page 72.

(b) Reports on Form 8-K:



| |     |                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Current Report on Form 8-K dated and filed
	with the Commission on October 3, 2001, reporting under
	Item 5 specified preliminary third quarter results and
	other data.                                       
|
| | (2) | Current Report on Form 8-K dated and filed
	with the Commission on October 4, 2001, reporting under
	Item 5 specified technology initiatives and other data.                                                   
|
| | (3) | Current Report on Form 8-K dated and filed
	with the Commission on October 24, 2001, reporting under
	Item 5 financial results and other data for the third
	quarter of 2001.                                  
|
| | (4) | Current Report on Form 8-K dated and filed
	with the Commission on November 21, 2001, reporting under
	Item 5 a public safety spectrum allocation proposal by
	Nextel to the Federal Communications Commission.

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##### Table of Contents






SIGNATURES

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



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



| |     |                  
| | --- | -----------------
| | By: | /s/ PAUL N. SALEH

| | 
| | 
| | 

March 29, 2002


| |                                             
| | --------------------------------------------
| | Paul N. Saleh                               
| | Executive Vice President and Chief Financial
| | Officer                                     

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

|                                                 |  |                                                                                     |  |                |  | 
|------------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                        |  | Title                                                                               |  | Date          
|                                                 |  |                                                                                     |  |               
|/s/ WILLIAM E. CONWAY, JR.William E. Conway, Jr. |  | Chairman of the Board of Directors                                                  |  | March 29, 2002
|/s/ TIMOTHY M. DONAHUETimothy M. Donahue         |  | President, Chief Executive Officer and Director                                     |  | March 29, 2002
|/s/ PAUL N. SALEHPaul N. Saleh                   |  | Executive Vice President and Chief Financial
	Officer (principal financial officer) |  | March 29, 2002
|/s/ WILLIAM G. ARENDTWilliam G. Arendt           |  | Vice President and Controller (principal
	accounting officer)                       |  | March 29, 2002
|/s/ MORGAN E. OBRIENMorgan E. OBrien           |  | Vice Chairman of the Board                                                          |  | March 29, 2002
|/s/ J. TIMOTHY BRYANJ. Timothy Bryan             |  | Director                                                                            |  | March 29, 2002
|/s/ KEITH J. BANEKeith J. Bane                   |  | Director                                                                            |  | March 29, 2002
|/s/ CRAIG O. MCCAWCraig O. McCaw                 |  | Director                                                                            |  | March 29, 2002
|/s/ V. JANET HILLV. Janet Hill                   |  | Director                                                                            |  | March 29, 2002
|/s/ DENNIS M. WEIBLINGDennis M. Weibling         |  | Director                                                                            |  | March 29, 2002
|/s/ FRANK M. DRENDELFrank M. Drendel             |  | Director                                                                            |  | March 29, 2002
|/s/ WILLIAM E. KENNARDWilliam E. Kennard         |  | Director                                                                            |  | March 29, 2002

71



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##### Table of Contents



Exhibit Index

All documents referenced below were filed
pursuant to the Securities Exchange Act of 1934 by Nextel
Communications, Inc., file no. 0-19656, unless otherwise
indicated.

|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | 
|Number  |       | 
|        |       | 
|        | 3.1.1 |  |  | Restated Certificate of Incorporation of Nextel
	(filed June 1, 2000 as Exhibit 3.1 to Nextels
	post-effective amendment no. 2 to registration statement
	no. 33-1290 on Form S-4 and incorporated herein by
	reference).                                                                                                                                                                
|        | 3.1.2 |  |  | Certificate of Designation of the Powers,
	Preferences and Relative, Participating, Optional and Other
	Special Rights of 13% Series D Exchangeable Preferred Stock
	and Qualifications, Limitations and Restrictions Thereof (filed
	July 22, 1997 as Exhibit 4.1 to Nextels current
	report on Form 8-K dated July 21, 1997 and
	incorporated herein by reference).                    
|        | 3.1.3 |  |  | Certificate of Designation of the Powers,
	Preferences and Relative, Participating, Optional and Other
	Special Rights of 11.125% Series E Exchangeable Preferred
	Stock and Qualifications, Limitations and Restrictions Thereof
	(filed February 12, 1998 as Exhibit 4.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                
|        | 3.1.4 |  |  | Certificate of Designation of the Powers,
	Preferences and Relative, Participating, Optional and Other
	Special Rights of Zero Coupon Convertible Preferred Stock due
	2013 and Qualifications, Limitations and Restrictions Thereof
	(filed February 10, 1999 as Exhibit 4.16 to
	Nextels registration statement on Form S-4 and
	incorporated herein by reference).                    
|        | 3.2   |  |  | Amended and Restated By-Laws of Nextel (filed
	July 31, 1995 as Exhibit 4.2 to Nextels
	post-effective amendment no. 1 on Form S-8 to registration
	statement no. 33-91716 on Form S-4 and incorporated herein
	by reference).                                                                                                                                                           
|        | 4.1   |  |  | Indenture dated March 6, 1997 between NII
	Holdings, Inc, (formerly Nextel International, Inc.) and The
	Bank of New York, as Trustee, relating to NII Holdings
	13.0% Senior Discount Notes due 2007 (filed March 31, 1997
	as Exhibit 4.24 to Nextels annual report on
	Form 10-K for the year ended December 31, 1996 (the
	1996 Form 10-K) and incorporated herein by
	reference).
|        | 4.2   |  |  | Warrant Agreement dated March 6, 1997,
	between NII Holdings and The Bank of New York (filed
	March 31, 1997 as Exhibit 4.26 to the 1996
	Form 10-K and incorporated herein by reference).                                                                                                                                                                                                
|        | 4.3   |  |  | Indenture dated September 17, 1997 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 10.65% Senior Redeemable Discount Notes due
	2007 (filed September 22, 1997 as Exhibit 4.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                        
|        | 4.4   |  |  | Indenture dated October 22, 1997 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 9.75% Senior Serial Redeemable Discount Notes
	due 2007 (filed October 23, 1997 as Exhibit 4.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                      
|        | 4.5   |  |  | Indenture dated February 11, 1998 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 9.95% Senior Serial Redeemable Discount Notes
	due 2008 (filed February 12, 1998 as Exhibit 4.2 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                    
|        | 4.6   |  |  | Indenture dated November 4, 1998 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 12.0% Senior Serial Redeemable Notes due 2008
	(filed February 10, 1999 as Exhibit 4.13.1 to
	Nextels registration statement on Form S-4 and
	incorporated herein by reference).                                                                                   

72



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##### Table of Contents



|        |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ------ |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        | 
|Number  |        | 
|        |        | 
|        | 4.7    |  |  | Indenture dated March 12, 1998 between NII
	Holdings and The Bank of New York, as Trustee, relating to NII
	Holdings 12.125% Senior Serial Redeemable Discount Notes
	due 2008 (filed May 14, 1998 as Exhibit 4.1 to NII
	Holdings quarterly report on Form 10-Q for the
	quarter ended March 31, 1998 and incorporated herein by
	reference).                                                                                                   
|        | 4.8    |  |  | Indenture dated June 16, 1999 between Nextel
	and Harris Trust and Savings Bank, as Trustee, relating to
	Nextels 4.75% Convertible Senior Redeemable Notes due 2007
	(filed June 23, 1999 as Exhibit 4.1 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).                                                                                                                                                         
|        | 4.9    |  |  | Indenture dated November 12, 1999 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 9.375% Senior Serial Redeemable Notes due 2009
	(filed November 15, 1999 as Exhibit 4.1 to
	Nextels quarterly report on Form 10-Q for the quarter
	ended September 30, 1999 (the 1999 Third Quarter
	10-Q) and incorporated herein by reference).                                                                        
|        | 4.10   |  |  | Indenture dated January 26, 2000 between
	Nextel and Harris Trust and Savings Bank, as Trustee, relating
	to Nextels 5.25% Convertible Senior Redeemable Notes due
	2010 (filed January 26, 2000 as Exhibit 4.1 to
	Nextels current report on Form 8-K and incorporated
	herein by reference).                                                                                                                                                   
|        | 4.11   |  |  | Indenture dated August 1, 2000 between NII
	Holdings and The Bank of New York, as Trustee, relating to NII
	Holdings 12.75% Senior Serial Redeemable Notes due 2010
	(filed August 2, 2000 as Exhibit 4.1 to NII
	Holdings current report on Form 8-K dated
	August 1, 2000 and incorporated herein by reference).                                                                                                                               
|        | 4.12   |  |  | 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).                                                                                                                                                            
|        | 4.13   |  |  | Indenture dated May 29, 2001, between Nextel
	and BNY Midwest Trust Company, as Trustee, relating to
	Nextels 6.0% Convertible Senior Redeemable Notes due 2011
	(filed May 29, 2001 as Exhibit 4.1 to Nextels
	current report on Form 8-K and incorporated herein by
	reference).                                                                                                                                                               
|        | 4.14.1 |  |  | Amended and Restated Credit Agreement dated
	November 9, 1999 among Nextel, Nextel Finance Company, the
	other Restricted Companies party thereto, the Lenders Party
	thereto, Toronto Dominion (Texas) Inc., as Administrative Agent,
	and The Chase Manhattan Bank as Collateral Agent (filed
	November 15, 1999 as Exhibit 4.3 to the 1999 Third
	Quarter 10-Q and incorporated herein by reference).                                           
|        | 4.14.2 |  |  | Tranche D Term Loan Agreement dated
	March 15, 2000 among Nextel, Nextel Finance Company, the
	other Restricted Companies party thereto, the Lenders Party
	thereto, Toronto Dominion (Texas), as Administrative Agent, and
	The Chase Manhattan Bank as Collateral Agent (filed
	March 15, 2000 as Exhibit 4.1 to Nextels current
	report on Form 8-K and incorporated herein by reference).                                                     
|        | 4.14.3 |  |  | Amendment no. 1 dated April 26, 2000 to the
	Amended and Restated Credit Agreement dated November 9,
	1999 among Nextel, Nextel Finance Company, the Other Restricted
	Companies party thereto, the Lenders party thereto, Toronto
	Dominion (Texas), as Administrative Agent, and The Chase
	Manhattan Bank, as Collateral Agent (filed May 5, 2000 as
	Exhibit 4.1 to Nextels current report on
	Form 8-K and incorporated herein by reference).

73



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|        |          |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          | 
|Number  |          | 
|        |          | 
|        | 4.14.4   |  |  | Amendment no. 2 dated March 29, 2001 to the
	Amended and Restated Credit Agreement dated November 9,
	1999, as amended, among Nextel, Nextel Finance Company, the
	Other Restricted Companies party thereto, the Lenders party
	thereto, Toronto Dominion (Texas), as Administrative Agent, and
	The Chase Manhattan Bank, as Collateral Agent. (filed
	April 2, 2001 as Exhibit 4.13.4 to Nextels
	annual report on Form 10-K for the year ended
	December 31, 2001 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 report on
	Form 10-K for the year ended December 31, 2000 and
	incorporated herein by reference).                                                                                                                                                                                                                                     

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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.                                                                                                                     
|        | 10.2     |  |  | Agreement and Plan of Contribution and Merger
	dated August 4, 1994, as amended, among Nextel, Motorola,
	ESMR, Inc., ESMR Sub, Inc. and others (filed April 28, 1995
	as Exhibit 2.01 to the ESMR Form S-4 Registration
	Statement and incorporated herein by reference).                                  
|        | 10.3     |  |  | Registration Rights Agreement dated July 28,
	1995 between Nextel and Motorola (filed November 14, 1995
	as Exhibit 10.8 to Nextels quarterly report on
	Form 10-Q for the quarter ended September 30, 1995 and
	incorporated herein by reference).                                                        
|        | 10.4.1   |  |  | Securities Purchase Agreement between Nextel,
	Digital Radio, L.L.C and Craig O. McCaw, dated April 4,
	1995 (filed April 11, 1995 as Exhibit 2.1 to
	Nextels current report on Form 8-K dated
	April 10, 1995 and incorporated herein by reference).                                                      
|        | 10.4.2   |  |  | Management Support Agreement dated April 4,
	1995 between Nextel and Eagle River, Inc. (filed on
	April 11, 1995 as Exhibit 99.2 to Nextels
	current report on Form 8-K dated April 10, 1995 and
	incorporated herein by reference).                                                                       
|        | 10.4.3   |  |  | Form of Registration Rights Agreement dated
	July 28, 1995 between Nextel and Digital Radio (filed
	March 31, 1997 as Exhibit 10.38 to the 1996
	Form 10-K and incorporated herein by reference).                                                                                                           
|        | 10.4.4   |  |  | 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).                            
|        | 10.4.5   |  |  | 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).                                                                                  
|        | 10.4.6   |  |  | Incentive Option Agreement between Nextel and
	Eagle River dated April 4, 1995 (filed April 11, 1995
	as Exhibit 99.3 to Nextels current report on
	Form 8-K dated April 10, 1995 and incorporated herein
	by reference).                                                                                  
|        | 10.5.1   |  |  | Option Purchase Agreement among Nextel,
	Unrestricted Subsidiary Funding Company and Option Acquisition
	dated June 16, 1997 (filed July 9, 1997 as
	Exhibit 10.3 to 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**   |  |  | Form of Indemnification Agreement and exhibits
	thereto between Nextel and each of its directors (filed
	June 24, 1992 as Exhibit 10.56 to Nextels annual
	report on Form 10-K for the year ended March 31, 1992
	and incorporated herein by reference).                                                   

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|        |          |   |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | -------- | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |  
|Number  |          |  
|        |          |  
|        | 10.7     |   |  | Amendment dated August 9, 2001 to the
	Securities Purchase Agreement dated April 4, 1995 between
	Nextel, Digital Radio, L.L.C. and Mr. Craig O. McCaw.
	(filed August 10, 2001 as Exhibit 10.1 to
	Nextels quarterly report on Form 10-Q for the quarter
	ended June 30, 2001 and incorporated herein by reference).                           
|        | 10.8**   |   |  | 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).                                                                                                                                    
|        | 10.9**   |   |  | Nextel Severance Benefits Plan.                                                                                                                                                                                                                                                                                                                  
|        | 10.10**  |   |  | Nextel Associate Stock Purchase Plan (filed
	June 21, 1996 as Exhibit 4.3 to Nextels
	registration statement no. 333-06523 on Form S-8 and
	incorporated herein by reference).                                                                                                                                                                  
|        | 10.11**  |   |  | Nextel Cash Compensation Deferral Plan (filed
	December 17, 1997 as Exhibit 4.1 to Nextels
	registration statement No. 333-42537 on Form S-8 and
	incorporated herein by reference).                                                                                                                                                            
|        | 10.12**  |   |  | Nextel Change of Control Retention Bonus and
	Severance Pay Plan dated July 14, 1999. (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).                                                                                                
|        | 10.13.1* | * |  | Employment Agreement dated February 1, 1996
	between Tim Donahue and Nextel (filed March 31, 1997 as
	Exhibit 10.36 to the 1996 Form 10-K and incorporated
	herein by reference).                                                                                                                                                                
|        | 10.13.2* | * |  | Addendum to Employment Agreement between Tim
	Donahue and Nextel dated March 24, 1997 (filed
	March 31, 1997 as Exhibit 10.37 to the 1996
	Form 10-K and incorporated herein by reference).                                                                                                                                                      
|        | 10.14    |   |  | Employment Agreement between Paul N. Saleh and
	Nextel dated August 3, 2001.                                                                                                                                                                                                                                                                     
|        | 10.15.1  |   |  | 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).                                                                                      
|        | 10.15.2  |   |  | 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 on Form S-1 and incorporated herein
	by reference).
|        | 10.15.3  |   |  | 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 on Form S-4 and incorporated herein
	by reference).                                                                                                         
|        | 10.15.4  |   |  | 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).                                                                                                        
|        | 10.15.5  |   |  | 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).                                                                                                        
|        | 10.15.6  |   |  | 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).                                                                                                    
|        | 10.15.7  |   |  | 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).                                                                                                            

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|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ----- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | 
|Number  |       | 
|        |       | 
|        | 10.16 |  |  | Master Site Lease Agreement among Nextel of New
	York, Inc. Nextel Communications of the Mid-Atlantic, Inc.,
	Nextel South Corp., Nextel of Texas, Inc. Nextel West Corp., and
	Nextel of California, Inc. and Tower Asset Sub Inc. and the
	Landlord Parties as defined therein (filed April 29, 1999
	as Exhibit 10.33 to SpectraSite Holdings, Inc.s
	registration statement no. 333-67043 on Form S-4 (the
	SpectraSite Holdings S-4 Registration Statement) and
	incorporated herein by reference).
|        | 10.17 |  |  | Master Site Commitment Agreement among Nextel,
	Nextel of New York, Nextel Communications of the Mid-Atlantic,
	Nextel South Corp., Nextel of Texas, Nextel West Corp., Nextel
	of California, Tower Parent Corp., SpectraSite Holdings and
	Tower Asset Sub (filed April 29, 1999 as Exhibit 10.34
	to the SpectraSite Holdings S-4 Registration Statement and
	incorporated herein by reference).                                                                                                        
|        | 10.18 |  |  | Second Amended and Restated Right of First
	Opportunity Agreement dated August 1, 2000 between Nextel
	and NII Holdings (filed August 14, 2000 as
	Exhibit 10.4 to NII Holdings quarterly report on
	Form 10-Q and incorporated herein by reference).                                                                                                                                                                                                                                                     
|        | 21    |  |  | Subsidiaries of Nextel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 23    |  |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 99.1  |  |  | Memorandum Opinion and Order of the FCC dated
	February 13, 1991 (filed December 5, 1992 as
	Exhibit 28.1 to the S-1 Registration Statement and
	incorporated herein by reference).                                                                                                                                                                                                                                                                                                                        



---



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

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES

Index to Consolidated Financial Statements
and

Financial Statement Schedules


|                                  |                                                                                                                             |      |     |      | 
|--------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ---- | --- | ---- | 
|                                  |                                                                                                                             | Page
|                                  |                                                                                                                             |     
|INDEPENDENT AUDITORS REPORT      |                                                                                                                             |      | F-2 |     
|CONSOLIDATED FINANCIAL STATEMENTS |                                                                                                                             |      |     |     
|                                  | Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                                               |      |     | F-3  | 
|                                  | Consolidated Statements of Operations for the
	Years Ended December 31, 2001, 2000 and 1999                                 |      |     | F-4  | 
|                                  | Consolidated Statements of Changes in
	Stockholders (Deficit) Equity for the Years Ended
	December 31, 2001, 2000 and 1999 |      |     | F-5  | 
|                                  | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999                                 |      |     | F-6  | 
|                                  | Notes to Consolidated Financial Statements                                                                                  |      |     | F-7  | 
|FINANCIAL STATEMENT SCHEDULES     |                                                                                                                             |      |     |     
|                                  | Schedule I  Condensed Financial
	Information of Registrant                                                                 |      |     | F-47 | 
|                                  | Schedule II  Valuation and
	Qualifying Accounts                                                                            |      |     | F-51 | 

F-1



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##### Table of Contents






INDEPENDENT AUDITORS REPORT

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

Reston, Virginia


We have audited the accompanying consolidated
balance sheets of Nextel Communications, Inc. and subsidiaries
(the Company) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, changes
in stockholders (deficit) equity, and cash flows for
each of the three years in the period ended December 31,
2001. Our audits also included the financial statement schedules
listed in the Index at Item 14(a)(2). These consolidated
financial statements and financial statement schedules are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedules based
on our audits.

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

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of Nextel Communications, Inc. and
subsidiaries at December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

As discussed in notes 1 and 8 to the consolidated
financial statements, in 2001, the Company changed its method of
accounting for derivative instruments to conform to Statement of
Financial Accounting Standards (SFAS) No. 133, as amended
by SFAS No. 138 and recorded a cumulative effect of a
change in accounting principle in 2001. As discussed in note 1
to the consolidated financial statements, the Company adopted
the provisions of Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements, in 2000.

DELOITTE & TOUCHE LLP

McLean, Virginia

March 19, 2002


F-2



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##### Table of Contents






NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






CONSOLIDATED BALANCE SHEETS


As of December 31, 2001 and
2000


(in millions)


|                                                    |                                                                                 |                                      |        |        |        |   |        |        |        | 
|--------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------ | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                    |                                                                                 | 2001                                 |        | 2000  
|                                                    |                                                                                 |                                      |        |       
|ASSETS                                             
|Current assets                                      |                                                                                 |                                      |        |        |        |   |        |       
|                                                    | Cash and cash equivalents, of which $250 and $474
	is restricted                |                                      | $      | 2,481  |        |   | $      | 2,609  |       
|                                                    | NII Holdings restricted cash held in escrow                                     |                                      |        | 84     |        |   |        |       |       
|                                                    | Short-term investments                                                          |                                      |        | 1,236  |        |   |        | 2,065  |       
|                                                    | Accounts and notes receivable, net                                              |                                      |        | 1,129  |        |   |        | 864    |       
|                                                    | Handset and accessory inventory                                                 |                                      |        | 260    |        |   |        | 183    |       
|                                                    | Prepaid expenses and other current assets                                       |                                      |        | 533    |        |   |        | 737    |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | Total current assets                 |        |        | 5,723  |   |        |        | 6,458  | 
|Investments                                         |                                                                                 |                                      | 188    |        |        |   | 756    |       
|Property, plant and equipment, net                  |                                                                                 |                                      | 9,274  |        |        |   | 8,791  |       
|Intangible assets, net                              |                                                                                 |                                      | 6,067  |        |        |   | 5,982  |       
|Other assets                                        |                                                                                 |                                      | 812    |        |        |   | 699    |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | $                                    | 22,064 |        |        | $ | 22,686 |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|LIABILITIES AND STOCKHOLDERS
	(DEFICIT) EQUITY    
|Current liabilities                                 |                                                                                 |                                      |        |        |        |   |        |       
|                                                    | Accounts payable                                                                |                                      | $      | 756    |        |   | $      | 953    |       
|                                                    | Accrued expenses and other                                                      |                                      |        | 1,470  |        |   |        | 1,244  |       
|                                                    | Due to related parties                                                          |                                      |        | 341    |        |   |        | 423    |       
|                                                    | Current portion of long-term debt, capital lease
	and finance obligations       |                                      |        | 145    |        |   |        | 102    |       
|                                                    | Debt of NII Holdings, nonrecourse to and not held
	by parent (note 7)           |                                      |        | 1,865  |        |   |        |       |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | Total current liabilities            |        |        | 4,577  |   |        |        | 2,722  | 
|Long-term debt                                      |                                                                                 |                                      | 13,815 |        |        |   | 13,763 |       
|Capital lease and finance
	obligations              |                                                                                 |                                      | 905    |        |        |   | 866    |       
|Deferred income taxes                               |                                                                                 |                                      | 669    |        |        |   | 912    |       
|Deferred revenues and other                         |                                                                                 |                                      | 566    |        |        |   | 514    |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | Total liabilities                    |        |        | 20,532 |   |        |        | 18,777 | 
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|Commitments and contingencies (notes 7, 10 and
	14) |                                                                                 |                                      |        |        |        |   |        |       
|Mandatorily redeemable preferred stock (note
	11)   |                                                                                 |                                      | 2,114  |        |        |   | 1,881  |       
|Stockholders
	(deficit) equity                     |                                                                                 |                                      |        |        |        |   |        |       
|                                                    | Convertible preferred stock, 8 shares issued and
	outstanding                   |                                      |        | 283    |        |   |        | 283    |       
|                                                    | Common stock, class A, 763 and 727 shares issued
	and outstanding               |                                      |        | 1      |        |   |        | 1      |       
|                                                    | Common stock, class B, nonvoting convertible, 36
	shares issued and outstanding |                                      |        |       |        |   |        |       |       
|                                                    | Paid-in capital                                                                 |                                      |        | 8,581  |        |   |        | 8,370  |       
|                                                    | Accumulated deficit                                                             |                                      |        | (9,179 | )      |   |        | (6,554 | )     
|                                                    | Treasury stock, at cost                                                         |                                      |        |       |        |   |        | (2     | )     
|                                                    | Deferred compensation, net                                                      |                                      |        | (17    | )      |   |        | (28    | )     
|                                                    | Accumulated other comprehensive loss                                            |                                      |        | (251   | )      |   |        | (42    | )     
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | Total stockholders (deficit) equity |        |        | (582   | ) |        |        | 2,028  | 
|                                                    |                                                                                 |                                      |        |        |        |   |        |       
|                                                    |                                                                                 | $                                    | 22,064 |        |        | $ | 22,686 |       
|                                                    |                                                                                 |                                      |        |        |        |   |        |       

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

F-3



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##### Table of Contents






NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF
OPERATIONS


For the Years Ended December 31, 2001,
2000 and 1999


(in millions, except per share
amounts)


|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |       |  
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ----- | -
|                                                                                        |                                                                     | 2001 |        | 2000   |   | 1999
|                                                                                        |                                                                     |      |        |        |   |     
|Operating revenues                                                                      |                                                                     | $    | 7,689  |        |   | $    | 5,714  |        |   | $ | 3,786  |      
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Operating expenses                                                                      |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        | Cost of revenues                                                    |      |        | 2,869  |   |      |        | 2,172  |   |   |        | 1,579 |  
|                                                                                        | Selling, general and administrative                                 |      |        | 3,020  |   |      |        | 2,278  |   |   |        | 1,672 |  
|                                                                                        | Restructuring and impairment charges (note 3)                       |      |        | 1,769  |   |      |        |       |   |   |        |      |  
|                                                                                        | Depreciation and amortization                                       |      |        | 1,746  |   |      |        | 1,265  |   |   |        | 1,004 |  
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        |                                                                     |      | 9,404  |        |   |      | 5,715  |        |   |   | 4,255  |      
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Operating loss                                                                          |                                                                     |      | (1,715 | )      |   |      | (1     | )      |   |   | (469   | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Other income (expense)                                                                  |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        | Interest expense                                                    |      |        | (1,403 | ) |      |        | (1,245 | ) |   |        | (878  | )
|                                                                                        | Interest income                                                     |      |        | 207    |   |      |        | 396    |   |   |        | 96    |  
|                                                                                        | Equity in losses of unconsolidated affiliates                       |      |        | (95    | ) |      |        | (152   | ) |   |        | (73   | )
|                                                                                        | Foreign currency transaction losses, net                            |      |        | (70    | ) |      |        | (25    | ) |   |        | (61   | )
|                                                                                        | Realized gain on investments, net                                   |      |        | 47     |   |      |        | 275    |   |   |        | 70    |  
|                                                                                        | Reduction in fair value of available-for-sale
	securities           |      |        | (188   | ) |      |        |       |   |   |        |      |  
|                                                                                        | Other, net                                                          |      |        | (12    | ) |      |        | 8      |   |   |        | 17    |  
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        |                                                                     |      | (1,514 | )      |   |      | (743   | )      |   |   | (829   | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Loss before income tax benefit and
	extraordinary item                                  |                                                                     |      | (3,229 | )      |   |      | (744   | )      |   |   | (1,298 | )    
|Income tax benefit                                                                      |                                                                     |      | 135    |        |   |      | 33     |        |   |   | 28     |      
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Loss before extraordinary item                                                          |                                                                     |      | (3,094 | )      |   |      | (711   | )      |   |   | (1,270 | )    
|Extraordinary item  gain
	(loss) on early retirement of debt, net of income tax of
	$0 |                                                                     |      | 469    |        |   |      | (104   | )      |   |   | (68    | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Net loss                                                                                |                                                                     |      | (2,625 | )      |   |      | (815   | )      |   |   | (1,338 | )    
|Mandatorily redeemable preferred stock
	dividends                                       |                                                                     |      | (233   | )      |   |      | (209   | )      |   |   | (192   | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Loss attributable to common
	stockholders                                               |                                                                     | $    | (2,858 | )      |   | $    | (1,024 | )      |   | $ | (1,530 | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Loss per share attributable to common
	stockholders, basic and diluted                  |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        | Loss before extraordinary item attributable to
	common stockholders |      | $      | (4.27  | ) |      | $      | (1.21  | ) |   | $      | (2.29 | )
|                                                                                        | Extraordinary item                                                  |      |        | 0.60   |   |      |        | (0.14  | ) |   |        | (0.10 | )
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|                                                                                        |                                                                     | $    | (3.67  | )      |   | $    | (1.35  | )      |   | $ | (2.39  | )    
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      
|Weighted average number of common shares
	outstanding                                   |                                                                     |      | 778    |        |   |      | 756    |        |   |   | 639    |      
|                                                                                        |                                                                     |      |        |        |   |      |        |        |   |   |        |      

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

F-4



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS (DEFICIT) EQUITY

For the Years Ended December 31, 2001,
2000 and 1999


(in millions)


|                           |                           |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  |  | 
|-------------------------- | ------------------------- | ----------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------------------- |  | ------------ | --- | ------- |  | ----------- | --- | ------ | -- | ------- | - | ------- | - | - | -- |  |  | - | - |  |  | - | ----- |  | ---- | ----- | ------ | ------ | - |  |  | 
|                           |                           |                                                             |                                                    |                                                            |  |              |     |         |  |            
|                           |                           | Convertible                                                 |                                                    | Class A                                                    |  | Class B      |     |         |  |            
|                           |                           | Preferred Stock                                             |                                                    | Common Stock                                               |  | Common Stock |     |         |  |            
|                           |                           |                                                             |                                                    |                                                            |  |              |     | Paid-in |  | Accumulated
|                           |                           | Shares                                                      |                                                    | Amount                                                     |  | Shares       |     | Amount  |  | Shares      |     | Amount |    | Capital |   | Deficit
|                           |                           |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |        
|Balance, December 31, 1998 |                           |                                                             | 8                                                  |                                                            |  | $            | 291 |         |  |             | 544 |        |    | $       | 1 |         |   |   | 36 |  |  | $ |  |  |  | $ | 4,378 |  |      | $     | (4,401 | )     
|                           | Net loss                  |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        | (1,338 | )
|                           |                           | Other comprehensive income, net of income tax:              |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   | 
|                           |                           |                                                             | Foreign currency translation adjustment            |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  | 
|                           |                           |                                                             | Unrealized gain on available-for-sale securities   |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  | 
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  |  | 
|                           |                           | Issuance of common stock:                                   |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   | 
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |  |              |     |         |  |             |     |        |    | 56      |   |         |   |  |    |  |  |   |   |  |  |   |       |  |      | 467   |        |        |   |  | 
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      | 3     |        |        |   |  | 
|                           |                           |                                                             | Public offering, net of issuance costs             |                                                            |  |              |     |         |  |             |     |        |    | 68      |   |         |   |  |    |  |  |   |   |  |  |   |       |  |      | 2,752 |        |        |   |  | 
|                           |                           | Issuance of restricted stock                                |                                                    |                                                            |  |              |     |         |  |             |     |        | 34 |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  | 600  |       |        |        |   | 
|                           |                           | Deferred compensation and other                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  | 38   |       |        |        |   | 
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  | (192 | )     |        |        |   | 
|                           |                           |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |       
|Balance, December 31, 1999 |                           |                                                             | 8                                                  |                                                            |  |              | 291 |         |  |             | 702 |        |    |         | 1 |         |   |   | 36 |  |  |   |  |  |  |   | 8,046 |  |      |       | (5,739 | )     
|                           | Net loss                  |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        | (815   | )
|                           |                           | Other comprehensive loss, net of income tax:                |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   | 
|                           |                           | Foreign currency translation adjustment                     |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   | 
|                           |                           | Net unrealized gains on available- for-sale
	securities     |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   | 
|                           |                           |                                                             | Unrealized holding gains arising during the period |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  | 
|                           |                           |                                                             |                                                    | Reclassification adjustment for gain included in
	net loss |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  |  | 
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |   |  |  | 
|                           | Issuance of common stock: |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |        |  
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |  |              |     |         |  |             |     |        |    | 7       |   |         |   |  |    |  |  |   |   |  |  |   |       |  |      | 74    |        |        |   |  | 
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      | 15    |        |        |   |  | 
|                           |                           |                                                             | Conversion of debt securities and preferred stock  |                                                            |  |             |     |         |  | (8          | )   |        |    | 18      |   |         |   |  |    |  |  |   |   |  |  |   |       |  |      | 344   |        |        |   |  | 
|                           |                           | Gain on issuance of equity by affiliate, net of
	income tax |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  | 87   |       |        |        |   | 
|                           |                           | Deferred compensation                                       |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  | 13   |       |        |        |   | 
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |  |              |     |         |  |             |     |        |   |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  | (209 | )     |        |        |   | 
|                           |                           |                                                             |                                                    |                                                            |  |              |     |         |  |             |     |        |    |         |   |         |   |   |    |  |  |   |   |  |  |   |       |  |      |       |        |       

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                           |                           |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |   |     |   |  | 
|-------------------------- | ------------------------- | ----------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------------------- | - | ------------ | --- | - | -- | - | --- | - | --- | - |  | 
|                           |                           |                                                             |                                                    |                                                           
|                           |                           | Treasury Stock                                              |                                                    |                                                           
|                           |                           |                                                             |                                                    | Deferred                                                  
|                           |                           | Shares                                                      |                                                    | Amount                                                     |   | Compensation
|                           |                           |                                                             |                                                    |                                                            |   |             
|Balance, December 31, 1998 |                           |                                                             | 2                                                  |                                                            |   | $            | (13 | ) |    | $ | (2  | )
|                           | Net loss                  |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |   |    
|                           |                           | Other comprehensive income, net of income tax:              |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           |                                                             | Foreign currency translation adjustment            |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           |                                                             | Unrealized gain on available-for-sale securities   |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |   |              |     |   |    |   |     |   |     |   |  | 
|                           |                           | Issuance of common stock:                                   |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |   |             |     |   |    |  |     |   |     |   | 
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |   | (2           | )   |   |    | 9 |     |   |     |   | 
|                           |                           |                                                             | Public offering, net of issuance costs             |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           | Issuance of restricted stock                                |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           | Deferred compensation and other                             |                                                    |                                                            |  |              |     |   | (2 | ) |     |   | (21 | )
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |  
|Balance, December 31, 1999 |                           |                                                             |                                                   |                                                            |   |              | (6  | ) |    |   | (23 | )
|                           | Net loss                  |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |   |    
|                           |                           | Other comprehensive loss, net of income tax:                |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           | Foreign currency translation adjustment                     |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           | Net unrealized gains on available- for-sale
	securities     |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           |                                                             | Unrealized holding gains arising during the period |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           |                                                             |                                                    | Reclassification adjustment for gain included in
	net loss |   |              |     |   |    |   |     |   |     |   |  | 
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |   |              |     |   |    |   |     |   |     |   |  | 
|                           | Issuance of common stock: |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |   |    
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |   |             |     |   |    | 4 |     |   |     |   | 
|                           |                           |                                                             | Conversion of debt securities and preferred stock  |                                                            |   |              |     |   |    |   |     |   |     |   | 
|                           |                           | Gain on issuance of equity by affiliate, net of
	income tax |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           | Deferred compensation                                       |                                                    |                                                            |   |              |     |   |    |   |     |   | (5  | )
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |   |              |     |   |    |   |     |   |     |  
|                           |                           |                                                             |                                                    |                                                            |   |              |     |   |    |   |     |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      |       |        |  
|-------------------------- | ------------------------- | ----------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------------------- |  | ----- | ---- | ----- | - | ---- | - |  |  | - | ----- | ------ | ---- | ----- | ------ | -
|                           |                           |                                                             |                                                    |                                                           
|                           |                           | Accumulated Other                                           |                                                    |                                                           
|                           |                           | Comprehensive Income (Loss)                                 |                                                    |                                                           
|                           |                           |                                                             |                                                    |                                                           
|                           |                           | Unrealized                                                  |                                                    |                                                            |  |      
|                           |                           | Gain                                                        |                                                    | Cumulative                                                 |  | Cash  |      |      
|                           |                           | (Loss) on                                                   |                                                    | Translation                                                |  | Flow  |      |      
|                           |                           | Investments                                                 |                                                    | Adjustment                                                 |  | Hedge |      | Total
|                           |                           |                                                             |                                                    |                                                            |  |       |      |      
|Balance, December 31, 1998 |                           | $                                                           |                                                   |                                                            |  | $     | (24  | )     |   | $    |  |  |  | $ | 230   |       
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           | Net loss                  |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       | (1,338 | )   
|                           |                           | Other comprehensive income, net of income tax:              |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      |      
|                           |                           |                                                             | Foreign currency translation adjustment            |                                                            |  |       |      |       |   | (114 | ) |  |  |   |       |        |      | (114  | )     
|                           |                           |                                                             | Unrealized gain on available-for-sale securities   |                                                            |  | 142   |      |       |   |      |   |  |  |   |       |        |      | 142   |       
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |  |       |      |       |   |      |   |  |  |   |       |        |      |       | (1,310 | )
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           |                           | Issuance of common stock:                                   |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      |      
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 467   |       
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 12    |       
|                           |                           |                                                             | Public offering, net of issuance costs             |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 2,752 |       
|                           |                           | Issuance of restricted stock                                |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | 600  |      
|                           |                           | Deferred compensation and other                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | 15   |      
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | (192 | )    
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|Balance, December 31, 1999 |                           |                                                             | 142                                                |                                                            |  |       | (138 | )     |   |      |  |  |  |   | 2,574 |       
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           | Net loss                  |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       | (815   | )   
|                           |                           | Other comprehensive loss, net of income tax:                |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      |      
|                           |                           | Foreign currency translation adjustment                     |                                                    |                                                            |  |       |      |       | 4 |      |   |  |  |   |       |        | 4    |      
|                           |                           | Net unrealized gains on available- for-sale
	securities     |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      |      
|                           |                           |                                                             | Unrealized holding gains arising during the period |                                                            |  | 225   |      |       |   |      |   |  |  |   |       |        |      | 225   |       
|                           |                           |                                                             |                                                    | Reclassification adjustment for gain included in
	net loss |  |       | (275 | )     |   |      |   |  |  |   |       |        |      |       | (275   | )
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           |                           |                                                             |                                                    | Total comprehensive loss                                   |  |       |      |       |   |      |   |  |  |   |       |        |      |       | (861   | )
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       
|                           | Issuance of common stock: |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |     
|                           |                           |                                                             | Exercise of options and warrants                   |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 74    |       
|                           |                           |                                                             | Employee stock purchase plan                       |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 19    |       
|                           |                           |                                                             | Conversion of debt securities and preferred stock  |                                                            |  |       |      |       |   |      |   |  |  |   |       |        |      | 336   |       
|                           |                           | Gain on issuance of equity by affiliate, net of
	income tax |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | 87   |      
|                           |                           | Deferred compensation                                       |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | 8    |      
|                           |                           | Mandatorily redeemable preferred stock dividends            |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |        | (209 | )    
|                           |                           |                                                             |                                                    |                                                            |  |       |      |       |   |      |   |  |  |   |       |       

F-5



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS (DEFICIT) EQUITY

For the Years Ended December 31, 2001,
2000 and 1999


(in millions)


|                           |          |                                                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|-------------------------- | -------- | --------------------------------------------------------- | --------------------------------------------------------------- | ------------ |  | ------------ | --- | ------- |  | ----------- | --- | ------ |  | ------- | - | ------- |  | - | -- |  |  | - | - |  |  | - | ----- |  | ---- | --- | ------ | ------ | - |  | 
|                           |          |                                                           |                                                                 |              |  |              |     |         |  |            
|                           |          | Convertible                                               |                                                                 | Class A      |  | Class B      |     |         |  |            
|                           |          | Preferred Stock                                           |                                                                 | Common Stock |  | Common Stock |     |         |  |            
|                           |          |                                                           |                                                                 |              |  |              |     | Paid-in |  | Accumulated
|                           |          | Shares                                                    |                                                                 | Amount       |  | Shares       |     | Amount  |  | Shares      |     | Amount |  | Capital |   | Deficit
|                           |          |                                                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |        
|Balance, December 31, 2000 |          |                                                           | 8                                                               |              |  |              | 283 |         |  |             | 727 |        |  |         | 1 |         |  |   | 36 |  |  |   |  |  |  |   | 8,370 |  |      |     | (6,554 | )     
|                           | Net loss |                                                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        | (2,625 | )
|                           |          | Other comprehensive loss, net of income tax:              |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   | 
|                           |          | Foreign currency translation adjustment                   |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   | 
|                           |          | Net unrealized losses on available- for-sale
	securities: |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   | 
|                           |          |                                                           | Unrealized holding losses arising during the
	period            |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          |                                                           | Reclassification adjustment for losses included
	in net loss    |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          | Cash flow hedge:                                          |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   | 
|                           |          |                                                           | Cumulative effect of accounting change                          |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          |                                                           | Reclassification of transition adjustment
	included in net loss |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          |                                                           | Unrealized loss on cash flow hedge                              |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          |                                                           | Total comprehensive loss                                        |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   |  | 
|                           |          | Issuance of common stock:                                 |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |        |   | 
|                           |          |                                                           | Exercise of options                                             |              |  |              |     |         |  |             |     |        |  | 12      |   |         |  |  |    |  |  |   |   |  |  |   |       |  |      | 124 |        |        |   |  | 
|                           |          |                                                           | Employee stock purchase plan                                    |              |  |              |     |         |  |             |     |        |  | 2       |   |         |  |  |    |  |  |   |   |  |  |   |       |  |      | 18  |        |        |   |  | 
|                           |          |                                                           | Retirement of debt                                              |              |  |              |     |         |  |             |     |        |  | 22      |   |         |  |  |    |  |  |   |   |  |  |   |       |  |      | 292 |        |        |   |  | 
|                           |          | Deferred compensation and other                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  | 10   |     |        |        |   | 
|                           |          | Mandatorily redeemable preferred stock dividends          |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  | (233 | )   |        |        |   | 
|                           |          |                                                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |       
|Balance, December 31, 2001 |          |                                                           | 8                                                               |              |  | $            | 283 |         |  |             | 763 |        |  | $       | 1 |         |  |   | 36 |  |  | $ |  |  |  | $ | 8,581 |  |      | $   | (9,179 | )     
|                           |          |                                                           |                                                                 |              |  |              |     |         |  |             |     |        |  |         |   |         |  |   |    |  |  |   |   |  |  |   |       |  |      |     |        |       

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                           |          |                                                           |                                                                 |          |  |              |    |   |  |   |     |   |    |  | 
|-------------------------- | -------- | --------------------------------------------------------- | --------------------------------------------------------------- | -------- |  | ------------ | -- | - |  | - | --- | - | -- |  | 
|                           |          |                                                           |                                                                 |         
|                           |          | Treasury Stock                                            |                                                                 |         
|                           |          |                                                           |                                                                 | Deferred
|                           |          | Shares                                                    |                                                                 | Amount   |  | Compensation
|                           |          |                                                           |                                                                 |          |  |             
|Balance, December 31, 2000 |          |                                                           |                                                                |          |  |              | (2 | ) |  |   | (28 | )
|                           | Net loss |                                                           |                                                                 |          |  |              |    |   |  |   |     |   |   
|                           |          | Other comprehensive loss, net of income tax:              |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          | Foreign currency translation adjustment                   |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          | Net unrealized losses on available- for-sale
	securities: |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          |                                                           | Unrealized holding losses arising during the
	period            |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          |                                                           | Reclassification adjustment for losses included
	in net loss    |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          | Cash flow hedge:                                          |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          |                                                           | Cumulative effect of accounting change                          |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          |                                                           | Reclassification of transition adjustment
	included in net loss |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          |                                                           | Unrealized loss on cash flow hedge                              |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          |                                                           | Total comprehensive loss                                        |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          | Issuance of common stock:                                 |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          |                                                           | Exercise of options                                             |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          |                                                           | Employee stock purchase plan                                    |          |  |             |    |   |  | 2 |     |   |    |  | 
|                           |          |                                                           | Retirement of debt                                              |          |  |              |    |   |  |   |     |   |    |  | 
|                           |          | Deferred compensation and other                           |                                                                 |          |  |              |    |   |  |   |     |   | 11 | 
|                           |          | Mandatorily redeemable preferred stock dividends          |                                                                 |          |  |              |    |   |  |   |     |   |    | 
|                           |          |                                                           |                                                                 |          |  |              |    |   |  |   |     |  
|Balance, December 31, 2001 |          |                                                           |                                                                |          |  | $            |   |   |  | $ | (17 | )
|                           |          |                                                           |                                                                 |          |  |              |    |   |  |   |     |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        |      |        |  
|-------------------------- | -------- | --------------------------------------------------------- | --------------------------------------------------------------- | ----------- |  | ----- | ---- | ----- | --- | - | --- | - |  | --- | ----- | ------ | ---- | ------ | -
|                           |          |                                                           |                                                                 |            
|                           |          | Accumulated Other                                         |                                                                 |            
|                           |          | Comprehensive Income (Loss)                               |                                                                 |            
|                           |          |                                                           |                                                                 |            
|                           |          | Unrealized                                                |                                                                 |             |  |      
|                           |          | Gain                                                      |                                                                 | Cumulative  |  | Cash  |      |      
|                           |          | (Loss) on                                                 |                                                                 | Translation |  | Flow  |      |      
|                           |          | Investments                                               |                                                                 | Adjustment  |  | Hedge |      | Total
|                           |          |                                                           |                                                                 |             |  |       |      |      
|Balance, December 31, 2000 |          |                                                           | 92                                                              |             |  |       | (134 | )     |     |   |    |   |  |     | 2,028 |       
|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |       
|                           | Net loss |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       | (2,625 | )   
|                           |          | Other comprehensive loss, net of income tax:              |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        |      |       
|                           |          | Foreign currency translation adjustment                   |                                                                 |             |  |       |      |       | (95 | ) |     |   |  |     |       |        | (95  | )     
|                           |          | Net unrealized losses on available- for-sale
	securities: |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        |      |       
|                           |          |                                                           | Unrealized holding losses arising during the
	period            |             |  | (234  | )    |       |     |   |     |   |  |     |       |        |      | (234   | )
|                           |          |                                                           | Reclassification adjustment for losses included
	in net loss    |             |  | 149   |      |       |     |   |     |   |  |     |       |        |      | 149    |  
|                           |          | Cash flow hedge:                                          |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        |      |       
|                           |          |                                                           | Cumulative effect of accounting change                          |             |  |       |      |       |     |   |     |   |  | (20 | )     |        |      | (20    | )
|                           |          |                                                           | Reclassification of transition adjustment
	included in net loss |             |  |       |      |       |     |   |     |   |  | 8   |       |        |      | 8      |  
|                           |          |                                                           | Unrealized loss on cash flow hedge                              |             |  |       |      |       |     |   |     |   |  | (17 | )     |        |      | (17    | )
|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |       
|                           |          |                                                           | Total comprehensive loss                                        |             |  |       |      |       |     |   |     |   |  |     |       |        |      | (2,834 | )
|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |       
|                           |          | Issuance of common stock:                                 |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        |      |       
|                           |          |                                                           | Exercise of options                                             |             |  |       |      |       |     |   |     |   |  |     |       |        |      | 124    |  
|                           |          |                                                           | Employee stock purchase plan                                    |             |  |       |      |       |     |   |     |   |  |     |       |        |      | 20     |  
|                           |          |                                                           | Retirement of debt                                              |             |  |       |      |       |     |   |     |   |  |     |       |        |      | 292    |  
|                           |          | Deferred compensation and other                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        | 21   |       
|                           |          | Mandatorily redeemable preferred stock dividends          |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |        | (233 | )     
|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |       
|Balance, December 31, 2001 |          | $                                                         | 7                                                               |             |  | $     | (229 | )     |     | $ | (29 | ) |  | $   | (582  | )     
|                           |          |                                                           |                                                                 |             |  |       |      |       |     |   |     |   |  |     |       |       

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

F-5



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended December 31, 2001,
2000 and 1999


(in millions)


|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |        |       |      |        |  
|------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ----------------------------------------- | ----- | ---- | ------ | ------ | ----- | ---- | ------ | ------ | ----- | ---- | ------ | -
|                                                              |                                                                                  | 2001                                                                                                                           |                                              | 2000                                      |       | 1999
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |     
|Cash flows from operating activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              | Net loss                                                                         |                                                                                                                                | $                                            | (2,625                                    | )     |      | $      | (815   | )     |      | $      | (1,338 | )    
|                                                              | Adjustments to reconcile net loss to net cash
	provided by operating activities: |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |        |      
|                                                              |                                                                                  | Amortization of debt financing costs and
	accretion of senior redeemable discount notes, net of accreted
	interest capitalized |                                              |                                           | 504   |      |        |        | 389   |      |        |        | 409   |     
|                                                              |                                                                                  | Provision for losses on accounts receivable                                                                                    |                                              |                                           | 370   |      |        |        | 179   |      |        |        | 152   |     
|                                                              |                                                                                  | Stock-based compensation                                                                                                       |                                              |                                           | 16    |      |        |        | 10    |      |        |        | 16    |     
|                                                              |                                                                                  | Impairment charges                                                                                                             |                                              |                                           | 1,741 |      |        |        |      |      |        |        |      |     
|                                                              |                                                                                  | Depreciation and amortization                                                                                                  |                                              |                                           | 1,746 |      |        |        | 1,265 |      |        |        | 1,004 |     
|                                                              |                                                                                  | Equity in losses of unconsolidated affiliates                                                                                  |                                              |                                           | 95    |      |        |        | 152   |      |        |        | 73    |     
|                                                              |                                                                                  | Foreign currency transaction losses, net                                                                                       |                                              |                                           | 70    |      |        |        | 25    |      |        |        | 61    |     
|                                                              |                                                                                  | Realized gain on investments, net                                                                                              |                                              |                                           | (47   | )    |        |        | (275  | )    |        |        | (70   | )   
|                                                              |                                                                                  | Reduction in fair value of available-for-sale
	securities                                                                      |                                              |                                           | 188   |      |        |        |      |      |        |        |      |     
|                                                              |                                                                                  | Income tax benefit                                                                                                             |                                              |                                           | (135  | )    |        |        | (33   | )    |        |        | (28   | )   
|                                                              |                                                                                  | Extraordinary (gain) loss on retirement of
	debt                                                                               |                                              |                                           | (469  | )    |        |        | 104   |      |        |        | 68    |     
|                                                              |                                                                                  | Other, net                                                                                                                     |                                              |                                           | 12    |      |        |        | (92   | )    |        |        | 3     |     
|                                                              |                                                                                  | Change in assets and liabilities, net of effects
	from acquisitions:                                                           |                                              |                                           |       |      |        |        |       |      |        |        |       |     
|                                                              |                                                                                  |                                                                                                                                | Accounts and notes receivable                |                                           |       | (637 | )      |        |       | (406 | )      |        |       | (337 | )     
|                                                              |                                                                                  |                                                                                                                                | Handset and accessory inventory              |                                           |       | (79  | )      |        |       | (78  | )      |        |       | (65  | )     
|                                                              |                                                                                  |                                                                                                                                | Prepaid expenses and other assets            |                                           |       | 195  |        |        |       | (288 | )      |        |       | 5    |       
|                                                              |                                                                                  |                                                                                                                                | Accounts payable, accrued expenses and other |                                           |       | 184  |        |        |       | 439  |        |        |       | 371  |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash provided by operating activities |       |      | 1,129  |        |       |      | 576    |        |       |      | 324    |  
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|Cash flows from investing activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              | Capital expenditures                                                             |                                                                                                                                |                                              | (3,418                                    | )     |      |        | (3,294 | )     |      |        | (1,947 | )    
|                                                              | Proceeds from maturities and sales of short-term
	investments                    |                                                                                                                                |                                              | 4,879                                     |       |      |        | 4,950  |       |      |        |       |      
|                                                              | Purchases of short-term investments                                              |                                                                                                                                |                                              | (3,987                                    | )     |      |        | (5,801 | )     |      |        | (1,100 | )    
|                                                              | Payments for purchases of licenses and other                                     |                                                                                                                                |                                              | (877                                      | )     |      |        | (935   | )     |      |        | (97    | )    
|                                                              | Payments for acquisitions, net of cash acquired                                  |                                                                                                                                |                                              | (245                                      | )     |      |        | (386   | )     |      |        |       |      
|                                                              | Proceeds from sales of investments                                               |                                                                                                                                |                                              | 142                                       |       |      |        |       |       |      |        | 138    |      
|                                                              | Other investments and advances to affiliates                                     |                                                                                                                                |                                              | (23                                       | )     |      |        | (20    | )     |      |        | (44    | )    
|                                                              | Proceeds from sale of assets                                                     |                                                                                                                                |                                              | 17                                        |       |      |        | 17     |       |      |        | 156    |      
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash used in investing activities     |       |      | (3,512 | )      |       |      | (5,469 | )      |       |      | (2,894 | )
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|Cash flows from financing activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              | Issuance of debt securities                                                      |                                                                                                                                |                                              | 2,250                                     |       |      |        | 1,791  |       |      |        | 2,600  |      
|                                                              | Retirement of debt securities                                                    |                                                                                                                                |                                              |                                          |       |      |        | (1,208 | )     |      |        | (546   | )    
|                                                              | Sale of common stock and exercise of stock
	options, warrants and other          |                                                                                                                                |                                              | 124                                       |       |      |        | 74     |       |      |        | 3,819  |      
|                                                              | Borrowings under long-term credit facilities                                     |                                                                                                                                |                                              | 19                                        |       |      |        | 1,907  |       |      |        | 1,077  |      
|                                                              | Repayments under capital lease and finance
	obligations                          |                                                                                                                                |                                              | (83                                       | )     |      |        | (44    | )     |      |        | (16    | )    
|                                                              | Proceeds from sale-leaseback transactions                                        |                                                                                                                                |                                              | 42                                        |       |      |        | 376    |       |      |        | 587    |      
|                                                              | Repayments under long-term credit facilities                                     |                                                                                                                                |                                              | (34                                       | )     |      |        | (35    | )     |      |        | (12    | )    
|                                                              | Increase in restricted cash held in escrow                                       |                                                                                                                                |                                              | (27                                       | )     |      |        |       |       |      |        |       |      
|                                                              | Revolving line of credit repayments, net                                         |                                                                                                                                |                                              |                                          |       |      |        |       |       |      |        | (423   | )    
|                                                              | Debt financing costs and other                                                   |                                                                                                                                |                                              | (35                                       | )     |      |        | (63    | )     |      |        | (120   | )    
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash provided by financing activities |       |      | 2,256  |        |       |      | 2,798  |        |       |      | 6,966  |  
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|Effect of exchange rate changes on cash and
	cash equivalents |                                                                                  |                                                                                                                                | (1                                           | )                                         |       |      | 3      |        |       |      | (16    | )     
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|Net (decrease) increase in cash and cash
	equivalents         |                                                                                  |                                                                                                                                | (128                                         | )                                         |       |      | (2,092 | )      |       |      | 4,380  |       
|Cash and cash equivalents, beginning of
	period               |                                                                                  |                                                                                                                                | 2,609                                        |                                           |       |      | 4,701  |        |       |      | 321    |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       
|Cash and cash equivalents, end of
	period                     |                                                                                  | $                                                                                                                              | 2,481                                        |                                           |       | $    | 2,609  |        |       | $    | 4,701  |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |       |      |        |       

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

F-6



---



##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS




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

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

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



| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service, including
	advanced calling features such as speakerphone, conference
	calling, voice-mail, call forwarding and additional line service;   
|
| |  | Nextel Direct Connect service, which
	allows subscribers in the same local calling area to contact
	each other instantly, on a private one-to-one call or on a group
	call;
|
| |  | Internet services, mobile messaging services,
	e-mail and advanced Java enabled business applications, which
	are marketed as Nextel Wireless Web services; and            
|
| |  | international roaming capabilities, which are
	marketed as Nextel Worldwide.                                                                                               

In addition to our domestic operations, we have
ownership interests in international wireless companies through
our substantially wholly owned subsidiary, NII Holdings, Inc,
formerly known as Nextel International, Inc. NII Holdings,
through its operating subsidiaries, provides wireless
communications services in and around selected major
metropolitan market areas in Latin America and the Philippines
and owns specialized mobile radio companies in Chile.

During the third quarter of 2001, following NII
Holdings review of the economic conditions, operating
performance and other relevant factors in the Philippines, NII
Holdings decided to discontinue funding to its Philippine
operating company. In view of the capital constrained
environment and NII Holdings lack of funding sources,
during the fourth quarter of 2001, NII Holdings undertook an
extensive review of its business plan and determined to pursue a
less aggressive growth strategy that targets conservation of
cash resources by slowing enhancement and expansion of its
networks and reducing subscriber growth and operating expenses.
In connection with the implementation of this plan and the
decision to discontinue funding to its Philippine operating
company, NII Holdings recorded non-cash pretax impairment
charges and pretax restructuring and other charges of about
$1.75 billion during 2001. See note 3, Restructuring
and Impairment Charges.

On December 31, 2001, NII Holdings failed to
make scheduled principal payments of $8 million under its
Argentina credit facilities. On February 1, 2002, NII
Holdings failed to make a $41 million interest payment due under
its 12.75% senior notes. These defaults resulted in defaults
under NII Holdings $382 million of Motorola vendor
financing facilities due to cross default provisions. As a
result of these events of default and the operation of
cross-default provisions contained in NII Holdings other
debt arrangements, NII Holdings entire debt balance is
callable or subject to acceleration, and is therefore classified
in current liabilities. In addition, the lenders under the
affected facilities are each free to pursue their respective
remedies, including, in the case of vendor and bank financing
facilities, seizing the assets of NII Holdings and its
subsidiaries that are pledged as collateral. NII Holdings is
currently in discussions with its various creditors regarding
the restructuring of its debt obligations. See note 7,
Long-Term Debt, Capital Lease and Finance
Obligations.

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

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


period. Due to the inherent uncertainty involved
in making those estimates, actual results to be reported in
future periods could differ from those estimates.

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

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

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

Foreign Currency.Results of operations for our
non-U.S. subsidiaries and affiliates are translated from the
designated functional currency to the U.S. dollar using average
exchange rates during the period, while assets and liabilities
are translated at the exchange rate in effect at the reporting
date. Resulting gains or losses from translating foreign
currency financial statements are reported as other
comprehensive income (loss). The effect of changes in exchange
rates between the designated functional currency and the
currency in which a transaction is denominated are recorded as
foreign currency transaction gains (losses). However, the
effects of changes in exchange rates associated with NII
Holdings U.S. dollar denominated loans to its foreign
subsidiaries that are of a long-term investment nature are
reported as part of the cumulative foreign currency translation
adjustment in our consolidated financial statements.

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

NII Holdings and its subsidiaries held cash and
cash equivalents of $250 million at December 31, 2001 and
$474 million at December 31, 2000 that were not
available to fund any of the cash needs of our domestic
operations due to restrictions contained in their financing
agreements. At December 31, 2001, NII Holdings also had $84
million in escrow to fund some of its debt obligations, which is
not available to fund any of the other cash needs of NII
Holdings.

Supplemental Cash Flow
Information.

|                                                      |                                                                |                         |       |       |   |      |       |       |  |   |       |       | 
|----------------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ----- | ----- | - | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                      |                                                                |                        
|                                                      |                                                                | Year Ended December 31,
|                                                      |                                                                |                        
|                                                      |                                                                | 2001                    |       | 2000  |   | 1999
|                                                      |                                                                |                         |       |       |   |     
|                                                      |                                                                |                        
|                                                      |                                                                | (in millions)          
|Capital expenditures, including capitalized
	interest |                                                                |                         |       |       |   |      |       |       |  |   |       |      
|                                                      | Cash paid for capital expenditures                             |                         | $     | 3,418 |   |      | $     | 3,294 |  |   | $     | 1,947 | 
|                                                      | Change in capital expenditures accrued and unpaid
	or financed |                         |       | (282  | ) |      |       | 337   |  |   |       | 180   | 
|                                                      |                                                                |                         |       |       |   |      |       |       |  |   |       |      
|                                                      |                                                                | $                       | 3,136 |       |   | $    | 3,631 |       |  | $ | 2,127 |      
|                                                      |                                                                |                         |       |       |   |      |       |       |  |   |       |      
|Interest costs                                        |                                                                |                         |       |       |   |      |       |       |  |   |       |      
|                                                      | Interest expense                                               |                         | $     | 1,403 |   |      | $     | 1,245 |  |   | $     | 878   | 
|                                                      | Interest capitalized                                           |                         |       | 127   |   |      |       | 88    |  |   |       | 46    | 
|                                                      |                                                                |                         |       |       |   |      |       |       |  |   |       |      
|                                                      |                                                                | $                       | 1,530 |       |   | $    | 1,333 |       |  | $ | 924   |      
|                                                      |                                                                |                         |       |       |   |      |       |       |  |   |       |      

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                                    |                                                                                         |                         |     |      |   |      |     |     |  |   |     |     | 
|--------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------- | --- | ---- | - | ---- | --- | --- |  | - | --- | --- | 
|                                                    |                                                                                         |                        
|                                                    |                                                                                         | Year Ended December 31,
|                                                    |                                                                                         |                        
|                                                    |                                                                                         | 2001                    |     | 2000 |   | 1999
|                                                    |                                                                                         |                         |     |      |   |     
|                                                    |                                                                                         |                        
|                                                    |                                                                                         | (in millions)          
|Other non-cash investing and financing
	activities  |                                                                                         |                         |     |      |   |      |     |     |  |   |     |    
|                                                    | Increase in capital lease and finance obligations
	for digital mobile network equipment |                         | $   | 108  |   |      | $   | 32  |  |   | $   | 7   | 
|                                                    | Increase in investment from issuance of equity by
	affiliate                            |                         |     | 13   |   |      |     | 149 |  |   |     |    | 
|                                                    | Net (decrease) increase in fair value of
	marketable equity securities and warrant      |                         |     | (145 | ) |      |     | 216 |  |   |     | 219 | 
|                                                    | Mandatorily redeemable preferred stock dividends                                        |                         |     | 233  |   |      |     | 209 |  |   |     | 192 | 
|                                                    | Conversion of debt securities and preferred stock                                       |                         |     |     |   |      |     | 344 |  |   |     |    | 
|Cash paid for interest, net of amounts
	capitalized |                                                                                         | $                       | 845 |      |   | $    | 816 |     |  | $ | 358 |    
|                                                    |                                                                                         |                         |     |      |   |      |     |     |  |   |     |    
|Cash paid for income taxes                          |                                                                                         | $                       | 7   |      |   | $    | 4   |     |  | $ | 7   |    
|                                                    |                                                                                         |                         |     |      |   |      |     |     |  |   |     |    

Investments.Marketable debt securities with
maturities greater than three months and less than one year at
the time of purchase are classified as short-term investments.
As of December 31, 2001 and 2000, our short-term
investments consist of commercial paper and corporate bonds.

Marketable equity securities intended to be held
more than one year are classified within investments. All of our
investments in marketable equity securities are classified as
available-for-sale as of the balance sheet date and are reported
at fair value. Unrealized gains and losses, net of income tax,
are recorded as other comprehensive income (loss). We report
realized gains or losses, as determined on a specific
identification basis, and other-than-temporary declines in
value, if any, on available-for-sale securities in other income
(expense). We record restricted investments in publicly traded
companies and investments in privately held companies at cost,
adjusted for other-than-temporary declines in value, if any,
because they do not have readily determinable fair values.

We assess declines in the value of individual
investments to determine whether the decline is
other-than-temporary and thus the investment is impaired. We
make this assessment by considering available evidence,
including changes in general market conditions, specific
industry and individual company data, the length of time and the
extent to which the market value has been less than cost, the
financial condition and near-term prospects of the individual
company and our intent and ability to hold the investment.

Handset and Accessory
Inventory.Handsets and
accessories are valued at the lower of cost or market. We
determine cost by the first-in, first-out, or FIFO, method for
domestic operations and by the weighted average method for
international operations. Handset costs in excess of the revenue
generated from handset sales, or handset subsidies, are expensed
at the time of sale. We do not recognize the expected handset
subsidy prior to the time of sale because we expect to recover
the handset subsidy through service revenues. See Customer
Related Direct Costs below for additional information.

Property, Plant and
Equipment.We record property,
plant and equipment, including improvements that extend useful
lives, at cost, while maintenance and repairs are charged to
operations as incurred. We calculate depreciation using the
straight-line method based on estimated useful lives of up to
31 years for buildings, 3 to 20 years for the digital
mobile network equipment and software and 3 to 12 years for
non-network internal use software, office equipment and other.
We amortize leasehold improvements and assets under capital
leases over the shorter of the lease terms or the estimated
useful lives of the assets. The gross amount of assets recorded
under capital lease and finance obligations included in
property, plant and equipment is $801 million as of
December 31, 2001 and $693 million as of
December 31, 2000.

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

We periodically review the depreciation method,
useful lives and estimated salvage value of our property, plant
and equipment and revise those estimates if current estimates
are significantly different from previous estimates.

Capitalized
Software.We capitalize costs for
computer software developed or obtained for internal use when
incurred during the application development stage as described
under Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal
Use. We classify digital mobile network internal use
software and non-network internal use software as property,
plant and equipment.

We capitalize costs for software products that
will be sold, leased or otherwise marketed when technological
feasibility has been established under Statement of Financial
Accounting Standards, or SFAS, No. 86, Accounting for
Computer Software to be Sold, Leased or Otherwise
Marketed. Capitalization ceases and amortization starts
when the software product is available for general release to
customers. At each balance sheet date, the unamortized
capitalized costs of a software product are compared to the net
realizable value of the product and any excess of costs over the
net realizable value is written off. We classify software
products to be sold, leased or otherwise marketed as noncurrent
other assets.

Intangible
Assets.We amortize our intangible
assets using the straight-line method over the estimated period
benefited. We amortize all of our Federal Communications
Commission, or FCC, licenses and goodwill related to all
domestic license acquisitions over 40 years. FCC licenses,
which authorize wireless carriers to use radio frequency
spectrum, are issued on both a site-specific and wide-area
basis, enabling wireless carriers to provide service either in
specific 800 MHz economic areas or 900 MHz metropolitan trading
areas in the United States. Currently, our 800 MHz and 900 MHz
licenses are issued for a period of 10 years and our 700 MHz
licenses are issued for a period of 15 years. All of our
FCC licenses are subject to construction and/or operational and
technical requirements. The FCC has routinely granted license
renewals if the licensees provide substantial services in their
licensed area and have complied with applicable rules and
policies and the Communications Act of 1934, as amended. We
believe that we have met and will continue to meet all
requirements necessary to retain and secure renewal of our FCC
licenses. See New Accounting Pronouncements for
information regarding the adoption of SFAS No. 142,
Goodwill and Other Intangible Assets.

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

We amortize our debt financing costs as interest
expense over the terms of the underlying obligation. We amortize
goodwill related to acquisitions of our Nextel stores over its
expected useful life of 10 years and customer lists over
their expected useful lives, which is generally 2 to
3 years. Other intangible assets include non-compete
agreements which are amortized over the lives of the related
agreements, generally 2 to 5 years, and trademarks which
are amortized over 20 years.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

Derivative Instruments and Hedging
Activities.We use derivative
instruments consisting primarily of interest rate swap and
option agreements to manage our exposure to changes in the fair
values or future cash flows of some of our long-term debt, which
are caused by interest rate changes. We do not use derivative
instruments for trading or other speculative purposes.

Effective January 1, 2001, we adopted SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities, which, as amended by
SFAS No. 138, establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities. Derivative instruments designated in hedging
relationships that mitigate exposure to changes in the fair
value of our debt are considered fair value hedges. Derivative
instruments designated in hedging relationships that mitigate
exposure to the variability in future cash flows of our debt are
considered cash flow hedges. We formally document all
relationships between hedging instruments and hedged items and
the risk management objective and strategy for each hedge
transaction.

We record all derivatives, including any
derivatives embedded in contracts issued, acquired or
substantively modified after December 31, 1998, in other
assets or other liabilities on our balance sheet at their fair
values. If the derivative is designated as a fair value hedge
and the hedging relationship qualifies for hedge accounting,
changes in the fair values of both the derivative and the hedged
portion of our debt are recognized in interest expense in our
statement of operations. If the derivative is designated as a
cash flow hedge and the hedging relationship qualifies for hedge
accounting, the effective portion of the change in fair value of
the derivative is recorded in other comprehensive loss and
reclassified to interest expense when the hedged debt affects
interest expense. The ineffective portion of the change in fair
value of the derivative qualifying for hedge accounting and
changes in the fair values of derivative instruments not
qualifying for hedge accounting are recognized in interest
expense in the period of the change.

At inception of the hedge and quarterly
thereafter, we perform a correlation assessment to determine
whether changes in the fair values or cash flows of the
derivatives are deemed highly effective in offsetting changes in
the fair values or cash flows of the hedged items. If we do not
deem a derivative highly effective as a hedge, we discontinue
hedge accounting and recognize all subsequent derivative gains
and losses in earnings.

Prior to January 1, 2001, under accounting
principles generally accepted in the United States, we did not
record our derivative instruments on the balance sheet at fair
values. We recognized the periodic net cash settlements as
adjustments to interest expense in our statement of operations.

See note 8 for additional discussion of our
derivative instruments and hedging activities.

Revenue Recognition.Operating revenues primarily
consist of wireless service revenues and revenues generated from
the sale of digital handsets and accessories. Service revenues
primarily include fixed monthly access charges for digital
mobile telephone, digital two-way radio and other services and
variable charges for airtime and digital two-way radio usage in
excess of plan minutes and long-distance charges derived from
calls placed by our customers.

We recognize revenue for access charges and other
services charged at fixed amounts ratably over the service
period, net of credits and adjustments for service discounts. We
recognize excess usage and long distance revenue at contractual
rates per minute as minutes are used. We recognize revenue from
accessory sales when title passes upon delivery of the accessory
to the customer. We establish an allowance for doubtful accounts
receivable sufficient to cover probable and reasonably estimable
losses.

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SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


We recognize revenue from handset sales on a
straight-line basis over the expected customer relationship
periods of up to four years, starting when the customer has
taken title. We recognize revenue from activation fees on a
straight-line basis over the expected relationship periods of up
to four years, starting when wireless service is activated. Our
wireless service is essential to the functionality of our
handsets due to the fact that the handsets can, with very
limited exceptions, only be used on our digital mobile network.
Accordingly, this multiple element arrangement is not accounted
for separately.

Change in Accounting Principle.In January 2000, we changed our
revenue and handset cost recognition policy in accordance with
Staff Accounting Bulletin, or SAB, No. 101, Revenue
Recognition in Financial Statements. Under the prior
method of accounting, we recognized sales and the related costs
of handsets sold when title passed to the customer. We have
accounted for the adoption of SAB No. 101 as a change in
accounting principle effective January 1, 2000, and therefore
have not restated the 1999 financial statements for the change
in accounting policies related to our handset sales and cost of
handset sales. This accounting change has no impact on loss
before extraordinary item, loss attributable to common
stockholders or related per share amounts for any period. Had we
adopted SAB No. 101 effective January 1, 1999,
operating revenues would have been $3.66 billion and cost
of revenues would have been $1.45 billion for the year
ended December 31, 1999. As a result of our adoption of SAB
No. 101, we recognized revenues from digital handset sales
and equal amounts of cost of revenues during the following
periods that are attributable to handset sales reported prior to
2000 as follows:

|                       |  |               |     |      |  |   |     | 
|---------------------- |  | ------------- | --- | ---- |  | - | --- | 
|                       |  | 2001          |     | 2000
|                       |  |               |     |     
|                       |  |              
|                       |  | (in millions)
|Year ended December 31 |  | $             | 256 |      |  | $ | 316 | 
|                       |  |               |     |      |  |   |     | 

Customer Related Direct Costs.We recognize the costs of handset
sales over the expected customer relationship periods of up to
four years in amounts equivalent to the revenues recognized from
handset sales. Other customer related costs in excess of the
revenue generated from handset sales, such as excess handset
costs, commissions, activation and fulfillment costs, are
expensed at the time of sale as these amounts currently exceed
the minimum contractual revenues. Minimum contractual revenues
are currently limited to the revenue generated from handset
sales as our history of enforcing cancellation fee provisions
where contracts exist with terminating customers is insufficient.

Stock-based Compensation.We account for stock-based
compensation for employees and non-employee members of our board
of directors in accordance with Accounting Principles Board, or
APB, Opinion No. 25, Accounting for Stock Issued to
Employees, and comply with the disclosure provisions of
SFAS No. 123, Accounting for Stock-Based
Compensation. Under APB Opinion No. 25, compensation
expense is based on the intrinsic value on the measurement date,
calculated as the difference between the fair value of the class
A common stock and the relevant exercise price. We account for
stock-based compensation for non-employees at fair value using a
Black-Scholes option-pricing model in accordance with the
provisions of SFAS No. 123 and other applicable accounting
principles.

Advertising Costs.Costs related to advertising and
other promotional expenditures are expensed as incurred.
Advertising costs totaled $340 million during 2001,
$221 million during 2000 and $173 million during 1999.

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

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Loss per Share Attributable to Common
Stockholders, Basic and Diluted.Basic loss per share includes no dilution and is computed by
dividing the loss attributable to common stockholders by the
weighted average number of common shares outstanding for the
period. Diluted loss per share reflects the potential dilution
of securities that could share in our earnings. As presented,
our basic and diluted loss per share attributable to common
stockholders is based on the weighted average number of common
shares outstanding during the period and does not include other
potential common shares, including shares issuable upon exercise
of options, warrants or conversion rights, since their effect
would be antidilutive due to our losses.

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

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

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

New Accounting Pronouncements.In June 2001, the Financial
Accounting Standards Board, or FASB, issued SFAS No. 141,
Business Combinations, which addresses the
accounting and reporting for business combinations and broadens
the criteria for recording intangible assets separate from
goodwill. On July 1, 2001, we adopted SFAS No. 141, which
eliminates the pooling of interest method and requires us to use
the purchase method of accounting for all business combinations
initiated after June 30, 2001.

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets.
SFAS No. 142 requires goodwill and intangible assets
with indefinite useful lives to no longer be amortized but to be
tested for impairment at least annually. Intangible assets that
have finite lives will continue to be amortized over their
useful lives. The amortization and nonamortization provisions of
SFAS No. 142 were applicable to all goodwill and intangible
assets acquired after June 30, 2001. Effective
January 1, 2002, we began applying the provisions of SFAS
No. 142 to all goodwill and intangible assets recognized on
our financial statements at that date. Goodwill amortization was
$38 million for the year ended December 31, 2001.

We believe that our portfolio of FCC licenses
represents an intangible asset with an indefinite useful life
due to the fact that spectrum is a reusable resource that does
not deplete or exhaust over time and that FCC rules entitle
licensees to a renewal expectancy that is designed to provide
carriers with a high level of assurance that their licenses will
be renewed. Accordingly, we ceased amortizing FCC license costs
effective January 1, 2002. FCC license amortization was
$109 million for the year ended December 31, 2001.

In connection with the adoption of SFAS
No. 142, we expect to incur a non-cash charge of about
$350 million in the first quarter of 2002 to income tax
expense to increase the valuation allowance related to our net
operating loss. This charge will be required because we have
significant deferred tax liabilities related to FCC licenses
with no tax basis. Historically, we did not need a valuation
allowance for the portion of our net operating loss equal to the
amount of license amortization expected to occur during the
carryforward period of our net operating loss. Since we ceased
amortizing licenses on January 1, 2002, we can no longer
estimate the amount, if any, of deferred tax liabilities related
to our FCC licenses which will reverse during the carryforward
period. Accordingly, we need to increase the valuation allowance.

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which requires that one accounting
model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. It also
broadens the presentation of discontinued operations to include
more disposal transactions. The adoption of SFAS No. 144 on
January 1, 2002 did not have a material impact on our
financial position or results of operations.

2.  Significant
Acquisitions

Domestic Acquisitions.In May 2001, we purchased from
Arch Wireless, Inc. 900 MHz specialized mobile radio licenses
and Arch Wireless redeemable cumulative preferred stock for a
total cash purchase price of $250 million. We accounted for
this transaction as an asset purchase.

In May 2001, we purchased from Mobex
Communications, Inc. 800 MHz and 900 MHz specialized mobile
radio licenses and related assets and an equity interest in a
subsidiary of Mobex for a total cash purchase price of
$117 million. In June 2001, we purchased from Motorola,
Inc. 900 MHz specialized mobile radio licenses and related
assets for a cash purchase price of $58 million. In
December 2001, we purchased from Pacific Wireless Technologies,
Inc. 800 MHz specialized mobile radio licenses and related
assets for a cash purchase price of $58 million. Each of
these acquisitions was accounted for as a business combination
under the purchase method and substantially all of the purchase
price was allocated to licenses. Additionally, in May 2001,
we purchased from Lets Talk Cellular & Wireless, Inc.
a substantial portion of the operations, assets and rights
associated with about 200 stores, for a cash purchase price of
$34 million.

International Acquisitions.In May 2000, NII Holdings
purchased the remaining equity interests of its Peruvian
operating company from Motorola International Development
Corporation and the other minority stockholder, increasing NII
Holdings ownership interest in its Peruvian operating
company from 64% to 100%. At the same time, NII Holdings
purchased all of Motorola Internationals equity interests
in McCaw International (Brazil), Ltd., the parent company of NII
Holdings primary Brazilian operating company. In May 2000,
NII Holdings also purchased three Chilean specialized mobile
radio companies from Motorola International. NII Holdings paid
Motorola International an aggregate purchase price of
$78 million in cash for the acquisitions in Peru, Brazil
and Chile.

In 1997, NII Holdings purchased 81% of the
capital stock of McCaw International (Brazil) Ltd., which
entitled it to 90% of the voting rights. A group represented by
Telcom Ventures, L.L.C. owned 19% of the capital stock at that
time, which entitled it to 10% of the voting rights. Pursuant to
a stockholders agreement, that group had the right so long as it
maintained at least a 10% ownership interest in McCaw
International (Brazil) to designate candidates representing at
least 10% of the directors of McCaw International (Brazil). The
group also had the right to defer making its pro rata share of
any capital calls that may have arisen until April 1999 without
suffering any dilution of its right to receive dividends and
other cash or non-cash distributions. The group ultimately did
not make these capital contributions by April 1999 in accordance
with the relevant terms of the stockholders agreement, which
resulted in the proportionate dilution of its equity interest in
McCaw International (Brazil). Since their share of McCaw
International (Brazil)s capital stock dropped below 10%,
the group was no longer entitled to designate a member of the
McCaw International (Brazil) board of directors. NII Holdings
called upon the groups designated director to resign, but
he refused. NII Holdings and Telcom Ventures subsequently filed
actions regarding the matter.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

During 2000, NII Holdings acquired several
additional Latin American businesses for a total cash purchase
price of $163 million. NII Holdings also increased its
direct and indirect ownership interests in its Philippine
operating company to about 51% in 2000 by purchasing some of the
minority owners equity interests for $10 million and
to about 59% in 2001 by purchasing additional equity interests
of the minority holders for $4 million in January 2001.

Purchase Price Allocation.The total purchase price and net
assets acquired for significant domestic and international
business combinations completed during 2001 and 2000 are
presented below. As the purchase prices for some of the business
combinations in 2001 were allocated on a preliminary basis,
further adjustments may be necessary. The direct cost of
business combinations and net assets acquired during 2000
includes the effect of the consolidation of our Philippine
operating company previously accounted for under the equity
method.

|                                     |                                                      |               |     |      |  |   |     |      |  
|------------------------------------ | ---------------------------------------------------- | ------------- | --- | ---- |  | - | --- | ---- | -
|                                     |                                                      |              
|                                     |                                                      | Year Ended   
|                                     |                                                      | December 31, 
|                                     |                                                      |              
|                                     |                                                      | 2001          |     | 2000
|                                     |                                                      |               |     |     
|                                     |                                                      |              
|                                     |                                                      | (in millions)
|Direct cost of business combinations |                                                      |               |     |      |  |   |     |     
|                                     | Cash paid, net of cash acquired                      |               | $   | 245  |  |   | $   | 386  |  
|                                     | Escrow deposits paid in prior periods                |               |     | 22   |  |   |     |     |  
|                                     | Investments  carrying value prior to
	consolidation |               |     |     |  |   |     | 91   |  
|                                     | Accrued acquisition and transaction costs and
	other |               |     | 7    |  |   |     | 27   |  
|                                     |                                                      |               |     |      |  |   |     |     
|                                     |                                                      | $             | 274 |      |  | $ | 504 |     
|                                     |                                                      |               |     |      |  |   |     |     
|Net assets acquired                  |                                                      |               |     |      |  |   |     |     
|                                     | Working capital  net                                |               | $   | 4    |  |   | $   | 3    |  
|                                     | Property, plant and equipment                        |               |     | 11   |  |   |     | 68   |  
|                                     | Intangible assets                                    |               |     | 256  |  |   |     | 503  |  
|                                     | Other assets                                         |               |     | 3    |  |   |     | 5    |  
|                                     | Other liabilities                                    |               |     |     |  |   |     | 25   |  
|                                     | Deferred income taxes                                |               |     |     |  |   |     | (100 | )
|                                     |                                                      |               |     |      |  |   |     |     
|                                     |                                                      | $             | 274 |      |  | $ | 504 |     
|                                     |                                                      |               |     |      |  |   |     |     

Pro Forma Results.Since results of operations for
the years ended December 31, 2001 and 2000 were not
materially affected by the business combinations consummated in
2001 and 2000, pro forma results are not presented. All of the
business combinations described above were accounted for by the
purchase method. As a result, assets and liabilities have been
reflected at estimated fair values at the date of acquisition.
We include the operating results of the acquired companies in
our consolidated statements of operations from their acquisition
dates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


3. Restructuring and Impairment
Charges

International.

Third quarter charges.During the third quarter of 2001,
following NII Holdings review of the economic conditions,
operating performance and other relevant factors in the
Philippines, NII Holdings decided to discontinue funding to its
Philippine operating company. As a result, NII Holdings
performed an assessment of the carrying values of the long-lived
assets in the Philippines, including property, plant and
equipment, intangible assets and other long-lived assets, in
accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of.

SFAS No. 121 requires that long-lived assets
to be held and used be reviewed for impairment on the basis of
undiscounted future cash flows before interest and that those
assets be grouped at the lowest level for which there are
independent identifiable cash flows. To perform its review, NII
Holdings grouped all of the long-lived assets of its Philippine
operating company together. NII Holdings review indicated
that the assets related to its Philippine operating company were
impaired because the estimated undiscounted future cash flows
were less than the carrying values of the assets reviewed.

To estimate fair value of the long-lived assets
related to its Philippine operating company, NII Holdings used a
market value-based approach, as reviewed and determined to be
reasonable by an independent appraiser. Based on the results of
the market value-based approach, NII Holdings estimated the fair
value of the long-lived assets to be about $15 million. As
a result, during the third quarter of 2001, NII Holdings
wrote-down the carrying values of the long-lived assets of its
Philippine operating company to their estimated fair market
values and recorded a $147 million non-cash pretax
impairment charge.

Fourth quarter charges.In view of the capital constrained
environment and its lack of funding sources, NII Holdings
undertook an extensive review of its business plan during the
fourth quarter of 2001 and determined to pursue a less
aggressive growth strategy that targets conservation of cash
resources by slowing enhancement and expansion of its networks
and reducing subscriber growth and operating expenses. NII
Holdings retained outside financial advisors to assist it in
studying various strategic alternatives.

NII Holdings revised business plan pursues
a less aggressive growth strategy and reflects currently
anticipated available sources of funding. The revised business
plan includes some capital expenditures necessary to continue to
selectively build out some of its digital mobile networks at
slower rates. NII Holdings is in discussions with its lenders
regarding the restructuring of its outstanding obligations. The
revised business plan contemplates the restructuring of its
outstanding indebtedness, the receipt of $250 million of
capital funding to finance capital expenditures and some
operating expenses and the continued availability of short-term
handset financing. However, any additional sources of funding
may only become available under specified conditions, which have
not been, and may never be, satisfied. Therefore, NII Holdings
cannot be sure that it will receive the additional funding or
the handset financing on acceptable terms, or at all.

Under NII Holdings revised business plan,
it intends to focus substantially all of its available funding
towards continuing the growth of its Mexican operations. NII
Holdings made this decision based on its Mexican operating
companys operating performance, future prospects and
economic conditions in Mexico, as well as other relevant
factors. NII Holdings plans to provide substantially less
funding to its markets in Brazil, Argentina and Peru. Further,
during the fourth quarter of 2001, NII Holdings began exploring
the possibility of selling its Philippine operations. NII
Holdings primary objectives with respect to its markets
other than Mexico are to minimize operating costs and capital
expenditures and maximize cash resources and segment earnings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


In connection with the implementation of its
revised business plan, NII Holdings reviewed the long-lived
assets, including property, plant and equipment, intangible
assets and other long-term assets, held by each of its operating
companies in accordance with SFAS No. 121. Since the
receipt of funds contemplated in its revised business plan is
uncertain, NII Holdings did not consider in its analysis the
future cash flows generated by any additional funding. NII
Holdings analysis indicated that all of the long-lived
assets held by each of its operating companies were impaired,
primarily due to its curtailed growth projections.

In consultation with an independent appraiser and
outside financial advisors, NII Holdings estimated the fair
values of the long-lived assets held by its operating companies
based on discounted cash flows. Due to its unique wireless
technology and specific spectrum holdings, comparable market
prices are generally not readily available. As a result, fair
values were derived primarily from the estimated discounted cash
flows from future operations; however, NII Holdings also took
into consideration market-based valuations of Latin American
wireless telecommunications companies to corroborate the results
from the discounted cash flows approach. NII Holdings
determination of fair value required it to make estimates and
assumptions that significantly affect the reported amounts of
long-lived assets at December 31, 2001 and the resulting
impairment charges. These estimates and assumptions primarily
include, but are not limited to, estimates of future cash flows,
remaining useful lives, discount rates, growth rates and
terminal values. Due to the inherent uncertainty involved in
making these estimates, actual results could differ from those
estimates.

The following table shows the impact of the 2001
impairment charges related to NII Holdings long-lived
assets by type (in millions):

|                                                              |                |   |       |     | 
|------------------------------------------------------------- | -------------- | - | ----- | --- | 
|Property, plant and equipment                                 |                | $ | 1,089 |    
|Intangibles                                                   |                |   |       |    
|                                                              | Goodwill       |   |       | 144 | 
|                                                              | Licenses       |   |       | 476 | 
|                                                              | Customer lists |   |       | 12  | 
|                                                              | Other          |   |       | 3   | 
|Other noncurrent assets                                       |                |   | 17    |    
|                                                              |                |   |       |    
|Total non-cash pretax impairment charge on
	long-lived assets |                | $ | 1,741 |    
|                                                              |                |   |       |    

During the fourth quarter of 2001, NII Holdings
wrote-down the carrying values of the long-lived assets held by
its operating companies to their estimated fair market values
and recorded non-cash pretax impairment charges of about
$1.6 billion. The new cost basis of the impaired assets was
$541 million as of December 31, 2001. NII Holdings
will depreciate the new cost basis of the long-lived assets over
their estimated remaining useful lives.

In connection with the fourth quarter
implementation of its revised business plan, NII Holdings
operating companies in Brazil and the Philippines restructured
their operations to align their objectives with NII
Holdings less aggressive growth strategy. These
restructurings included reductions to their workforces and
cancellations of contracts that had been required to sustain
their earlier growth expectations. In addition, NII Holdings
wrote-off an information technology development project that was
abandoned in connection with its revised business plan. As a
result of these restructurings, NII Holdings recorded
$6 million in pretax restructuring and other charges in the
fourth quarter of 2001.

During the first quarter of 2002, NII
Holdings Argentine and Brazilian operating companies as
well as its corporate headquarters further restructured their
operations, which included reductions in workforces.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


NII Holdings anticipates that it will record a
restructuring charge in the first quarter of 2002 related to
these actions.

Domestic.In
May 2001, we announced a restructuring to reduce domestic
payroll and other operating costs by implementing a 5% workforce
reduction and streamlining our operations. The workforce
reduction, completed during the second quarter, affected about
800 employees across the entire domestic organization. As a
result of the restructuring, we recorded a $22 million
charge in the second quarter of 2001 consisting of
$15 million related to severance and fringe benefits and
$7 million related to the write-off of information
technology development projects that we abandoned as a result of
the reduced headcount. As of December 31, 2001, liabilities
related to the workforce reduction had been substantially paid.

In January 2002, we announced a five-year
information technology outsourcing agreement with Electronic
Data Systems Corp., or EDS, under which EDS will manage our
corporate data center, database administration, helpdesk,
desktop services and other technical functions. Additionally, in
January 2002, we announced an eight-year customer relationship
management agreement with IBM and TeleTech Holdings, Inc. to
manage our customer care centers. In connection with these
outsourcing agreements, we expect to record a restructuring
charge in the first quarter of 2002 related to vacating unneeded
facilities and other matters.

4.     Balance Sheet
Details

|                                           |                                                                |               |       |        |   |   |       |        |  
|------------------------------------------ | -------------------------------------------------------------- | ------------- | ----- | ------ | - | - | ----- | ------ | -
|                                           |                                                                |              
|                                           |                                                                | December 31, 
|                                           |                                                                |              
|                                           |                                                                | 2001          |       | 2000  
|                                           |                                                                |               |       |       
|                                           |                                                                |              
|                                           |                                                                | (in millions)
|Accounts and notes receivable              |                                                                |               |       |        |   |   |       |       
|                                           | Trade                                                          |               | $     | 1,216  |   |   | $     | 915    |  
|                                           | Notes receivable and other                                     |               |       | 62     |   |   |       | 34     |  
|                                           | Due from related parties                                       |               |       | 18     |   |   |       | 19     |  
|                                           | Less allowance for doubtful accounts                           |               |       | (167   | ) |   |       | (104   | )
|                                           |                                                                |               |       |        |   |   |       |       
|                                           |                                                                | $             | 1,129 |        |   | $ | 864   |       
|                                           |                                                                |               |       |        |   |   |       |       
|Prepaid expenses and other current
	assets |                                                                |               |       |        |   |   |       |       
|                                           | Deferred costs of handset sales                                |               | $     | 412    |   |   | $     | 380    |  
|                                           | Refundable FCC auction deposits                                |               |       |       |   |   |       | 239    |  
|                                           | Prepaid expenses                                               |               |       | 121    |   |   |       | 118    |  
|                                           |                                                                |               |       |        |   |   |       |       
|                                           |                                                                | $             | 533   |        |   | $ | 737   |       
|                                           |                                                                |               |       |        |   |   |       |       
|Property, plant and equipment              |                                                                |               |       |        |   |   |       |       
|                                           | Land                                                           |               | $     | 1      |   |   | $     | 4      |  
|                                           | Buildings and improvements                                     |               |       | 183    |   |   |       | 146    |  
|                                           | Digital mobile network equipment and software                  |               |       | 10,108 |   |   |       | 8,579  |  
|                                           | Non-network internal use software, office
	equipment and other |               |       | 1,204  |   |   |       | 993    |  
|                                           | Less accumulated depreciation and amortization                 |               |       | (3,667 | ) |   |       | (2,482 | )
|                                           |                                                                |               |       |        |   |   |       |       
|                                           |                                                                |               | 7,829 |        |   |   | 7,240 |       
|                                           | Construction in progress                                       |               |       | 1,445  |   |   |       | 1,551  |  
|                                           |                                                                |               |       |        |   |   |       |       
|                                           |                                                                | $             | 9,274 |        |   | $ | 8,791 |       
|                                           |                                                                |               |       |        |   |   |       |       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                           |                                       |               |       |        |   |   |       |        |  
|-------------------------- | ------------------------------------- | ------------- | ----- | ------ | - | - | ----- | ------ | -
|                           |                                       |              
|                           |                                       | December 31, 
|                           |                                       |              
|                           |                                       | 2001          |       | 2000  
|                           |                                       |               |       |       
|                           |                                       |              
|                           |                                       | (in millions)
|Intangible assets          |                                       |               |       |        |   |   |       |       
|                           | Licenses                              |               | $     | 5,577  |   |   | $     | 5,282  |  
|                           | Goodwill                              |               |       | 1,184  |   |   |       | 1,360  |  
|                           | Debt financing costs, net             |               |       | 289    |   |   |       | 311    |  
|                           | Customer lists                        |               |       | 114    |   |   |       | 116    |  
|                           | Other                                 |               |       | 24     |   |   |       | 14     |  
|                           |                                       |               |       |        |   |   |       |       
|                           |                                       |               | 7,188 |        |   |   | 7,083 |       
|                           | Less accumulated amortization         |               |       | (1,121 | ) |   |       | (1,101 | )
|                           |                                       |               |       |        |   |   |       |       
|                           |                                       | $             | 6,067 |        |   | $ | 5,982 |       
|                           |                                       |               |       |        |   |   |       |       
|Accrued expenses and other |                                       |               |       |        |   |   |       |       
|                           | Deferred revenues                     |               | $     | 578    |   |   | $     | 515    |  
|                           | Accrued interest                      |               |       | 211    |   |   |       | 171    |  
|                           | Payroll related items and commissions |               |       | 197    |   |   |       | 145    |  
|                           | Other                                 |               |       | 484    |   |   |       | 413    |  
|                           |                                       |               |       |        |   |   |       |       
|                           |                                       | $             | 1,470 |        |   | $ | 1,244 |       
|                           |                                       |               |       |        |   |   |       |       

5.     Investments

|                                                                                                                   |  |               |     |      |  |   |     | 
|------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- | ---- |  | - | --- | 
|                                                                                                                   |  |              
|                                                                                                                   |  | December 31, 
|                                                                                                                   |  |              
|                                                                                                                   |  | 2001          |     | 2000
|                                                                                                                   |  |               |     |     
|                                                                                                                   |  |              
|                                                                                                                   |  | (in millions)
|Investments in affiliates  equity method,
	at cost less equity in net losses of $223 and $176                     |  | $             | 99  |      |  | $ | 177 | 
|Investment in Nextel Partners  mandatorily
	redeemable preferred stock, at accreted liquidation preference
	value |  |               | 31  |      |  |   | 28  | 
|Marketable equity securities and warrant                                                                           |  |               | 50  |      |  |   | 542 | 
|Nonmarketable equity securities, at cost                                                                           |  |               | 8   |      |  |   | 9   | 
|                                                                                                                   |  |               |     |      |  |   |     | 
|                                                                                                                   |  | $             | 188 |      |  | $ | 756 | 
|                                                                                                                   |  |               |     |      |  |   |     | 

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

|                             |                            |              |  |      |   |  |  |    |  
|---------------------------- | -------------------------- | ------------ |  | ---- | - |  |  | -- | -
|                             |                            |             
|                             |                            | Percentage  
|                             |                            | Ownership   
|                             |                            | December 31,
|                             |                            |             
|                             |                            | 2001         |  | 2000
|                             |                            |              |  |     
|Equity Method Investments    |                            |              |  |      |   |  |  |   
|                             | Nextel Partners, Inc.      |              |  | 32   | % |  |  | 32 | %
|Marketable Equity Securities |                            |              |  |      |   |  |  |   
|                             | SpectraSite Holdings, Inc. |              |  | 9    | % |  |  | 10 | %
|                             | TELUS Corporation (Canada) |              |  |     |   |  |  | 5  | %

Nextel Partners.In 1999, we entered into
agreements with Nextel Partners and other parties, including
Motorola and Eagle River Investments, L.L.C., an affiliate of
Mr. Craig O. McCaw, one of our

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


principal stockholders, relating to the
capitalization, governance, financing and operation of Nextel
Partners. Nextel Partners is constructing and operating a
digital mobile network utilizing the iDEN technology used in our
digital mobile network. In addition, these agreements establish
circumstances in which we will have the right or obligation to
purchase the equity interests in Nextel Partners at specified
prices. Subject to certain limitations, we will have the right
to purchase the outstanding shares of Nextel Partners class A
common stock on January 29, 2008. In connection with a
series of transactions in 1999, we sold assets and transferred
specified FCC licenses to Nextel Partners. In exchange, at the
dates of transfer, Nextel Partners issued to us equity having a
total agreed value of $140 million and paid us
$142 million in cash related to the assets sold and the
reimbursement of costs and net operating expenses. Additionally,
we made a $13 million cash equity investment in Nextel
Partners to avoid dilution of our voting interest.

As a result of Nextel Partners initial
public offering in February 2000, our total ownership interest
was diluted. Our investment in Nextel Partners preferred stock
converted to a combination of voting class B common stock
and nonvoting preferred stock that is subject to mandatory cash
redemption by February 2010. At December 31, 2001, our
investment in Nextel Partners, which includes equity in Nextel
Partners losses, was $96 million.

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

Under a roaming agreement between one of our
wholly owned subsidiaries and a wholly owned subsidiary of
Nextel Partners, we were charged $36 million during 2001,
$19 million during 2000 and $8 million during 1999 for
our customers roaming on Nextel Partners digital mobile
network, net of roaming revenues earned. Our wholly owned
subsidiary provides specified telecommunications switching
services to Nextel Partners under a switch sharing agreement.
For these services, we earned $49 million in 2001,
$15 million in 2000 and $2 million in 1999, which we
recorded as a reduction to cost of revenues. We charged Nextel
Partners $5 million in 2001, $4 million in 2000 and
$3 million in 1999 for administrative services provided
under a transition services agreement. We recorded these amounts
as a reduction to selling, general and administrative expenses.
We have a net receivable due from Nextel Partners of
$5 million as of December 31, 2001 and $2 million
as of December 31, 2000.

Summarized financial information reported by
Nextel Partners is presented below.

|                                       |  |               |       |      |  |   |       | 
|-------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | 
|                                       |  |              
|                                       |  | December 31, 
|                                       |  |              
|                                       |  | 2001          |       | 2000
|                                       |  |               |       |     
|                                       |  |              
|                                       |  | (in millions)
|Current assets                         |  | $             | 659   |      |  | $ | 984   | 
|Noncurrent assets                      |  |               | 1,163 |      |  |   | 809   | 
|Current liabilities                    |  |               | 128   |      |  |   | 120   | 
|Noncurrent liabilities                 |  |               | 1,343 |      |  |   | 1,075 | 
|Mandatorily redeemable preferred stock |  |               | 31    |      |  |   | 28    | 

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                         |  |                         |     |      |  |      |     |  |  |   |     | 
|---------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- |  |  | - | --- | 
|                                         |  |                        
|                                         |  | Year Ended December 31,
|                                         |  |                        
|                                         |  | 2001                    |     | 2000 |  | 1999
|                                         |  |                         |     |      |  |     
|                                         |  |                        
|                                         |  | (in millions)          
|Operating revenues                       |  | $                       | 377 |      |  | $    | 136 |  |  | $ | 33  | 
|Cost of revenues                         |  |                         | 252 |      |  |      | 112 |  |  |   | 30  | 
|Loss before extraordinary item           |  |                         | 286 |      |  |      | 242 |  |  |   | 112 | 
|Loss attributable to common stockholders |  |                         | 291 |      |  |      | 271 |  |  |   | 112 | 

SpectraSite.In April 1999, we and some of our
subsidiaries transferred about 2,000 telecommunications towers
and related assets to SpectraSite Holdings, Inc. and some of its
subsidiaries, which we then leased back.

We also entered into a commitment agreement with
SpectraSite to lease at least 1,700 additional towers in the
United States by April 2004 to support the expansion of our
digital mobile network and the compatible digital mobile network
of Nextel Partners. In exchange, we received $560 million
in cash, which we reflected as a finance obligation on our
balance sheet, and we received an ownership interest in
SpectraSite. Due to our continuing involvement related to
SpectraSites tower construction and our ownership interest
in SpectraSite, these sale-leaseback and lease transactions are
accounted for by the financing method.

During 2001, we fulfilled our obligation under
the 1,700 tower commitment. We received cash of $42 million
during 2001, $92 million during 2000, and $27 million
during 1999 for the sale of additional towers, which we then
leased back, resulting in a corresponding increase in our
finance obligation. We also lease towers built by SpectraSite.
For the towers built to our specifications, we recorded
SpectraSites construction costs on these leased towers as
tower assets with a corresponding increase in our finance
obligation of $24 million during 2001, $32 million
during 2000 and $7 million during 1999.

TELUS Corporation.In October 2000, TELUS Corporation
acquired Clearnet Communications, Inc., a publicly traded
Canadian company in which NII Holdings owned an equity interest,
for cash and stock. TELUS is a telecommunications company that,
before its acquisition of Clearnet, provided wireline, wireless
data and Internet communications services primarily in Western
Canada. Under agreements among NII Holdings, TELUS and Clearnet,
NII Holdings exchanged all of its Clearnet stock for nonvoting
shares of TELUS. In exchange for 8.4 million shares of Clearnet
stock, NII Holdings received 13.7 million shares of TELUS
stock, representing slightly less than 5% of the ownership
interest in TELUS. We recorded a pretax gain of
$275 million in 2000 related to this transaction. In
accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, the shares of
TELUS stock were recorded at their then current market value in
our financial statements.

In September 2001, we recognized a
$188 million other-than-temporary reduction in the fair
value of our investment in TELUS based on its stock price at
September 30, 2001. In November 2001, NII Holdings sold its
investment in TELUS for $196 million in cash, including
$57 million that was placed directly into an escrow account
as collateral for a portion of NII Holdings vendor credit
facilities (see note 7). NII recorded a pretax gain of
$42 million in the fourth quarter of 2001 as a result of
this sale.

6.     Fair Value of
Financial Instruments

We have determined the estimated fair values of
financial instruments using available market information and
appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the
estimates of fair value. As a result, the estimates presented
below are not necessarily indicative of the amounts that we
could realize or be required to pay in a current

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


market exchange. The use of different market
assumptions as well as estimation methodologies may have a
material effect on the estimated fair value amounts.

|                                                                         |  |               |        |            |  |          |        |            |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------ |  | ------------- | ------ | ---------- |  | -------- | ------ | ---------- |  | - | ------ | - |  | - | ------ | -
|                                                                         |  |              
|                                                                         |  | December 31, 
|                                                                         |  |              
|                                                                         |  |               |        |           
|                                                                         |  | 2001          |        | 2000      
|                                                                         |  |               |        |           
|                                                                         |  | Carrying      |        | Estimated  |  | Carrying |        | Estimated 
|                                                                         |  | Amount        |        | Fair Value |  | Amount   |        | Fair Value
|                                                                         |  |               |        |            |  |          |        |           
|                                                                         |  |              
|                                                                         |  | (in millions)
|Marketable equity securities and warrant                                 |  | $             | 50     |            |  | $        | 50     |            |  | $ | 542    |   |  | $ | 542    |  
|Nonmarketable mandatorily redeemable preferred
	stock of Nextel Partners |  |               | 31     |            |  |          | 11     |            |  |   | 28     |   |  |   | 17     |  
|Debt of NII Holdings, nonrecourse to and not held
	by parent             |  |               | 1,865  |            |  |          | 542    |            |  |   | 2,519  |   |  |   | 2,044  |  
|Domestic long-term debt, including current portion                       |  |               | 13,864 |            |  |          | 11,044 |            |  |   | 11,278 |   |  |   | 10,610 |  
|Derivative instruments, net                                              |  |               | (70    | )          |  |          | (70    | )          |  |   | (45    | ) |  |   | (65    | )
|Mandatorily redeemable preferred stock                                   |  |               | 2,114  |            |  |          | 1,100  |            |  |   | 1,881  |   |  |   | 1,639  |  
|Finance obligation                                                       |  |               | 693    |            |  |          | 416    |            |  |   | 674    |   |  |   | 510    |  

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

Marketable Equity Securities and Warrant.We estimate the fair value of
these securities based on quoted market prices. The fair value
of NII Holdings warrant to purchase shares of stock of
China United Telecommunications Corporation that we received in
connection with the termination of our Chinese joint venture was
estimated using the Black-Scholes option-pricing model. This
warrant expired in June 2001. At December 31, 2001 and
2000, marketable equity securities and warrant included within
investments consist of the following:

|                                                 |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|------------------------------------------------ |  | ------------- | --- | ---------- |  | ---------- | --- | ---------- |  | - | - |  |  | - | --- | 
|                                                 |  |               |     | Gross      |  | Gross      |     |           
|                                                 |  |               |     | Unrealized |  | Unrealized |     |           
|                                                 |  | Cost          |     | Gain       |  | Loss       |     | Fair Value
|                                                 |  |               |     |            |  |            |     |           
|                                                 |  |              
|                                                 |  | (in millions)
|2001                                             |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|Available-for-sale equity securities             |  | $             | 38  |            |  | $          | 12  |            |  | $ |  |  |  | $ | 50  | 
|2000                                             |  |               |     |            |  |            |     |            |  |   |   |  |  |   |     | 
|Available-for-sale equity securities and warrant |  |               | 392 |            |  |            | 152 |            |  |   | 2 |  |  |   | 542 | 

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

Debt.We
estimate the fair value of these securities based on quoted
market prices of our senior notes and estimates from bankers for
our domestic bank credit facility. As NII Holdings bank
and vendor credit facilities do not have quoted market prices,
NII Holdings estimated fair value for these facilities based on
current carrying values, as interest rates are reset
periodically. However, as a result of defaults under these
facilities, other methods used to determine fair value may
result in significantly different amounts. See note 7.

Derivative
Instruments.The fair value of these instruments is
based on estimates obtained from bankers to settle the
agreements. See note 8.

Mandatorily Redeemable Preferred
Stock.We
estimate the fair value of these securities based on quoted
market prices. See note 11.

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Finance Obligation.We estimate the fair value of our
finance obligation based on the present value of future cash
flows using a discount rate available for similar obligations.
See note 7.

Letters of Credit.We use letters of credit to back
some lease guarantees. Outstanding letters of credit totaled
$31 million at December 31, 2001 and 2000. The letters
of credit reflect fair value as a condition of their underlying
purpose and are subject to fees competitively determined in the
market place.



|   |                                                       
|-- | ------------------------------------------------------
|7. | Long-Term Debt, Capital Lease and Finance
	Obligations

|                                                                                                                                                                                                                   |                               |                       |        |      |   |   |        |   | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- | --------------------- | ------ | ---- | - | - | ------ | - | 
|                                                                                                                                                                                                                   |                               |                      
|                                                                                                                                                                                                                   |                               | December 31,         
|                                                                                                                                                                                                                   |                               |                      
|                                                                                                                                                                                                                   |                               | 2001                  |        | 2000
|                                                                                                                                                                                                                   |                               |                       |        |     
|                                                                                                                                                                                                                   |                               |                      
|                                                                                                                                                                                                                   |                               | (dollars in millions)
|Domestic                                                                                                                                                                                                           |                               |                       |        |      |   |   |        |  
|10.65% senior redeemable discount notes due
	2007,net of unamortized discount of
	$59 and $136                                                                                                                     |                               | $                     | 781    |      |   | $ | 704    |  
|9.75% senior serial redeemable discount notes
	due 2007,net of unamortized discount
	of $86 and $180                                                                                                               |                               |                       | 1,043  |      |   |   | 949    |  
|4.75% convertible senior notes due
	2007                                                                                                                                                                           |                               |                       | 354    |      |   |   | 354    |  
|9.95% senior serial redeemable discount notes
	due 2008,net of unamortized discount
	of $168 and $303                                                                                                              |                               |                       | 1,459  |      |   |   | 1,324  |  
|12% senior serial redeemable notes due 2008,net of unamortized discount of $3 and
	$4                                                                                                                              |                               |                       | 297    |      |   |   | 296    |  
|9.375% senior serial redeemable notes due
	2009                                                                                                                                                                    |                               |                       | 2,000  |      |   |   | 2,000  |  
|5.25% convertible senior notes due
	2010                                                                                                                                                                           |                               |                       | 1,150  |      |   |   | 1,150  |  
|9.5% senior serial redeemable notes due 2011,including a fair value hedge
	adjustment of $11                                                                                                                       |                               |                       | 1,261  |      |   |   |       |  
|6% convertible senior notes due 2011                                                                                                                                                                               |                               |                       | 1,000  |      |   |   |       |  
|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, (4.02% to
	10.44%  2001; 8.63% to 10.44%  2000) |                               |                       | 4,500  |      |   |   | 4,500  |  
|Other                                                                                                                                                                                                              |                               |                       | 19     |      |   |   | 1      |  
|                                                                                                                                                                                                                   |                               |                       |        |      |   |   |        |  
|Total domestic long-term debt                                                                                                                                                                                      |                               |                       | 13,864 |      |   |   | 11,278 |  
|                                                                                                                                                                                                                   | Less domestic current portion |                       |        | (49  | ) |   |        |  | 
|                                                                                                                                                                                                                   |                               |                       |        |      |   |   |        |  
|                                                                                                                                                                                                                   |                               | $                     | 13,815 |      |   | $ | 11,278 |  
|                                                                                                                                                                                                                   |                               |                       |        |      |   |   |        |  

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |     |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | --------------------- | ------ | ------ | - | - | ------ | --- | -
|                                                                                                                                                                                                              |                                    |                      
|                                                                                                                                                                                                              |                                    | December 31,         
|                                                                                                                                                                                                              |                                    |                      
|                                                                                                                                                                                                              |                                    | 2001                  |        | 2000  
|                                                                                                                                                                                                              |                                    |                       |        |       
|                                                                                                                                                                                                              |                                    |                      
|                                                                                                                                                                                                              |                                    | (dollars in millions)
|International                                                                                                                                                                                                 |                                    |                       |        |        |   |   |        |    
|13% senior redeemable discount notes due 2007,issued by NII Holdings, net of
	unamortized discount of $26 and $156                                                                                            |                                    | $                     | 504    |        |   | $ | 795    |    
|12.125% senior serial redeemable discount
	notes due 2008,issued by NII
	Holdings, net of unamortized discount of $69 and $172                                                                                |                                    |                       | 420    |        |   |   | 558    |    
|12.75% senior serial redeemable notes due
	2010,issued by NII Holdings, net of
	unamortized discount of $5 and $9                                                                                             |                                    |                       | 451    |        |   |   | 641    |    
|NII Holdings vendor credit facilities,interest payable quarterly or
	semiannually at an adjusted rate calculated based either on the
	U.S. prime rate or LIBOR (7.25% to 11.21%  2001;
	10.8% to 12%  2000) |                                    |                       | 382    |        |   |   | 382    |    
|Argentina credit facilities,interest payable quarterly at an
	adjusted rate calculated based either on the Adjusted Base Rate
	or the Eurodollar rate (7.63% to 11.5%  2001;
	11.69%  2000)                 |                                    |                       | 108    |        |   |   | 142    |    
|Other                                                                                                                                                                                                         |                                    |                       |       |        |   |   | 1      |    
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|Total NII Holdings debt nonrecourse to
	and not held by parent                                                                                                                                               |                                    |                       | 1,865  |        |   |   | 2,519  |    
|                                                                                                                                                                                                              | Less NII Holdings current portion |                       |        | (1,865 | ) |   |        | (34 | )
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|                                                                                                                                                                                                              |                                    | $                     |       |        |   | $ | 2,485  |    
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|Consolidated                                                                                                                                                                                                  |                                    |                       |        |        |   |   |        |    
|Total consolidated debt                                                                                                                                                                                       |                                    | $                     | 15,729 |        |   | $ | 13,797 |    
|                                                                                                                                                                                                              | Less current portion               |                       |        | (1,914 | ) |   |        | (34 | )
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|                                                                                                                                                                                                              |                                    | $                     | 13,815 |        |   | $ | 13,763 |    
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|Domestic capital lease and finance
	obligations                                                                                                                                                               |                                    |                       |        |        |   |   |        |    
|Capital lease obligations                                                                                                                                                                                     |                                    | $                     | 308    |        |   | $ | 260    |    
|Finance obligation                                                                                                                                                                                            |                                    |                       | 693    |        |   |   | 674    |    
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|Total capital lease and finance
	obligations                                                                                                                                                                  |                                    |                       | 1,001  |        |   |   | 934    |    
|                                                                                                                                                                                                              | Less current portion               |                       |        | (96    | ) |   |        | (68 | )
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    
|                                                                                                                                                                                                              |                                    | $                     | 905    |        |   | $ | 866    |    
|                                                                                                                                                                                                              |                                    |                       |        |        |   |   |        |    

On December 31, 2001, NII Holdings
Argentine operating company failed to make scheduled principal
payments of $8 million under its Argentina credit
facilities. On February 1, 2002, NII Holdings failed to
make a $41 million interest payment due under its 12.75%
senior serial redeemable notes due 2010. As a result of these
events of default and the operation of cross-default provisions
contained in NII Holdings debt arrangements, NII
Holdings entire debt balance is callable or subject to
acceleration, and is therefore classified in current
liabilities. As discussed below, some of NII Holdings debt
facilities are secured by pledges of the stock of all of NII
Holdings operating subsidiaries or by a first priority
lien on some of their assets. NII Holdings lenders are
free to pursue any of their remedies under these agreements,
including, in the case of vendor and bank financing facilities,
seizing the assets of NII Holdings and its subsidiaries
that are pledged as collateral. NII Holdings is currently in
discussions with its various creditors regarding the
restructuring of its debt obligations.

Senior Redeemable Notes

10.65% Senior Redeemable Discount Notes.Cash interest on the 10.65% senior
redeemable discount notes due 2007 does not accrue prior to
September 15, 2002 and is payable semiannually beginning
March 15, 2003 at a rate of 10.65% per year. We may choose
to redeem some or all of these notes starting

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


September 15, 2002 at an initial redemption
price of 105.325% of the aggregate principal amount of these
notes, plus accrued and unpaid interest. These notes are senior
unsecured indebtedness of ours and rank equal in right of
payment with all our other unsubordinated, unsecured
indebtedness.

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

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

12% Senior Serial Redeemable Notes.Cash interest on the 12% senior
serial redeemable notes due 2008 is payable semiannually on
May 1 and November 1 at a rate of 12% per year. We may
choose to redeem some or all of these notes starting
November 1, 2003 at an initial redemption price of 106% of
the aggregate principal amount of these notes, plus accrued and
unpaid interest. These notes are senior unsecured indebtedness
of ours and rank equal in right of payment with all our other
unsubordinated, unsecured indebtedness.

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

9.5% Senior Serial Redeemable Notes.In January 2001, we completed the
sale of $1.25 billion in principal amount of 9.5% senior
serial redeemable notes due 2011, generating $1.245 billion
in net cash proceeds. Cash interest is payable semiannually on
February 1 and August 1 at a rate of 9.5% per year. We
may redeem some or all of these notes starting February 1,
2006 at an initial redemption price of 104.75% of the aggregate
principal amount of these notes, plus accrued and unpaid
interest. On or before February 1, 2004, we may choose to
redeem up to 35% of the original principal amount of the notes
using the proceeds of one or more sales of qualified equity
securities at 109.5% of their principal amount, plus accrued and
unpaid interest to the date of redemption. These notes are
senior unsecured indebtedness of ours and rank equal in right of
payment with all of our other unsubordinated, unsecured
indebtedness. In July 2001, we entered into three interest rate
swap agreements to hedge the risk of changes in fair value
attributable to changes in market interest rates associated with
$500 million of our 9.5% senior serial redeemable notes. As
a result of this hedge and in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, we have recognized an $11 million
increase to the

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


carrying value of these notes as of
December 31, 2001. See note 7. However, this fair
value hedge adjustment does not change the amounts due at
maturity of the notes.

13% Senior Redeemable Discount Notes issued
by NII Holdings.Cash interest on
the 13% senior redeemable discount notes due 2007 issued by NII
Holdings accrues beginning April 15, 2002 and is payable
semiannually beginning October 15, 2002 at a rate of 13%
per year. NII Holdings may choose to redeem some or all of these
notes starting April 15, 2002 at an initial redemption
price of 106.5% of the aggregate principal amount of these
notes, plus accrued and unpaid interest. These notes are senior
unsecured indebtedness of NII Holdings and rank equal in right
of payment with all other unsubordinated, unsecured indebtedness
of NII Holdings and are nonrecourse to Nextel Communications.
Because NII Holdings failed to make an interest payment on its
12.75% senior notes, these 13% senior notes are subject to
acceleration thirty days after an acceleration has been declared
under any of NII Holdings other significant indebtedness.

12.125% Senior Serial Redeemable Discount
Notes issued by NII Holdings.Cash
interest on NII Holdings 12.125% senior serial redeemable
discount notes due 2008 issued by NII Holdings accrues beginning
April 15, 2003, and is payable semiannually beginning
October 15, 2003 at a rate of 12.125% per year. NII
Holdings may choose to redeem some or all of these notes
starting April 15, 2003 at an initial redemption price of
106.063% of the aggregate principal amount of these notes, plus
accrued and unpaid interest. These notes are senior unsecured
indebtedness of NII Holdings and rank equal in right of payment
with all other unsubordinated, unsecured indebtedness of NII
Holdings and are nonrecourse to Nextel Communications. Because
NII Holdings failed to make an interest payment on its 12.75%
senior notes, these 12.125% senior notes are subject to
acceleration thirty days after an acceleration has been declared
under any of NII Holdings other significant indebtedness.

12.75% Senior Serial Redeemable Notes
issued by NII Holdings.In August
2000, NII Holdings completed the sale of $650 million in
principal amount of 12.75% senior serial redeemable notes due
2010, generating $624 million in net cash proceeds. Cash
interest is payable semiannually on February 1 and
August 1 at a rate of 12.75% per year. NII Holdings may
choose to redeem some or all of these notes starting
August 1, 2005 at an initial redemption price of 106.375%
of the aggregate principal amount of these notes, plus accrued
and unpaid interest. Before August 1, 2003, NII Holdings
may choose to redeem up to 35% of the aggregate principal amount
of the notes using the proceeds of one or more sales of
qualified equity securities at 112.75% of their principal
amount, plus accrued and unpaid interest to the date of
redemption. These notes are senior unsecured indebtedness of NII
Holdings and rank equal in right of payment with all other
unsubordinated, unsecured indebtedness of NII Holdings and are
nonrecourse to Nextel Communications. NII Holdings failed to
make a $41 million interest payment due February 1,
2002 on these notes, which are now in default and subject to
being declared immediately due and payable.

Convertible Senior Notes

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

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

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

6% Convertible Senior Notes.In May 2001, we completed the sale
of $1.0 billion in principal amount of 6% convertible senior
notes due 2011, generating $980 million in net cash
proceeds. Cash interest is payable semiannually on June 1
and December 1 at a rate of 6% per year. We may choose to
redeem some or all of these notes starting June 4, 2004 at
an initial redemption price of 104% of the aggregate principal
amount of these notes, plus accrued and unpaid interest. These
notes are convertible at the option of the holders into our
class A common stock at any time prior to redemption, repurchase
or maturity at a conversion price of about $23.84 per share,
subject to adjustment. These notes are senior unsecured
indebtness of ours and rank equal in right of payment with all
our other unsubordinated, unsecured indebtedness.

Bank and Vendor Credit Facilities

Domestic Bank Credit Facility.As of December 31, 2001, our
domestic bank credit facility provided for total secured
financing capacity of up to $6.0 billion, subject to the
satisfaction or waiver of applicable borrowing conditions. This
facility consists of a $1.5 billion revolving loan
commitment and $4.5 billion in term loans that have already
been fully accessed. Principal repayment begins on the term
loans in limited amounts in late 2002, and the several tranches
that make up the term loans mature over a period from
December 31, 2007 to March 31, 2009. The amounts
available under the revolving loan commitment decrease in
limited amounts beginning at the end of 2002 continuing until
late 2007, when no amounts are available under the revolving
loan commitment.

The bank credit agreement requires compliance
with financial ratio tests, including total indebtedness to
operating cash flow, secured indebtedness to operating cash
flow, operating cash flow to interest expense and operating cash
flow to specified charges, each as defined under the bank credit
agreement. Some of these tests become more stringent over time.
The maturity dates of the loans may accelerate if we do not
comply with the financial ratio tests, which could have a
material adverse effect on our financial condition. Borrowings
under the bank credit facility are secured by liens on assets of
substantially all of our domestic subsidiaries. As of
December 31, 2001, we were in compliance with all financial
ratio tests required under our bank credit facility.

In addition, the loans under the bank credit
agreement can accelerate if the aggregate amount of our public
notes that mature within the succeeding six months of any date
before June 30, 2009, or the aggregate amount of our
redeemable stock that is mandatorily redeemable within the
succeeding six months of any date before June 30, 2009,
exceed amounts specified in our bank credit facility. However,
no such acceleration would occur if the long-term rating for our
public notes is at least BBB- by

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Standard & Poors Ratings
Services or Baa3 by Moodys Investors Service, Inc. There
is no provision under any of our indebtedness that requires
repayment in the event of a downgrade by any ratings service.

Our ability to access additional amounts under
the bank credit agreement may be restricted by provisions
included in some of our public notes and preferred stock that
limit the incurrence of additional indebtedness in certain
circumstances. The availability of borrowings under this
facility also is subject to the satisfaction or waiver of
specified borrowing conditions. In March 2001, we amended this
bank credit facility to modify certain financial covenants to
better reflect our anticipated financial performance and to
permit ongoing compliance with the financial covenants during
2001. As of December 31, 2001, we were able to access
substantially all of the remaining $1.5 billion available
under the bank credit facility.

The bank credit facility also contains covenants
which limit our ability and some of our subsidiaries
ability to incur additional indebtedness; create liens; pay
dividends or make distributions in respect of our or their
capital stock or make specified other restricted payments;
consolidate, merge or sell all or substantially all of our or
their assets; guarantee obligations of other entities; enter
into hedging agreements; enter into transactions with affiliates
or related persons or engage in any business other than the
telecommunications business. Finally, except for distributions
for specified limited purposes, these covenants limit the
distribution of substantially all of our subsidiaries net
assets.

International Facilities.As of December 31, 2001 and
2000, there were no amounts available for borrowing under our
international credit facilities.

McCaw International (Brazil), Ltd. has an
equipment financing agreement with Motorola Credit Corporation,
a subsidiary of Motorola, which provided $125 million in
multi-draw term loans to McCaw International (Brazil). Loans
made were used to acquire digital mobile network equipment and
related services from Motorola. The financing advanced under
this agreement was originally repayable in U.S. dollars in
semiannual installments over 42 months beginning
June 30, 2000. McCaw International (Brazil) and Motorola
Credit entered into an amendment to this agreement in February
2001, which permits installments due after that date to be
repaid in U.S. dollars in semiannual installments beginning
December 31, 2002, with final payment due June 30,
2005. The loans made under this agreement are secured by a first
priority lien on substantially all of McCaw International
(Brazil)s assets, a pledge of all of the stock of McCaw
International (Brazil) and its subsidiaries and
NII Holdings guarantee of the obligations. This
facility also requires McCaw International (Brazil) to meet and
maintain specified financial and operating covenants. This
facility is currently in default under cross-default provisions
triggered by NII Holdings failure to make scheduled
principal payments of $8 million under its Argentina credit
facilities on December 31, 2001. As a result, Motorola
Credit is free to pursue its remedies available under this
facility, including seizing the pledged collateral.

NII Holdings has an equipment financing facility
with Motorola Credit which provided for $225 million of
secured term loans primarily used to finance the cost of
qualifying purchases of digital mobile network equipment and
related services and to repay all of the previously outstanding
long-term debt of our Philippine operating company. Amounts
borrowed under this facility were originally repayable in eight
equal semiannual installments beginning June 30, 2001 and
maturing December 31, 2004. NII Holdings and Motorola
Credit entered into an amendment to this facility in February
2001 that defers the first installment payment to
December 31, 2002 and extends the maturity to June 30,
2006. This facility is secured by, among other things, a pledge
of NII Holdings equity interests in its Mexican,
Peruvian and Philippine operating companies, as well as a pledge
by some of the minority stockholders of their equity interests
in NII Holdings Philippine operating company. This
facility is currently in default under cross-default provisions
triggered by NII Holdings failure to make scheduled
principal payments of $8 million under its Argentina credit
facilities on December 31, 2001. As a result, Motorola
Credit is free to pursue its remedies available under this
facility, including seizing the pledged collateral.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


NII Holdings has an agreement with Motorola
Credit under which Motorola Credit provided $57 million in
incremental term loans to NII Holdings. In January 2000,
NII Holdings borrowed the full $57 million available
under this facility to acquire digital mobile network equipment
and related services from Motorola. NII Holdings and
Motorola Credit entered into an amendment to this facility in
February 2001 under which amounts borrowed under this facility
now mature June 30, 2003. Before the amendment, loans under
this facility were to mature December 31, 2001. Loans under
this facility are secured by a cash escrow account of
$57 million. This facility is currently in default under
cross-default provisions triggered by NII Holdings
failure to make scheduled principal payments of $8 million
under its Argentina credit facilities on December 31, 2001.
As a result, Motorola Credit is free to pursue its remedies
available under this facility, including seizing the pledged
collateral.

NII Holdings Argentine operating company
has credit facilities with Chase Manhattan Bank and Motorola
Credit which provided $100 million in term loans for
general corporate purposes and $50 million in incremental
term loans for purchasing qualifying digital mobile network
equipment and related services from Motorola. Loans under this
facility are repayable in quarterly installments beginning
September 30, 2000 through March 31, 2003. Each of the
first nine installments is equal to  1/18 of the
outstanding balance at September 30, 2000, and the final
installment is an amount equal to the remaining balance.
Borrowings under this facility are secured by a pledge of stock
of, and a first priority lien on the assets of the Argentine
operating company. This facility also requires the Argentine
operating company to meet financial and operating ratios. In
June 2000, in conformity with its business plan, NII
Holdings Argentine operating company and the lenders under
the credit facility amended the facility to modify several
financial covenants. As a condition to the effectiveness of
those amendments, NII Holdings amended the capital subscription
agreement under which it must contribute minimum amounts of
equity to its Argentine operating company. On December 31,
2001, NII Holdings failed to make scheduled principal
payments of $8 million on these credit facilities and is
therefore in default on these facilities. In addition, in
February 2002, the lenders under these facilities seized
$8 million, which was pledged under a cash collateral
account as security under this debt.

Debt Extinguishments and Purchases

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

During the first quarter of 2000, we utilized
$1.21 billion of cash to redeem prior to final maturity all
of our outstanding 10.125% senior notes due 2004 and
9.75% senior notes due 2004. As a result of these
transactions, we recognized an extraordinary loss of
$104 million, representing the excess of the purchase price
over the carrying values of the redeemed notes and the write-off
of $26 million of unamortized debt financing costs.

In August 2001, Nextel Communications purchased
in private placement transactions an aggregate of
$422 million in principal amount of NII Holdings
13% senior redeemable discount notes due 2007,
$241 million in principal amount of NII Holdings
12.125% senior serial redeemable discount notes due 2008
and $194 million in principal amount of
NII Holdings 12.75% senior serial redeemable
notes due 2010 in exchange for about 21.6 million shares of
our class A common stock. Nextel Communications continues
to hold these notes, and therefore, these notes remain
outstanding obligations of NII Holdings. However, in
accordance with generally accepted accounting principles, these
transactions have been recorded as an early retirement of debt
in our consolidated financial statements. As a result, we
recognized

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


an extraordinary gain of $469 million,
representing the excess of the net carrying values of the
repurchased notes over the market value of the 21.6 million
shares on the dates of the exchange.

Capital Lease Obligations

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

Effective April 2001, a switch equipment
sale-leaseback transaction, previously accounted for as an
operating lease, has been accounted for as a capital lease due
to a modification to the lease provisions. As of
December 31, 2001, the gross amount of assets recorded
under capital lease included in property, plant and equipment
resulting from this transaction is $84 million.

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

For the years subsequent to December 31,
2001, scheduled annual maturities of long-term debt, capital
lease and finance obligations outstanding as of
December 31, 2001 under existing long-term debt, capital
lease and finance obligation agreements are as follows:

|                          |  |               |        |               |  |       |       |   |  |   |        |  
|------------------------- |  | ------------- | ------ | ------------- |  | ----- | ----- | - |  | - | ------ | -
|                          |  |               |        | Capital Lease |  |      
|                          |  | Long-Term     |        | and Finance   |  |      
|                          |  | Debt(1)       |        | Obligations   |  | Total
|                          |  |               |        |               |  |      
|                          |  |              
|                          |  | (in millions)
|2002                      |  | $             | 2,014  |               |  | $     | 140   |   |  | $ | 2,154  |  
|2003                      |  |               | 199    |               |  |       | 142   |   |  |   | 341    |  
|2004                      |  |               | 327    |               |  |       | 135   |   |  |   | 462    |  
|2005                      |  |               | 433    |               |  |       | 116   |   |  |   | 549    |  
|2006                      |  |               | 466    |               |  |       | 82    |   |  |   | 548    |  
|Thereafter                |  |               | 12,706 |               |  |       | 516   |   |  |   | 13,222 |  
|                          |  |               |        |               |  |       |       |   |  |   |        |  
|                          |  |               | 16,145 |               |  |       | 1,131 |   |  |   | 17,276 |  
|Less unamortized discount |  |               | (416   | )             |  |       |      |   |  |   | (416   | )
|Less imputed interest     |  |               |       |               |  |       | (130  | ) |  |   | (130   | )
|                          |  |               |        |               |  |       |       |   |  |   |        |  
|                          |  | $             | 15,729 |               |  | $     | 1,001 |   |  | $ | 16,730 |  
|                          |  |               |        |               |  |       |       |   |  |   |        |  



---



|    |                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in the 2002 maturities of long-term debt
	is NII Holdings debt in the amount of
	$1,865 million, which is callable or subject to
	acceleration by third parties and nonrecourse to and not held by
	parent.

8.     Derivative
Instruments and Hedging Activities

We use derivative instruments consisting
primarily of interest rate swap and option agreements to manage
our exposure to changes in interest rates. We do not use
derivative instruments for trading or other speculative
purposes. The use of derivative instruments exposes us to market
risk and credit risk. Market risk is the adverse effect that a
change in interest rates has on the value of a financial
instrument. We manage market risk associated with our derivative
instruments by establishing and monitoring limits on the degree
of risk that may be undertaken. This risk is also monitored
through regular communication with senior management. While
derivative instruments are subject to fluctuations in values,
these fluctuations are generally offset by fluctuations in fair
values or cash flows of the underlying hedged items. Credit risk
is the risk that the counterparty exposes us to loss in the
event of nonperformance. We mitigate

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


credit risk by dealing only with counterparties
that have at least an A rating from either
Moodys or Standard & Poors, and by setting
exposure limits with each approved counterparty. We currently do
not hedge assets or liabilities denominated in foreign
currencies or foreign currency transactions.

The following table summarizes our interest rate
swap agreements at December 31, 2001. We did not have any
option agreements in 2001.

|                                         |  |               |     |       |  |                  |     |      |  |         |           |  |  |  |     |   |  |  |     |  
|---------------------------------------- |  | ------------- | --- | ----- |  | ---------------- | --- | ---- |  | ------- | --------- |  |  |  | --- | - |  |  | --- | -
|                                         |  |               |     |       |  |                 
|                                         |  |               |     |       |  | Weighted Average
|                                         |  |               |     |       |  |                 
|                                         |  | Notional      |     | Fair  |  |                  |     | Pay  |  | Receive
|                                         |  | Amount        |     | Value |  | Maturity         |     | Rate |  | Rate   
|                                         |  |               |     |       |  |                  |     |      |  |        
|                                         |  |               |     |       |  |                  |     |     
|                                         |  | (in millions) |     |       |  |                  |     |     
|Pay fixed rate, receive variable rate(1) |  | $             | 570 |       |  | $                | (83 | )    |  |         | 4.3 years |  |  |  | 8.1 | % |  |  | 2.6 | %
|Pay variable rate, receive fixed rate    |  |               | 500 |       |  |                  | 26  |      |  |         | 9.1 years |  |  |  | 5.4 | % |  |  | 9.5 | %
|Pay variable rate, receive variable rate |  |               | 400 |       |  |                  | (13 | )    |  |         | 1.1 years |  |  |  | 5.0 | % |  |  | 2.0 | %



---



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

Effective January 1, 2001, we adopted SFAS
No. 133, which, as amended by SFAS No. 138,
establishes accounting and reporting standards for derivative
instruments, including some derivative instruments embedded in
other contracts, and for hedging activities. Upon adoption of
SFAS No. 133, we recorded a $20 million transition
adjustment in other comprehensive loss as a cumulative effect of
a change in accounting principle. We reclassify this amount to
interest expense over the lives of the respective interest rate
swaps, including $8 million reclassified during the year
ended December 31, 2001.

We hedge the cash flows and fair values of some
of our long-term debt using interest rate swaps. We enter into
these derivative contracts to manage our exposure to interest
rate changes by achieving a desired proportion of fixed rate
versus variable rate debt. In an interest rate swap, we agree to
exchange the difference between a variable interest rate and
either a fixed or another variable interest rate, multiplied by
a notional principal amount. In 2001, we recorded
$22 million in interest expense related to the periodic net
cash settlements on these swaps.

In July 2001, we entered into interest rate swap
agreements to hedge the risk of changes in fair value of a
portion of our long-term fixed rate debt, which are attributable
to changes in LIBOR, as the benchmark interest rate. These fair
value hedges qualify for hedge accounting using the short-cut
method since the swap terms match the critical terms of the
hedged debt. Accordingly, there was no net effect on results of
operations for the twelve months ended December 31, 2001,
relating to the ineffectiveness of these fair value hedges. As
of December 31, 2001, we have recognized the interest rate
swaps at their fair values of $26 million, consisting of
$15 million in interest receivable and $11 million in
other assets, with an offsetting $11 million adjustment to
the carrying value of our hedged debt.

We also use interest rate swaps to hedge the
variability of future cash flows, which are caused by changes in
LIBOR, as the benchmark interest rate, associated with some of
our long-term variable rate debt. As of December 31, 2001,
we have recognized all of our cash flow hedges at their fair
values of $96 million in other current and other noncurrent
liabilities on our balance sheet. For our interest rate swap
that qualifies for cash flow hedge accounting, an unrealized
loss of $17 million, representing the effective portion of
the change in its fair value, is reported in other comprehensive
loss and will be reclassified to interest expense in the same
period during which our hedged debt affects interest expense. We
expect to reclassify $6 million of the $17 million to
interest expense in 2002. The ineffective portion of the change
in fair value of our swap qualifying for cash flow hedge
accounting, and changes in the fair values of our swaps not
qualifying for hedge accounting, are recognized in our statement
of operations in the period of the change. For the year ended
December 31, 2001, interest expense includes a loss of
$7 million representing changes in the fair values of our
swaps not qualifying for hedge accounting, and a

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


net effect of zero relating to the ineffective
portion of the change in fair value of our swap qualifying for
hedge accounting.

In June 2001, we terminated a variable to
variable interest rate swap in the notional amount of
$100 million in accordance with its original terms. There
was no realized gain or loss associated with this termination.

Prior to January 1, 2001, under accounting
principles generally accepted in the United States, we did not
record our derivative instruments on the balance sheet at fair
values. We recognized the periodic net cash settlements as
adjustments to interest expense in our statement of operations.
The incremental net effect was a $1 million decrease in
interest expense for the year ended December 31, 2000 and
an $8 million increase in interest expense for the year
ended December 31, 1999. Some of our interest rate swaps
and all of our option agreements were terminated during 2000 in
accordance with their original terms.

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

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

9.     Income
Taxes

The components of the income tax benefit were as
follows:

|                   |         |                         |     |      |   |      |    |    |   |   |    |    |  
|------------------ | ------- | ----------------------- | --- | ---- | - | ---- | -- | -- | - | - | -- | -- | -
|                   |         |                        
|                   |         | Year Ended December 31,
|                   |         |                        
|                   |         | 2001                    |     | 2000 |   | 1999
|                   |         |                         |     |      |   |     
|                   |         |                        
|                   |         | (in millions)          
|Current            |         |                         |     |      |   |      |    |    |   |   |    |   
|                   | Foreign |                         | $   | (26  | ) |      | $  | (2 | ) |   | $  | (3 | )
|Deferred           |         |                         |     |      |   |      |    |    |   |   |    |   
|                   | Federal |                         |     | 33   |   |      |    | 30 |   |   |    | 28 |  
|                   | State   |                         |     |     |   |      |    |   |   |   |    |   |  
|                   | Foreign |                         |     | 128  |   |      |    | 5  |   |   |    | 3  |  
|                   |         |                         |     |      |   |      |    |    |   |   |    |   
|                   |         |                         | 161 |      |   |      | 35 |    |   |   | 31 |   
|                   |         |                         |     |      |   |      |    |    |   |   |    |   
|Income tax benefit |         | $                       | 135 |      |   | $    | 33 |    |   | $ | 28 |   
|                   |         |                         |     |      |   |      |    |    |   |   |    |   

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

|                                              |  |                         |       |      |  |      |      |   |  |   |      |  
|--------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                              |  |                        
|                                              |  | Year Ended December 31,
|                                              |  |                        
|                                              |  | 2001                    |       | 2000 |  | 1999
|                                              |  |                         |       |      |  |     
|                                              |  |                        
|                                              |  | (in millions)          
|Income tax benefit at statutory rate          |  | $                       | 1,132 |      |  | $    | 261  |   |  | $ | 454  |  
|State tax benefit, net                        |  |                         | 51    |      |  |      | 57   |   |  |   | 49   |  
|Amortization of goodwill                      |  |                         | (10   | )    |  |      | (10  | ) |  |   | (10  | )
|Increase in valuation allowance               |  |                         | (592  | )    |  |      | (131 | ) |  |   | (423 | )
|Equity in losses of unconsolidated affiliates |  |                         | (49   | )    |  |      | (53  | ) |  |   | (28  | )
|Loss on impairment charge                     |  |                         | (377  | )    |  |      |     |   |  |   |     |  
|Other                                         |  |                         | (20   | )    |  |      | (91  | ) |  |   | (14  | )
|                                              |  |                         |       |      |  |      |      |   |  |   |      |  
|                                              |  | $                       | 135   |      |  | $    | 33   |   |  | $ | 28   |  
|                                              |  |                         |       |      |  |      |      |   |  |   |      |  

Deferred tax assets and liabilities consist of
the following:

|                         |                                  |               |        |       |  |  |        |       | 
|------------------------ | -------------------------------- | ------------- | ------ | ----- |  |  | ------ | ----- | 
|                         |                                  |              
|                         |                                  | December 31, 
|                         |                                  |              
|                         |                                  | 2001          |        | 2000 
|                         |                                  |               |        |      
|                         |                                  |              
|                         |                                  | (in millions)
|Deferred tax assets      |                                  |               |        |       |  |  |        |      
|                         | Net operating loss carryforwards |               | $      | 2,739 |  |  | $      | 2,256 | 
|                         | Deferred interest                |               |        | 224   |  |  |        | 153   | 
|                         | Foreign affiliates               |               |        | 11    |  |  |        | 11    | 
|                         | Other                            |               |        | 193   |  |  |        | 104   | 
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 3,167  |       |  |  | 2,524  |      
|Valuation allowance      |                                  |               | (2,369 | )     |  |  | (1,933 | )    
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 798    |       |  |  | 591    |      
|                         |                                  |               |        |       |  |  |        |      
|Deferred tax liabilities |                                  |               |        |       |  |  |        |      
|                         | Property, plant and equipment    |               |        | 263   |  |  |        | 125   | 
|                         | Intangibles                      |               |        | 1,138 |  |  |        | 1,257 | 
|                         | Other                            |               |        | 66    |  |  |        | 121   | 
|                         |                                  |               |        |       |  |  |        |      
|                         |                                  |               | 1,467  |       |  |  | 1,503  |      
|                         |                                  |               |        |       |  |  |        |      
|                         | Net deferred tax liability       |               | $      | 669   |  |  | $      | 912   | 
|                         |                                  |               |        |       |  |  |        |      

At December 31, 2001, we had
$7.0 billion of consolidated net operating loss
carryforwards for federal income tax purposes which expire
through 2021, and $357 million of separate return net
operating loss carryforwards which expire through 2017. The
utilization of tax net operating losses may be subject to
specified limitations.

At December 31, 2001, net operating loss
carryforwards for our foreign subsidiaries were about
$239 million for Mexican income tax purposes,
$251 million for Argentine income tax purposes,
$61 million for Philippine tax purposes and
$56 million for Peruvian income tax purposes. These
carryforwards expire in various amounts through 2011.
Additionally, our foreign subsidiaries had about
$329 million of net operating loss carryforwards for
Brazilian income tax purposes that have no expiration date and
that can only be utilized up to the limit of 30% of taxable
income for the year. Chile had about $12 million of net
operating carryforwards that have no expiration. At
December 31, 2001 asset tax credit carryforwards are about
$1 million for Mexican income tax purposes and
$7 million for Argentine income

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


tax purposes. These credits expire in various
amounts through 2010. Our foreign subsidiaries may be limited in
their ability to use foreign tax net operating losses in any
single year depending on their ability to generate sufficient
taxable income. Our foreign subsidiaries do not have positive
cumulative undistributed earnings, and therefore, no deferred
taxes have been recorded.

A significant portion of our deferred tax
liabilities will reverse after current net operating losses
expire. After considering this and other factors, including
recent operating results, we recorded a net increase to our
valuation allowance by $436 million in 2001,
$167 million in 2000 and $448 million in 1999.

In the first quarter of 2002, we are required to
adopt SFAS No. 142. In connection with the adoption of SFAS
No. 142, we expect to incur a non-cash charge of about
$350 million to income tax expense to increase the
valuation allowance related to our net operating loss. See
note 1, New Accounting Pronouncements, for more
detailed information.

10.     Commitments
and Contingencies

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

For years subsequent to December 31, 2001,
future minimum payments for all operating lease obligations that
have initial noncancelable lease terms exceeding one year, net
of rental income, are as follows (in millions):

|           |  |   |       | 
|---------- |  | - | ----- | 
|2002       |  | $ | 401   | 
|2003       |  |   | 362   | 
|2004       |  |   | 313   | 
|2005       |  |   | 225   | 
|2006       |  |   | 131   | 
|Thereafter |  |   | 310   | 
|           |  |   |       | 
|           |  | $ | 1,742 | 
|           |  |   |       | 

Total rental expense, net of rental income, was
$370 million during 2001, $302 million during 2000 and
$231 million during 1999.

Other Commitments.We are a party to service and
other contracts in connection with conducting our domestic
business. Minimum amounts due under some of the more significant
agreements are $139 million in 2002, $153 million in
2003, $165 million in 2004, $170 million in 2005,
$187 million in 2006 and $504 million thereafter.
Amounts actually paid under some of these agreements will likely
be higher due to variable components of these agreements. The
more significant variable components that determine the ultimate
obligation owed include such items as hours contracted,
subscribers and interest rates, among others. We also have
committed, subject to closing conditions which may not be met,
to pay up to $327 million for domestic spectrum
acquisitions entered into and outstanding as of
December 31, 2001, without giving effect to transactions in
which we may elect to issue equity rather than paying cash. In
addition, we are party to various arrangements that are
conditional in nature and obligate us to make payments only upon
the occurrence of certain events, such as the delivery of
functioning software or a product. In addition, significant
amounts expected to be paid to Motorola for infrastructure,
handsets and related services are not included above due to the
uncertainty surrounding the timing and extent of these payments
and because minimum contractual amounts under our agreements
with Motorola are not significant. See note 14 with respect
to amounts paid to Motorola in 2001, 2000 and 1999.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Contingencies.Beginning in 2000, allegations
against us of employment discrimination and harassment were
reported in the press, and thereafter, a group of current and
former employees filed some related complaints with the Equal
Employment Opportunity Commission. Those complaints were
subsequently withdrawn. In September 2000, as a result of
negotiations with counsel for the claimants, we agreed on a
mutually acceptable arrangement for processing and resolving all
of the claims. We have resolved or settled substantially all of
these claims, which has involved payments in an aggregate amount
that was not material to us.

In April 2001, a purported class action lawsuit
was filed in the Circuit Court in Baltimore, Maryland by the Law
Offices of Peter Angelos, and subsequently in other state courts
in Pennsylvania, New York and Georgia by Mr. Angelos and
other firms, alleging that wireless telephones pose a health
risk to users of those telephones and that the defendants failed
to disclose these risks. We, along with numerous other
companies, are defendants in these cases. The defendants have
removed the cases to federal court, and the plaintiffs have
filed motions to remand back to state court in some of the
cases. Mr. Angelos firm has also participated in the
filing of an amended complaint in a similar suit pending in
federal court in Louisiana, in which we are also named. These
suits seek to require the defendants to provide headsets, or
reimburse the cost of headsets, for use with wireless
telephones, as well as attorneys fees and punitive
damages. The cases have been transferred to federal court in
Baltimore, Maryland by the judicial panel on Multi-district
Litigation. While we cannot predict the outcome of this
litigation, we believe that the claims against us are without
merit and intend to vigorously defend against them.

11.     Mandatorily
Redeemable Preferred Stock

|                                                                      |                                                                                                                                                                                                 |                       |       |       |  |   |       |       | 
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ----- | ----- |  | - | ----- | ----- | 
|                                                                      |                                                                                                                                                                                                 |                      
|                                                                      |                                                                                                                                                                                                 | December 31,         
|                                                                      |                                                                                                                                                                                                 |                      
|                                                                      |                                                                                                                                                                                                 | 2001                  |       | 2000 
|                                                                      |                                                                                                                                                                                                 |                       |       |      
|                                                                      |                                                                                                                                                                                                 |                      
|                                                                      |                                                                                                                                                                                                 | (dollars in millions)
|Series D exchangeable preferred stock
	mandatorily redeemable 2009,   |                                                                                                                                                                                                 |                       |       |       |  |   |       |      
|                                                                      | 13% cumulative annual dividend; 859,391 and
	756,185 shares issued; 859,380 and 756,174 shares outstanding,
	stated at liquidation value                                                        |                       | $     | 883   |  |   | $     | 777   | 
|Series E exchangeable preferred stock
	mandatorily redeemable 2010,   |                                                                                                                                                                                                 |                       |       |       |  |   |       |      
|                                                                      | 11.125% cumulative annual dividend; 1,133,161 and
	1,015,397 shares issued; 1,133,147 and 1,015,383 shares
	outstanding; stated at liquidation value                                            |                       |       | 1,149 |  |   |       | 1,029 | 
|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 |                       |       | 82    |  |   |       | 75    | 
|                                                                      |                                                                                                                                                                                                 |                       |       |       |  |   |       |      
|                                                                      |                                                                                                                                                                                                 | $                     | 2,114 |       |  | $ | 1,881 |      
|                                                                      |                                                                                                                                                                                                 |                       |       |       |  |   |       |      

Series D Preferred Stock.Shares of our series D
exchangeable preferred stock due 2009 have a liquidation
preference of $1,000 per share. Dividends on the series D
preferred stock accrue at an annual rate of 13% of the
liquidation preference, are cumulative from the date of issuance
and are payable quarterly in cash or, on or prior to
July 15, 2002, at our option in additional shares of
series D preferred stock. Accrued but unpaid dividends were
$24 million at December 31, 2001 and $21 million
at December 31, 2000. The series D preferred stock is
mandatorily redeemable on July 15, 2009 at the liquidation
preference plus accrued and unpaid dividends. We may choose to
redeem some or all of the preferred stock after July 15,
2002 at specified redemption prices. We may also choose to
exchange the series D preferred stock, in whole but not in
part, after July 15, 2002 into subordinated debentures.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Series E Preferred Stock.Shares of our series E
exchangeable preferred stock due 2010 have a liquidation
preference of $1,000 per share. Dividends on the series E
preferred stock accrue at an annual rate of 11.125% of the
liquidation preference, are cumulative from the date of issuance
and are payable quarterly in cash or, on or prior to
February 15, 2003 at our option, in additional shares of
series E preferred stock. Accrued but unpaid dividends were
$16 million at December 31, 2001 and $14 million
at December 31, 2000. The series E preferred stock is
mandatorily redeemable on February 15, 2010 at the
liquidation preference plus accrued and unpaid dividends. We may
choose to redeem some or all of the preferred stock after
February 15, 2003 at specified redemption prices. We may
also choose to exchange the series E preferred stock, in
whole but not in part, after February 15, 2003 into
subordinated debentures.

Zero Coupon Preferred Stock.Shares of our zero coupon
convertible preferred stock due 2013 have a liquidation
preference of $1,000 per share at maturity. The zero coupon
preferred stock had an initial liquidation preference of
$253.675 per share. No dividends will be payable with respect to
the zero coupon preferred stock; however, the liquidation
preference will accrete from the issuance date at an annual rate
of 9.25% compounded quarterly. The zero coupon preferred stock
is convertible at the option of the holders prior to redemption
or maturity into our class A common stock at a conversion rate
of 19.4882 shares of our class A common stock for each share of
zero coupon preferred stock, subject to adjustment upon the
occurrence of specified events. We may choose to redeem some or
all of the preferred stock starting December 23, 2005, and
the preferred stock may be tendered by the holders for
acquisition by us on December 23, 2005 and 2008. The zero
coupon preferred stock is mandatorily redeemable on
December 23, 2013 at the fully accreted liquidation
preference of $1,000 per share. We may elect, subject to the
satisfaction of specified requirements, to pay any redemption or
tender price with our class A common stock. During the first
half of 2000, we issued 6.7 million shares of our
class A common stock upon the conversion of
$98 million in total accreted value of our zero coupon
convertible preferred stock mandatorily redeemable in 2013,
representing the original stated conversion rate.

12.     Capital Stock
and Stock Rights

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



| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 2,060,000,000 shares of class A voting
	common stock, par value $0.001 per share;                   
|
| |  | 100,000,000 shares of class B nonvoting
	common stock, par value $0.001 per share;                  
|
| |  | 26,941,933 shares of class A convertible
	redeemable preferred stock, stated value $36.75 per share;
|
| |  | 82 shares of class B convertible preferred
	stock, stated value $1.00 per share;                    
|
| |  | 26,941,933 shares of class C convertible
	redeemable preferred stock, stated value $36.75 per share;
|
| |  | 1,600,000 shares of series D preferred
	stock, described in note 11;                                
|
| |  | 2,200,000 shares of series E preferred stock
	described in note 11;                                 
|
| |  | 800,000 shares of zero coupon preferred stock
	described in note 11; and                            
|
| |  | 15,400,000 shares of undesignated preferred
	stock, par value $0.01 per share.                      

The following is a summary description of our
capital stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Common Stock

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

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

Class B Common Stock.Motorola is currently the only
holder of our class B nonvoting common stock. A holder of
our class B common stock has no right to vote on any
matters submitted for action by the stockholders. However, a
holder of the class B common stock does have the right to
vote as a separate class, with each share having one vote, on:



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

in which the class B common stock would be
treated differently from the class A common stock.

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

Microsoft
Transaction.In 1999, Microsoft
Corporation purchased 33.3 million shares of our class A
common stock for a cash investment of $600 million, representing
a per share price of $18.00. In connection with this
transaction, we entered into agreements under which Microsoft
provides specified Internet portal services in connection with
our Nextel Wireless Web service offering.

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

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

Preferred Stock

The class A preferred stock, class B
preferred stock, and class C preferred stock are the
primary mechanism for providing Digital Radio with the corporate
governance rights associated with Mr. Craig O.
McCaws investment in Nextel in 1995. All outstanding
shares of class A and class B preferred stock
described below are held by Digital Radio, L.L.C., an affiliate
of Mr. McCaw. No shares of class C preferred stock are
currently outstanding. As of December 31, 2001,
Mr. McCaw and his affiliates beneficially owned 8% of our
common equity, assuming the conversion of the preferred stock
described below and the exercise of all presently exercisable
options held by Mr. McCaws affiliates. See
note 14.

Class A Convertible Redeemable
Preferred Stock.Each share of
class A preferred stock is convertible at the election of
the holder into six shares of class A common stock. Upon
the occurrence of specified events, the shares of class A
preferred stock automatically convert into shares of
class A common stock on a six-for-one basis or into shares
of class C preferred stock on a one-for-one basis. We may
choose to redeem shares of class A preferred stock at a
redemption price equal to the stated value of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


class A preferred stock plus the amount of
any accrued or declared but unpaid dividends, upon the
occurrence of specified events as set forth in our certificate
of incorporation. The class A preferred stock only pays
dividends under limited circumstances. Holders of class A
preferred stock are entitled to six votes per share on all
matters submitted for action by the stockholders except for the
election of directors. The holders of class A preferred
stock, voting separately as a class, are entitled to elect three
class A directors or 25% of the members of our board of
directors. Such directors will comprise the majority of the
members of the operations committee, which has the authority to
formulate key aspects of our business strategy.

In December 2000, Digital Radio exercised its
right to convert 0.2 million shares of class A preferred
stock into 1.2 million shares of class A common stock. In
June 2001, Digital Radio exercised its right to convert 9,169
shares of class A preferred stock into 55,014 shares of
class A common stock.

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

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

Ranking

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

Common Stock Reserved for Issuance

As of December 31, 2001, we had reserved
class A common stock for future issuance as detailed below
(in millions).

|                                                       |  |      
|------------------------------------------------------ |  | -----
|4.75% convertible debt conversion rights               |  | 15.0 
|5.25% convertible debt conversion rights               |  | 15.5 
|6% convertible debt conversion rights                  |  | 42.0 
|Zero coupon preferred stock conversion rights          |  | 4.8  
|Class A and class B preferred stock
	conversion rights |  | 46.2 
|Class B common stock conversion rights                 |  | 35.7 
|Incentive equity plan                                  |  | 143.7
|Options held by affiliates and warrants
	outstanding   |  | 2.0  
|Employee stock purchase plan                           |  | 5.5  
|Acquisitions                                           |  | 67.3 
|                                                       |  |      
|                                                       |  | 377.7
|                                                       |  |      

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


13.     Stock and
Employee Benefit Plans

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



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

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

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

|                               |           |        |      |                  |   |   |       |       | 
|------------------------------ | --------- | ------ | ---- | ---------------- | - | - | ----- | ----- | 
|                               |           |        |      | Weighted Average
|                               |           | Shares |      | Exercise Price  
|                               |           |        |      |                 
|Outstanding, December 31, 1998 |           |        | 40.6 |                  |   | $ | 10.32 |      
|                               | Granted   |        |      | 18.2             |   |   |       | 17.20 | 
|                               | Exercised |        |      | (12.0            | ) |   |       | 9.18  | 
|                               | Canceled  |        |      | (5.1             | ) |   |       | 13.17 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 1999 |           |        | 41.7 |                  |   |   | 13.19 |      
|                               |           |        |      |                  |   |   |       |      
|                               | Granted   |        |      | 24.1             |   |   |       | 61.19 | 
|                               | Exercised |        |      | (7.0             | ) |   |       | 10.58 | 
|                               | Canceled  |        |      | (4.4             | ) |   |       | 34.88 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 2000 |           |        | 54.4 |                  |   |   | 32.89 |      
|                               |           |        |      |                  |   |   |       |      
|                               | Granted   |        |      | 31.9             |   |   |       | 18.39 | 
|                               | Exercised |        |      | (1.5             | ) |   |       | 11.10 | 
|                               | Canceled  |        |      | (6.0             | ) |   |       | 35.74 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 2001 |           |        | 78.8 |                  |   |   | 27.14 |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 1999 |           |        | 9.2  |                  |   |   | 9.98  |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 2000 |           |        | 13.2 |                  |   |   | 12.05 |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 2001 |           |        | 33.9 |                  |   |   | 21.93 |      
|                               |           |        |      |                  |   |   |       |      

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Following is a summary of the status of stock
options outstanding and exercisable at December 31, 2001
(shares in millions):

|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 
|--------------- |  | ------------------- | ---- | ------------------- |  | -------- | ---------- | ------ |  | -------- | ----- |  |  |  | ---- |  |  | - | ----- | 
|                |  |                     |      |                    
|                |  | Options Outstanding |      | Options Exercisable
|                |  |                     |      |                    
|                |  |                     |      | Weighted            |  | Weighted |            |        |  | Weighted
|                |  |                     |      | Average             |  | Average  |            |        |  | Average 
|Exercise        |  |                     |      | Life                |  | Exercise |            |        |  | Exercise
|Price Range     |  | Shares              |      | Remaining           |  | Price    |            | Shares |  | Price   
|                |  |                     |      |                     |  |          |            |        |  |         
|$ 6.73  $10.71 |  |                     | 15.2 |                     |  |          | 7.17 years |        |  | $        | 8.63  |  |  |  | 8.6  |  |  | $ | 7.79  | 
|10.75   15.28. |  |                     | 20.4 |                     |  |          | 6.94 years |        |  |          | 14.30 |  |  |  | 11.6 |  |  |   | 14.07 | 
|15.38   20.44. |  |                     | 5.6  |                     |  |          | 8.55 years |        |  |          | 17.52 |  |  |  | 1.2  |  |  |   | 18.39 | 
|22.31           |  |                     | 15.5 |                     |  |          | 9.14 years |        |  |          | 22.31 |  |  |  | 6.4  |  |  |   | 22.31 | 
|22.88   61.19. |  |                     | 4.3  |                     |  |          | 8.33 years |        |  |          | 39.13 |  |  |  | 1.4  |  |  |   | 42.24 | 
|61.94   79.59. |  |                     | 17.8 |                     |  |          | 8.13 years |        |  |          | 61.97 |  |  |  | 4.7  |  |  |   | 61.98 | 
|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 
|                |  |                     | 78.8 |                     |  |          |            |        |  |          |       |  |  |  | 33.9 |  |  |   |       | 
|                |  |                     |      |                     |  |          |            |        |  |          |       |  |  |  |      |  |  |   |       | 

The Incentive Equity Plan also provides for the
grant of deferred shares at no cost to selected employees
generally in consideration of future services. These deferred
shares generally vest over a two to four year service period. An
accelerated vesting schedule may be triggered in the event of a
change in control of our company. We granted deferred shares
during the following years with the weighted average fair values
per share at grant date as indicated: 2001 
0.3 million shares at $14.41; 2000  0.2 million
shares at $52.59 and 1999  1.0 million shares at
$25.49.

Employee Stock Purchase
Plan.Under
the 1996 Employee Stock Purchase Plan, eligible employees may
subscribe to purchase shares of class A common stock through
payroll deductions of up to 10% of eligible compensation. The
purchase price is the lower of 85% of market value on the first
or last day of each quarter. The aggregate number of shares
purchased by an employee may not exceed $25,000 of fair market
value annually, subject to limitations imposed by
Section 423 of the Internal Revenue Code. A total of
10.0 million shares are authorized for purchase under the
plan. The Employee Stock Purchase Plan will terminate on the
tenth anniversary of its adoption. Employees purchased shares
under this plan during the following years at the weighted
average prices per share as indicated: 2001 
1.7 million shares at $11.75; 2000  0.5 million
shares at $35.32 and 1999  0.9 million shares
at $12.70.

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NEXTEL COMMUNICATIONS, INC. AND
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


Options Held by Affiliates and Warrants
Outstanding.The following is a
summary of outstanding options held by affiliates (see
note 14) and warrants for the purchase of class A common
stock (shares in millions):

|                               |           |        |      |                  |   |   |       |       | 
|------------------------------ | --------- | ------ | ---- | ---------------- | - | - | ----- | ----- | 
|                               |           |        |      | Weighted Average
|                               |           | Shares |      | Exercise Price  
|                               |           |        |      |                 
|Outstanding, December 31, 1998 |           |        | 56.2 |                  |   | $ | 8.85  |      
|                               | Exercised |        |      | (44.0            | ) |   |       | 8.51  | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 1999 |           |        | 12.2 |                  |   |   | 10.04 |      
|                               | Exercised |        |      | (0.2             | ) |   |       | 11.81 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 2000 |           |        | 12.0 |                  |   |   | 10.02 |      
|                               | Exercised |        |      | (10.0            | ) |   |       | 10.75 | 
|                               |           |        |      |                  |   |   |       |      
|Outstanding, December 31, 2001 |           |        | 2.0  |                  |   |   | 6.22  |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 1999 |           |        | 11.8 |                  |   |   | 10.18 |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 2000 |           |        | 12.0 |                  |   |   | 10.02 |      
|                               |           |        |      |                  |   |   |       |      
|Exercisable, December 31, 2001 |           |        | 2.0  |                  |   |   | 6.22  |      
|                               |           |        |      |                  |   |   |       |      

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

|                                                            |  |             |  |             |  |            
|----------------------------------------------------------- |  | ----------- |  | ----------- |  | -----------
|                                                            |  | 2001        |  | 2000        |  | 1999       
|                                                            |  |             |  |             |  |            
|Expected stock price volatility                             |  | 59%  69%   |  | 51%  59%   |  | 51%        
|Risk-free interest rates                                    |  | 3.6%  5.2% |  | 4.9%  6.9% |  | 4.7%  6.5%
|Expected life of option and deferred share grants
	in years |  | 3  5       |  | 3  5       |  | 2  5      
|Expected life of stock purchase plan grants in
	years       |  | 0.25        |  | 0.25        |  | 0.25       

The Black-Scholes option-pricing model was
developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable. In
addition, option-pricing models require the input of highly
subjective assumptions including the expected stock price
volatility. Because our stock options have characteristics
significantly different from those of traded options, and
because changes in the subjective input assumptions can
materially affect the fair value estimate, we believe that the
existing models do not necessarily provide a reliable single
measure of the fair value of our stock options. The weighted
average estimated fair value of our stock options granted during
2001 was $10.59, during 2000 was $32.39 and during 1999 was
$8.69.

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

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


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

|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |        |  
|---------------------------------------------------------------------- | ----------- | ----------------------- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                                                       |             |                        
|                                                                       |             | Year Ended December 31,
|                                                                       |             |                        
|                                                                       |             | 2001                    |   | 2000   |   | 1999
|                                                                       |             |                         |   |        |   |     
|Loss attributable to common stockholders (in
	millions)                |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | As reported |                         | $ | (2,858 | ) |      | $ | (1,024 | ) |  | $ | (1,530 | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | Pro forma   |                         | $ | (3,187 | ) |      | $ | (1,290 | ) |  | $ | (1,631 | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|Loss per share attributable to common
	stockholders, basic and diluted |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | As reported |                         | $ | (3.67  | ) |      | $ | (1.35  | ) |  | $ | (2.39  | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       
|                                                                       | Pro forma   |                         | $ | (4.10  | ) |      | $ | (1.71  | ) |  | $ | (2.55  | )
|                                                                       |             |                         |   |        |   |      |   |        |   |  |   |       

NII Holdings Stock Option Plans.Generally, options outstanding
under the NII Holdings 1997 Employee Stock Option Plan:



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

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

Employee Benefit
Plans.We maintain a defined
contribution plan pursuant to Section 401(k) of the
Internal Revenue Code covering all eligible officers and
employees. Participants may contribute up to 15% of their
compensation and be fully vested over four years of employment.
We provide a matching contribution of 100% of the first 4% of
salary contribution by employees. Prior to January 1, 2001,
we provided a matching contribution of 50% of the first 4% of
salary contributed by the employee. Our contributions were $18
million during 2001, $6 million during 2000 and
$5 million during 1999.

Under our Cash Compensation Deferral Plan, we
provide specified eligible employees and directors the
opportunity to defer cash compensation in excess of amounts
permitted under our 401(k) defined contribution plan. Eligible
employees may defer up to 90% of base salary and 100% of annual
bonus. We may, but are not obligated to, make discretionary
contributions. Distribution payments are made at retirement,
death, disability or termination of employment. The Cash
Compensation Deferral Plan is unfunded and all benefits will be
paid from our general assets. Deferred revenue and other
liabilities include $6 million as of December 31, 2001
and $7 million as of December 31, 2000, representing
deferrals made by participating employees and investment
earnings based on hypothetical investment elections.

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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


14.  Related Party
Transactions

One of our directors is chairman of the board and
chief executive officer of CommScope, Inc. We paid CommScope
$7 million during 2001 and $14 million during 2000 and
1999 for coaxial cables and related equipment for our
transmitter and receiver sites. We had amounts payable to
CommScope outstanding of $0.3 million at December 31,
2001 and $1 million at December 31, 2000.

The chairman of the board and chief executive
officer of XO Communications, Inc. was a member of our board of
directors through October 2001. Two other members of our board
of directors also serve on the board of directors of XO
Communications. Additionally, Mr. McCaw holds rights to
shares representing a majority of the voting interest of XO
Communications. In 1998, we entered into a joint venture through
NEXTBAND Communications, L.L.C. with XO Communications. In 1999,
we sold our 50% interest in NEXTBAND to XO Communications for
$138 million in cash and recognized a gain of
$70 million, which is included in other income. In July
2001, we entered into a multi-year agreement with XO
Communications under which it will provide us with
telecommunications services. We paid $21 million to XO
Communications during 2001, $5 million during 2000 and
$2 million during 1999 for telecommunications services.
Additionally, in September 2001, we purchased an aircraft from
XO Communications for a total consideration of $24 million.

Motorola.As
of December 31, 2001, Motorola beneficially owned about 14%
of our common equity, assuming the conversion of its investment
in shares of our class B common stock. One of our directors is
appointed by Motorola. We purchase handsets and accessories and
a substantial portion of our digital mobile network equipment
from Motorola. Our equipment purchase agreements with Motorola
govern our rights and obligations regarding purchases of digital
mobile network equipment manufactured by Motorola. As described
in note 7, NII Holdings also has various equipment financing
agreements with Motorola. We and Motorola have also agreed to
warranty and maintenance programs and specified indemnity
arrangements. We also pay Motorola for handset service and
repair, transmitter and receiver site rent and training. In
addition, we are reimbursed for some costs we incur under
various marketing and promotional arrangements.

Payables to Motorola were $290 million at
December 31, 2001 and $401 million at December 31,
2000. Net amounts paid to Motorola during the years ended
December 31, 2001, 2000 and 1999 consisted of the following:

|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|--------------------------------------------- |  | ------------- | ----- | ------------- |  | ------------ | --- |  |  | - | ----- | 
|                                              |  | Domestic      |       | International |  | Consolidated
|                                              |  |               |       |               |  |             
|                                              |  |              
|                                              |  | (in millions)
|2001                                          |  |               |       |               |  |              |     |  |  |   |       | 
|Handsets and accessory inventory              |  | $             | 1,276 |               |  | $            | 187 |  |  | $ | 1,463 | 
|Digital mobile network equipment and software |  |               | 932   |               |  |              | 200 |  |  |   | 1,132 | 
|Warranty, maintenance, training and other     |  |               | 77    |               |  |              | 10  |  |  |   | 87    | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|                                              |  | $             | 2,285 |               |  | $            | 397 |  |  | $ | 2,682 | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|2000                                          |  |               |       |               |  |              |     |  |  |   |       | 
|Handsets and accessory inventory              |  | $             | 1,074 |               |  | $            | 147 |  |  | $ | 1,221 | 
|Digital mobile network equipment and software |  |               | 1,018 |               |  |              | 368 |  |  |   | 1,386 | 
|Warranty, maintenance, training and other     |  |               | 50    |               |  |              | 2   |  |  |   | 52    | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|                                              |  | $             | 2,142 |               |  | $            | 517 |  |  | $ | 2,659 | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|--------------------------------------------- |  | ------------- | ----- | ------------- |  | ------------ | --- |  |  | - | ----- | 
|                                              |  | Domestic      |       | International |  | Consolidated
|                                              |  |               |       |               |  |             
|                                              |  |              
|                                              |  | (in millions)
|1999                                          |  |               |       |               |  |              |     |  |  |   |       | 
|Handsets and accessory inventory              |  | $             | 748   |               |  | $            | 65  |  |  | $ | 813   | 
|Digital mobile network equipment and software |  |               | 912   |               |  |              | 89  |  |  |   | 1,001 | 
|Warranty, maintenance, training and other     |  |               | 55    |               |  |              | 1   |  |  |   | 56    | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 
|                                              |  | $             | 1,715 |               |  | $            | 155 |  |  | $ | 1,870 | 
|                                              |  |               |       |               |  |              |     |  |  |   |       | 

In June 2001, we purchased from Motorola 900 MHz
specialized radio licenses and related assets for a cash
purchase price of $58 million. In December 2001, NII
Holdings sold its equity method investment in its Japanese
affiliate to Motorola for a $6.5 million credit for
equipment purchases.

McCaw Affiliates.In 1999, Digital Radio exercised
in full the outstanding option that was scheduled to expire on
that date to purchase 30.0 million shares of class A common
stock for an aggregate purchase price of $278 million. In
July 2001, various members of the McCaw family, and entities
affiliated with them, who previously were members of Digital
Radio, exercised in full the outstanding option that was
scheduled to expire on that date to purchase an aggregate of
10.0 million shares of our class A common stock for an
aggregate purchase price of about $108 million.

Under the terms of a management support
agreement, Eagle River, Inc., an affiliate of Mr. Craig O.
McCaw, provides management and consulting services from time to
time as requested for $0.2 million per year. Also in
consideration for these services, we entered into an incentive
option agreement in 1995 granting Eagle River an option to
purchase an aggregate of up to 2.0 million shares of class A
common stock at an exercise price of $6.13 per share. This
option expires in April 2005 and is presently exercisable with
respect to all 2.0 million shares. We recorded compensation
expense in connection with these agreements of $7 million
in 1999.

See note 5 for discussions of our investments in
Nextel Partners and SpectraSite Holdings.

15.  Segment Information

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

F-44



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|-------------------------------------------------------------- |  | ------------- | ------ | ------------- |  | ------------ | ------ | ------------ |  | - | ----- | - |  | - | ------ | -
|                                                               |  |               |        |               |  | Intercompany |        |             
|                                                               |  | Domestic      |        | International |  | Eliminations |        | Consolidated
|                                                               |  |               |        |               |  |              |        |             
|                                                               |  |              
|                                                               |  | (in millions)
|2001                                                           |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Operating revenues                                             |  | $             | 7,014  |               |  | $            | 680    |              |  | $ | (5    | ) |  | $ | 7,689  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Segment earnings (losses)                                      |  |               | 1,901  |               |  |              | (100   | )            |  |   | (1    | ) |  |   | 1,800  |  
|Restructuring and impairment charges (note 3)                  |  |               | (22    | )             |  |              | (1,747 | )            |  |   |      |   |  |   | (1,769 | )
|Depreciation and amortization                                  |  |               | (1,512 | )             |  |              | (234   | )            |  |   |      |   |  |   | (1,746 | )
|Interest expense                                               |  |               | (1,139 | )             |  |              | (300   | )            |  |   | 36    |   |  |   | (1,403 | )
|Interest income                                                |  |               | 230    |               |  |              | 13     |              |  |   | (36   | ) |  |   | 207    |  
|Equity in losses of unconsolidated affiliates                  |  |               | (95    | )             |  |              |       |              |  |   |      |   |  |   | (95    | )
|Foreign currency transaction losses, net                       |  |               |       |               |  |              | (70    | )            |  |   |      |   |  |   | (70    | )
|Realized gain on investments, net                              |  |               |       |               |  |              | 47     |              |  |   |      |   |  |   | 47     |  
|Reduction in fair value of available-for-sale
	securities, net |  |               |       |               |  |              | (188   | )            |  |   |      |   |  |   | (188   | )
|Other (expense) income, net                                    |  |               | (8     | )             |  |              | (4     | )            |  |   |      |   |  |   | (12    | )
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Loss before income tax benefit and extraordinary
	item         |  | $             | (645   | )             |  | $            | (2,583 | )            |  | $ | (1    | ) |  | $ | (3,229 | )
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Property, plant and equipment, net                             |  | $             | 8,924  |               |  | $            | 350    |              |  | $ |      |   |  | $ | 9,274  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Identifiable assets                                            |  | $             | 19,083 |               |  | $            | 1,244  |              |  | $ | 1,737 |   |  | $ | 22,064 |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Capital expenditures                                           |  | $             | 2,468  |               |  | $            | 668    |              |  | $ |      |   |  | $ | 3,136  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|2000                                                           |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Operating revenues                                             |  | $             | 5,385  |               |  | $            | 330    |              |  | $ | (1    | ) |  | $ | 5,714  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Segment earnings (losses)                                      |  |               | 1,395  |               |  |              | (133   | )            |  |   | 2     |   |  |   | 1,264  |  
|Depreciation and amortization                                  |  |               | (1,104 | )             |  |              | (161   | )            |  |   |      |   |  |   | (1,265 | )
|Interest expense                                               |  |               | (996   | )             |  |              | (249   | )            |  |   |      |   |  |   | (1,245 | )
|Interest income                                                |  |               | 374    |               |  |              | 22     |              |  |   |      |   |  |   | 396    |  
|Equity in losses of unconsolidated affiliates                  |  |               | (98    | )             |  |              | (54    | )            |  |   |      |   |  |   | (152   | )
|Foreign currency transaction losses, net                       |  |               |       |               |  |              | (25    | )            |  |   |      |   |  |   | (25    | )
|Realized gain on exchange of investment                        |  |               | 35     |               |  |              | 240    |              |  |   |      |   |  |   | 275    |  
|Other expense, net                                             |  |               | (3     | )             |  |              | 11     |              |  |   |      |   |  |   | 8      |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Loss before income tax benefit and extraordinary
	item         |  | $             | (397   | )             |  | $            | (349   | )            |  | $ | 2     |   |  | $ | (744   | )
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Property, plant and equipment, net                             |  | $             | 7,721  |               |  | $            | 1,070  |              |  | $ |      |   |  | $ | 8,791  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Identifiable assets                                            |  | $             | 19,687 |               |  | $            | 3,193  |              |  | $ | (194  | ) |  | $ | 22,686 |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Capital expenditures                                           |  | $             | 3,037  |               |  | $            | 594    |              |  | $ |      |   |  | $ | 3,631  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|1999                                                           |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Operating revenues                                             |  | $             | 3,662  |               |  | $            | 124    |              |  | $ |      |   |  | $ | 3,786  |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Segment earnings (losses)                                      |  |               | 698    |               |  |              | (163   | )            |  |   |      |   |  |   | 535    |  
|Depreciation and amortization                                  |  |               | (896   | )             |  |              | (108   | )            |  |   |      |   |  |   | (1,004 | )
|Interest expense                                               |  |               | (698   | )             |  |              | (180   | )            |  |   |      |   |  |   | (878   | )
|Interest income                                                |  |               | 87     |               |  |              | 9      |              |  |   |      |   |  |   | 96     |  
|Equity in losses of unconsolidated affiliates                  |  |               | (42    | )             |  |              | (31    | )            |  |   |      |   |  |   | (73    | )
|Foreign currency transaction losses, net                       |  |               |       |               |  |              | (61    | )            |  |   |      |   |  |   | (61    | )
|Realized gain on sale of investment                            |  |               | 70     |               |  |              |       |              |  |   |      |   |  |   | 70     |  
|Other income (expense), net                                    |  |               | 3      |               |  |              | 14     |              |  |   |      |   |  |   | 17     |  
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  
|Loss before income tax benefit and extraordinary
	item         |  | $             | (778   | )             |  | $            | (520   | )            |  | $ |      |   |  | $ | (1,298 | )
|                                                               |  |               |        |               |  |              |        |              |  |   |       |   |  |   |        |  

F-45



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


|                                   |  |               |        |               |  |              |       |              |  |   |    |  |  |   |        | 
|---------------------------------- |  | ------------- | ------ | ------------- |  | ------------ | ----- | ------------ |  | - | -- |  |  | - | ------ | 
|                                   |  |               |        |               |  | Intercompany |       |             
|                                   |  | Domestic      |        | International |  | Eliminations |       | Consolidated
|                                   |  |               |        |               |  |              |       |             
|                                   |  |              
|                                   |  | (in millions)
|Property, plant and equipment, net |  | $             | 5,613  |               |  | $            | 539   |              |  | $ |   |  |  | $ | 6,152  | 
|                                   |  |               |        |               |  |              |       |              |  |   |    |  |  |   |        | 
|Identifiable assets                |  | $             | 16,695 |               |  | $            | 1,682 |              |  | $ | 33 |  |  | $ | 18,410 | 
|                                   |  |               |        |               |  |              |       |              |  |   |    |  |  |   |        | 
|Capital expenditures               |  | $             | 1,943  |               |  | $            | 184   |              |  | $ |   |  |  | $ | 2,127  | 
|                                   |  |               |        |               |  |              |       |              |  |   |    |  |  |   |        | 

16.     Quarterly
Financial Data (Unaudited)

|                                                                              |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|----------------------------------------------------------------------------- |  | --------------------------------------- | ----- | ------ |  | ----- | ----- | ------ |  | - | ----- | - |  | - | ------ | -
|                                                                              |  | First                                   |       | Second |  | Third |       | Fourth
|                                                                              |  |                                         |       |        |  |       |       |       
|                                                                              |  |                                        
|                                                                              |  | (in millions, except per share amounts)
|2001                                                                          |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|Operating revenues                                                            |  | $                                       | 1,742 |        |  | $     | 1,881 |        |  | $ | 1,992 |   |  | $ | 2,074  |  
|Operating (loss) income                                                       |  |                                         | (76   | )      |  |       | 1     |        |  |   | (99   | ) |  |   | (1,541 | )
|Income tax benefit                                                            |  |                                         | 14    |        |  |       | 13    |        |  |   | 20    |   |  |   | 88     |  
|Loss before extraordinary item                                                |  |                                         | (372  | )      |  |       | (369  | )      |  |   | (619  | ) |  |   | (1,734 | )
|Loss attributable to common stockholders                                      |  |                                         | (428  | )      |  |       | (426  | )      |  |   | (209  | ) |  |   | (1,795 | )
|Loss per share before extraordinary item
	attributable to common stockholders |  | $                                       | (0.56 | )      |  | $     | (0.56 | )      |  | $ | (0.87 | ) |  | $ | (2.25  | )
|Extraordinary item                                                            |  |                                         |      |        |  |       |      |        |  |   | 0.60  |   |  |   |       |  
|                                                                              |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|Basic and diluted loss per share attributable to
	common stockholders         |  | $                                       | (0.56 | )      |  | $     | (0.56 | )      |  | $ | (0.27 | ) |  | $ | (2.25  | )
|                                                                              |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|2000                                                                          |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|Operating revenues                                                            |  | $                                       | 1,175 |        |  | $     | 1,365 |        |  | $ | 1,528 |   |  | $ | 1,646  |  
|Operating (loss) income                                                       |  |                                         | (52   | )      |  |       | (13   | )      |  |   | 44    |   |  |   | 20     |  
|Income tax benefit                                                            |  |                                         | 8     |        |  |       | 8     |        |  |   | 8     |   |  |   | 9      |  
|Loss before extraordinary item                                                |  |                                         | (279  | )      |  |       | (241  | )      |  |   | (184  | ) |  |   | (7     | )
|Loss attributable to common stockholders                                      |  |                                         | (435  | )      |  |       | (292  | )      |  |   | (236  | ) |  |   | (61    | )
|Loss per share before extraordinary item
	attributable to common stockholders |  | $                                       | (0.45 | )      |  | $     | (0.38 | )      |  | $ | (0.31 | ) |  | $ | (0.08  | )
|Extraordinary item                                                            |  |                                         | (0.14 | )      |  |       |      |        |  |   |      |   |  |   |       |  
|                                                                              |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  
|Basic and diluted loss per share attributable to
	common stockholders         |  | $                                       | (0.59 | )      |  | $     | (0.38 | )      |  | $ | (0.31 | ) |  | $ | (0.08  | )
|                                                                              |  |                                         |       |        |  |       |       |        |  |   |       |   |  |   |        |  




During the fourth quarter of 2001, we shortened
the lives of some assets located in facilities that are subject
to the customer care and information technology outsourcing
arrangements. We also changed the lives of some network assets.
We recorded an additional $21 million, or $0.03 per share,
in depreciation expense for the fourth quarter of 2001 as a
result of these changes in estimates. As described in
note 3, NII Holdings recorded non-cash pretax impairment
charges and pretax restructuring and other charges of about $1.6
billion in the fourth quarter of 2001 after revising its
business plan.


Operating income for the fourth quarter of 2000
includes adjustments related to changes in accounting estimates
which resulted in additional depreciation expense of
$17 million and a decrease in cost of revenues of
$13 million. The net effect of these adjustments had no
impact on loss per share attributable to common stockholders for
the quarter ended December 31, 2000. As described in note 5, we
recorded a $275 million realized gain on the exchange of an
investment in the fourth quarter of 2000.

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

F-46



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


17.     Subsequent
Events

In February 2002, we purchased from Chadmoore
Wireless Group, Inc. 800MHz and 900MHz specialized mobile radio
licenses and related assets for a cash purchase price of
$130 million, subject to adjustment.

During the first quarter of 2002, as a result of
the devaluation of the Argentine peso due to the recent adverse
economic developments in Argentina, NII Holdings expects to
record significant foreign currency transaction losses primarily
related to NII Holdings $108 million U.S. dollar
denominated Argentine credit facilities as well as a significant
foreign currency translation adjustment.

F-47



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)







SCHEDULE I  CONDENSED
FINANCIAL INFORMATION OF REGISTRANT


Condensed Balance Sheets


As of December 31, 2001 and
2000


(in millions)


|                                        |                           |                      |        |       |       |   |        |       |       | 
|--------------------------------------- | ------------------------- | -------------------- | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                                        |                           | 2001                 |        | 2000 
|                                        |                           |                      |        |      
|ASSETS                                 
|Current assets                          |                           |                      |        |       |       |   |        |      
|                                        | Cash and cash equivalents |                      | $      | 2,105 |       |   | $      | 1,824 |      
|                                        | Short-term investments    |                      |        | 1,236 |       |   |        | 2,015 |      
|                                        | Other current assets      |                      |        | 27    |       |   |        | 8     |      
|                                        |                           |                      |        |       |       |   |        |      
|                                        |                           | Total current assets |        |       | 3,368 |   |        |       | 3,847 | 
|Investments in subsidiaries
	(note 2)   |                           |                      | 9,503  |       |       |   | 8,468  |      
|Property, plant and equipment, net      |                           |                      | 253    |       |       |   | 221    |      
|Debt financing costs, net               |                           |                      | 155    |       |       |   | 151    |      
|Deferred income taxes                   |                           |                      | 64     |       |       |   | 70     |      
|Other assets (note 2)                   |                           |                      | 58     |       |       |   |       |      
|                                        |                           |                      |        |       |       |   |        |      
|                                        |                           | $                    | 13,401 |       |       | $ | 12,757 |      
|                                        |                           |                      |        |       |       |   |        |      
|LIABILITIES AND STOCKHOLDERS
	EQUITY  
|Current liabilities                     |                           | $                    | 270    |       |       | $ | 202    |      
|Due to subsidiaries                     |                           |                      | 744    |       |       |   | 1,869  |      
|Long-term debt                          |                           |                      | 9,345  |       |       |   | 6,777  |      
|Mandatorily redeemable preferred
	stock |                           |                      | 2,114  |       |       |   | 1,881  |      
|Stockholders equity                    |                           |                      | 928    |       |       |   | 2,028  |      
|                                        |                           |                      |        |       |       |   |        |      
|                                        |                           | $                    | 13,401 |       |       | $ | 12,757 |      
|                                        |                           |                      |        |       |       |   |        |      

F-48



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL
INFORMATION OF REGISTRANT (continued)

Condensed Statements of Operations and
Comprehensive Loss


For the Years Ended December 31, 2001,
2000 and 1999


(in millions)


|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |        |     | 
|------------------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------------------------------- | ------ | ------ | ---- | ---- | ------ | ---- | ---- | - | ------ | ------ | --- | 
|                                                                                |                                                               | 2001                                                                  |        | 2000   |      | 1999
|                                                                                |                                                               |                                                                       |        |        |      |     
|Operating expenses                                                              |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|                                                                                | Selling, general and administrative                           |                                                                       | $      | 126    |      |      | $      | 91   |      |   | $      | 71     |    
|                                                                                | Restructuring charge                                          |                                                                       |        | 22     |      |      |        |     |      |   |        |       |    
|                                                                                | Depreciation and amortization                                 |                                                                       |        | 83     |      |      |        | 63   |      |   |        | 25     |    
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|                                                                                |                                                               |                                                                       | 231    |        |      |      | 154    |      |      |   | 96     |       
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Other income (expense)                                                          |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|                                                                                | Interest expense                                              |                                                                       |        | (766   | )    |      |        | (608 | )    |   |        | (512   | )  
|                                                                                | Interest income (note 5)                                      |                                                                       |        | 202    |      |      |        | 302  |      |   |        | 62     |    
|                                                                                | Intercompany income (expense)                                 |                                                                       |        | 770    |      |      |        | 608  |      |   |        | (124   | )  
|                                                                                | Intercompany management fee (note 3)                          |                                                                       |        | 126    |      |      |        | 91   |      |   |        | 71     |    
|                                                                                | Equity in net losses of subsidiaries (note 2)                 |                                                                       |        | (1,262 | )    |      |        | (961 | )    |   |        | (675   | )  
|                                                                                | Other, net                                                    |                                                                       |        |       |      |      |        | 11   |      |   |        | (7     | )  
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|                                                                                |                                                               |                                                                       | (930   | )      |      |      | (557   | )    |      |   | (1,185 | )     
|Loss before income tax benefit and
	extraordinary item                          |                                                               |                                                                       | (1,161 | )      |      |      | (711   | )    |      |   | (1,281 | )     
|Income tax benefit                                                              |                                                               |                                                                       |       |        |      |      |       |      |      |   | 11     |       
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Loss before extraordinary item                                                  |                                                               |                                                                       | (1,161 | )      |      |      | (711   | )    |      |   | (1,270 | )     
|Extraordinary item  loss on early
	retirement of debt, net of income tax of $0 |                                                               |                                                                       |       |        |      |      | (104   | )    |      |   | (68    | )     
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Net loss                                                                        |                                                               |                                                                       | (1,161 | )      |      |      | (815   | )    |      |   | (1,338 | )     
|Mandatorily redeemable preferred stock
	dividends                               |                                                               |                                                                       | (233   | )      |      |      | (209   | )    |      |   | (192   | )     
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Loss attributable to common
	stockholders                                       |                                                               | $                                                                     | (1,394 | )      |      | $    | (1,024 | )    |      | $ | (1,530 | )     
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Comprehensive loss, net of income
	tax                                          |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|                                                                                | Net loss                                                      |                                                                       | $      | (1,161 | )    |      | $      | (815 | )    |   | $      | (1,338 | )  
|                                                                                | Net unrealized gain (loss) on
	available-for-sale securities: |                                                                       |        |        |      |      |        |      |      |   |        |        |    
|                                                                                |                                                               | Unrealized holding gains (losses) arising
	during the period (note 2) |        |        | (189 | )    |        |      | 225  |   |        |        | 142 | 
|                                                                                |                                                               | Reclassification adjustment for gain included in
	net loss            |        |        | 149  |      |        |      | (275 | ) |        |        |    | 
|                                                                                | Foreign currency translation adjustment                       |                                                                       |        | (95    | )    |      |        | 4    |      |   |        | (114   | )  
|                                                                                | Cash flow hedge:                                              |                                                                       |        |        |      |      |        |      |      |   |        |        |    
|                                                                                |                                                               | Cumulative effect of accounting change                                |        |        | (20  | )    |        |      |     |   |        |        |    | 
|                                                                                |                                                               | Reclassification of transition adjustment
	included in net loss       |        |        | 8    |      |        |      |     |   |        |        |    | 
|                                                                                |                                                               | Unrealized loss on cash flow hedge                                    |        |        | (17  | )    |        |      |     |   |        |        |    | 
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       
|Comprehensive loss                                                              |                                                               | $                                                                     | (1,325 | )      |      | $    | (861   | )    |      | $ | (1,310 | )     
|                                                                                |                                                               |                                                                       |        |        |      |      |        |      |      |   |        |       

F-49



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent Only)


SCHEDULE I  CONDENSED FINANCIAL
INFORMATION OF REGISTRANT (continued)

Condensed Statement of Cash Flows


For the Years Ended December 31, 2001,
2000 and 1999


(in millions)


|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |        |        |  
|----------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------------------------- | ----- | ------ | ------ | ---- | ------ | ------ | ------ | - | ----- | ------ | ------ | -
|                                                      |                                                                            | 2001                                                 |       | 2000   |        | 1999
|                                                      |                                                                            |                                                      |       |        |        |     
|Cash flows from operating activities                  |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      | Net loss                                                                   |                                                      | $     | (1,161 | )      |      | $      | (815   | )      |   | $     | (1,338 | )     
|                                                      | Adjustment to reconcile net loss to net cash used
	in operating activities |                                                      |       | 713    |        |      |        | 366    |        |   |       | 508    |       
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      |                                                                            | Net cash used in operating activities                |       |        | (448   | )    |        |        | (449   | ) |       |        | (830   | )
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|Cash flows from investing activities                  |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      | Purchases of short-term investments                                        |                                                      |       | (3,987 | )      |      |        | (5,123 | )      |   |       | (1,059 | )     
|                                                      | Proceeds from maturities and sales of short-term
	investments              |                                                      |       | 4,829  |        |      |        | 4,272  |        |   |       |       |       
|                                                      | Other investments and advances (to) from
	affiliates                       |                                                      |       | (2,327 | )      |      |        | (634   | )      |   |       | 55     |       
|                                                      | Capital expenditures and other                                             |                                                      |       | (132   | )      |      |        | (176   | )      |   |       | (24    | )     
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      |                                                                            | Net cash used in investing activities                |       |        | (1,617 | )    |        |        | (1,661 | ) |       |        | (1,028 | )
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|Cash flows from financing activities                  |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      | Issuance of debt securities                                                |                                                      |       | 2,250  |        |      |        | 1,150  |        |   |       | 2,600  |       
|                                                      | Retirement of debt securities                                              |                                                      |       |       |        |      |        | (1,208 | )      |   |       | (546   | )     
|                                                      | Sale of common stock and exercise of stock
	options, warrants and other    |                                                      |       | 124    |        |      |        | 74     |        |   |       | 3,819  |       
|                                                      | Debt financing costs and other                                             |                                                      |       | (28    | )      |      |        | (46    | )      |   |       | (52    | )     
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|                                                      |                                                                            | Net cash provided by (used in) financing
	activities |       |        | 2,346  |      |        |        | (30    | ) |       |        | 5,821  |  
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|Net increase (decrease) in cash and cash
	equivalents |                                                                            |                                                      | 281   |        |        |      | (2,140 | )      |        |   | 3,963 |       
|Cash and cash equivalents, beginning of
	period       |                                                                            |                                                      | 1,824 |        |        |      | 3,964  |        |        |   | 1     |       
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       
|Cash and cash equivalents, end of
	period             |                                                                            | $                                                    | 2,105 |        |        | $    | 1,824  |        |        | $ | 3,964 |       
|                                                      |                                                                            |                                                      |       |        |        |      |        |        |        |   |       |       

F-50



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC.

(Parent only)


SCHEDULE I  CONDENSED FINANCIAL
INFORMATION OF REGISTRANT (continued)

Notes to Condensed Financial
Statements




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | For accounting policies and other information,
	see the Notes to the Consolidated Financial Statements of Nextel
	Communications Inc. and Subsidiaries, included elsewhere herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | 2. | The parent company accounts for its investments
	in subsidiaries using the equity method of accounting. In 2001,
	the parent companys subsidiary, NII Holdings, wrote down
	the carrying values of the long-lived assets held by its
	operating companies to their estimated fair market values and
	recorded non-cash pretax impairment charges and pretax
	restructuring and other charges of about $1.75 billion. The
	parent company accordingly reduced the recorded amount of its
	investment in NII Holdings to zero due to the fact that the
	parent company does not have a legal or constructive obligation
	to provide NII Holdings additional capital. As discussed in note
	5 below, the parent company also holds NII Holdings notes,
	which are classified as available-for-sale securities in other
	assets on the balance sheet date and are reported at fair value.
	The notes were initially written-down to zero when applying the
	equity method and were subsequently written back up to fair
	value, with the increase recorded as a net unrealized gain as
	part of the overall comprehensive loss in equity.
|
| | 3. | The parent company has an agreement with each of
	its wholly owned subsidiaries whereby the parent company
	provides administrative services for each of its subsidiaries
	and charges the subsidiaries a fee equal to the actual costs
	incurred in performing these administrative services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 4. | The parent company allocated interest expense to
	its domestic subsidiaries in the amount of $766 million in
	2001 and $608 million in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 5. | As more fully described in note 7 to the
	consolidated financial statements, the parent company purchased
	an aggregate of $857 million in principal amount of three
	series of NII Holdings senior notes in exchange for about
	21.6 million shares of its class A common stock. The
	parent company continues to hold these notes, and therefore,
	these notes remain outstanding obligations of NII Holdings. In
	December 2001, the parent company recorded an impairment charge
	of $284 million, primarily representing the difference
	between the carrying value of the notes and the current market
	value. Included in interest income in 2001 is $36 million
	of interest earned on these notes.                                                                                                                                                                                                                                                                                                                                                                                                                           

F-51



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

(in millions)


|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |       | 
|---------------------------- | ------------------------------------------- | ---------- | - | ---------- |  | -------- | - | ---------- |  | --------- | - | -- |  |  | - | ---- | - |  | - | ----- | 
|                             |                                             | Balance at |   | Charged to |  | Charged  |   |            |  | Balance  
|                             |                                             | Beginning  |   | Costs and  |  | to Other |   |            |  | at End of
|                             |                                             | of Period  |   | Expenses   |  | Accounts |   | Deductions |  | Period   
|                             |                                             |            |   |            |  |          |   |            |  |          
|Year Ended December 31, 2001 |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Allowance for doubtful accounts             |            | $ | 104        |  |          | $ | 370        |  |           | $ | 23 |  |  | $ | (330 | ) |  | $ | 167   | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 22         |  |          | $ | 9          |  |           | $ |   |  |  | $ | (14  | ) |  | $ | 17    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 1,933      |  |          | $ | 436        |  |           | $ |   |  |  | $ |     |   |  | $ | 2,369 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|Year Ended December 31, 2000 |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Allowance for doubtful accounts             |            | $ | 75         |  |          | $ | 179        |  |           | $ | 6  |  |  | $ | (156 | ) |  | $ | 104   | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 19         |  |          | $ | 11         |  |           | $ |   |  |  | $ | (8   | ) |  | $ | 22    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 1,766      |  |          | $ | 167        |  |           | $ |   |  |  | $ |     |   |  | $ | 1,933 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|Year Ended December 31, 1999 |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Allowance for doubtful accounts             |            | $ | 63         |  |          | $ | 152        |  |           | $ |   |  |  | $ | (140 | ) |  | $ | 75    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Reserve for inventory obsolescence          |            | $ | 13         |  |          | $ | 12         |  |           | $ |   |  |  | $ | (6   | ) |  | $ | 19    | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      
|                             | Valuation allowance for deferred tax assets |            | $ | 1,318      |  |          | $ | 448        |  |           | $ |   |  |  | $ |     |   |  | $ | 1,766 | 
|                             |                                             |            |   |            |  |          |   |            |  |           |   |    |  |  |   |      |   |  |   |      

F-52