##### 


















FORM 10-Q/A








(Amendment No. 1)





(Mark One)


|                                                |  |                                                                                             
|----------------------------------------------- |  | --------------------------------------------------------------------------------------------
|[X]                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934 
|                                               
|For the quarterly period ended June 30, 2004   
|                                               
|OR                                             
|                                               
|[  ]                                            |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                               
|For the transition period
    from           to
|                                               
|Commission file number 0-19656                 

NEXTEL COMMUNICATIONS, INC.




|                                                                                   |  |                                               
|---------------------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization)         |  | 36-3939651(I.R.S. Employer Identification No.)
|                                                                                  
|2001 Edmund Halley Drive, Reston, Virginia(Address of principal executive offices) |  | 20191(Zip Code)                               
|                                                                                  
|Registrants telephone number, including area
    code: (703) 433-4000            







|                                                 |  |                              |               | 
|------------------------------------------------ |  | ---------------------------- | ------------- | 
|                                                 |  | Number of Shares Outstanding |              
|Title of Class                                   |  | on July 30, 2004             |              
|                                                 |  |                              |              
|Class A Common Stock, $0.001 par value           |  |                              | 1,077,892,064 | 
|Class B Nonvoting Common Stock, $0.001 par value |  |                              | 35,660,000    | 









---



##### 






EXPLANATORY NOTE































---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


INDEX





|        |  |                        |  |         |  |                                                                                                                                                      |  |  |    | 
|------- |  | ---------------------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|        |  |                        |  |         |  | Page                                                                                                                                                 | 
|        |  |                        |  |         |  |                                                                                                                                                      | 
|Part I  |  | Financial Information.
|        |  |                        |  | Item 1. |  | Financial Statements 
    Unaudited.                                                                                                                |  |  |    | 
|        |  |                        |  |         |  | Condensed Consolidated Balance Sheets As of
    June 30, 2004 and December 31, 2003, Restated                                                        |  |  | 3  | 
|        |  |                        |  |         |  | Condensed Consolidated Statements of
    Operations and Comprehensive Income For the Six and Three Months
    Ended June 30, 2004 and 2003, Restated |  |  | 4  | 
|        |  |                        |  |         |  | Condensed Consolidated Statement of Changes
    in Stockholders Equity For the Six Months Ended
    June 30, 2004, Restated                         |  |  | 5  | 
|        |  |                        |  |         |  | Condensed Consolidated Statements of Cash
    Flows For the Six Months Ended June 30, 2004 and 2003,
    Restated                                    |  |  | 6  | 
|        |  |                        |  |         |  | Notes to Condensed Consolidated Financial
    Statements                                                                                             |  |  | 7  | 
|        |  |                        |  |         |  | Report of Independent Registered Public
    Accounting Firm                                                                                          |  |  | 22 | 
|        |  |                        |  | Item 2. |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                            |  |  | 23 | 
|        |  |                        |  | Item 3. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                       |  |  | 48 | 
|        |  |                        |  | Item 4. |  | Controls and Procedures                                                                                                                              |  |  | 49 | 
|Part II |  | Other Information.    
|        |  |                        |  | Item 1. |  | Legal Proceedings                                                                                                                                    |  |  | 50 | 
|        |  |                        |  | Item 4. |  | Submission of Matters to a Vote of Security
    Holders                                                                                              |  |  | 50 | 
|        |  |                        |  | Item 5. |  | Other Information                                                                                                                                    |  |  | 51 | 
|        |  |                        |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                                     |  |  | 53 | 






---



##### 






PART I  FINANCIAL INFORMATION.





Item 1.     Financial
Statements  Unaudited.


NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES





Condensed Consolidated Balance Sheets


As of June 30, 2004 and December 31, 2003





Unaudited








|                                                                                                      |                                                                                            |                            |                           |                      |               |        |        |        |       |        |       | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------- | ------------------------- | -------------------- | ------------- | ------ | ------ | ------ | ----- | ------ | ----- | 
|                                                                                                      |                                                                                            | 2004                       |                           |                      | 2003          |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | (as restated)              |                           |                      | (as restated) |       
|                                                                                                      |                                                                                            | see note 1                 |                           |                      | see note 1    |       
|                                                                                                      |                                                                                            | (dollars in millions)      |                          
|ASSETS                                                                                               
|Current assets                                                                                        |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Cash and cash equivalents                                                                  |                            | $                         | 1,082                |               |        | $      | 806    |      
|                                                                                                      | Short-term investments                                                                     |                            |                           | 1,012                |               |        |        | 1,165  |      
|                                                                                                      | Accounts and notes receivable, less allowance for doubtful
    accounts of $77 and $86     |                            |                           | 1,369                |               |        |        | 1,276  |      
|                                                                                                      | Due from related parties                                                                   |                            |                           | 131                  |               |        |        | 70     |      
|                                                                                                      | Handset and accessory inventory                                                            |                            |                           | 461                  |               |        |        | 223    |      
|                                                                                                      | Prepaid expenses and other current assets                                                  |                            |                           | 331                  |               |        |        | 148    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            |                           | Total current assets |               |        | 4,386  |        |       |        | 3,688 | 
|Investments                                                                                           |                                                                                            |                            | 460                       |                      |               |        | 408    |       
|Property, plant and equipment,net of accumulated
    depreciation of $6,437 and $5,562                |                                                                                            |                            | 9,327                     |                      |               |        | 9,093  |       
|Intangible assets,net of accumulated amortization of $85
    and $92.                                 |                                                                                            |                            | 7,220                     |                      |               |        | 7,038  |       
|Other assets                                                                                          |                                                                                            |                            | 276                       |                      |               |        | 283    |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | $                          | 21,669                    |                      |               | $      | 20,510 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 
|Current liabilities                                                                                   |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Accounts payable                                                                           |                            | $                         | 855                  |               |        | $      | 663    |      
|                                                                                                      | Accrued expenses and other                                                                 |                            |                           | 1,265                |               |        |        | 1,382  |      
|                                                                                                      | Due to related parties                                                                     |                            |                           | 656                  |               |        |        | 285    |      
|                                                                                                      | Current portion of long-term debt and capital lease obligation                             |                            |                           | 385                  |               |        |        | 487    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            | Total current liabilities |                      |               | 3,161  |        |        |       | 2,817  |      
|Long-term debt                                                                                        |                                                                                            |                            | 9,222                     |                      |               |        | 9,725  |       
|Deferred income taxes (note 4)                                                                        |                                                                                            |                            | 638                       |                      |               |        | 1,873  |       
|Other liabilities                                                                                     |                                                                                            |                            | 293                       |                      |               |        | 258    |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            | Total liabilities         |                      |               | 13,314 |        |        |       | 14,673 |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|Commitments and contingencies (note 7)                                                                |                                                                                            |                            |                           |                      |               |        |        |       
|Zero coupon mandatorily redeemable preferred stock,convertible, 245,245 shares issued and outstanding |                                                                                            |                            | 103                       |                      |               |        | 99     |       
|Stockholders equity                                                                                  |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Common stock, class A, 1.077 billion and 1.068 billion
    shares issued and outstanding   |                            |                           | 1                    |               |        |        | 1      |      
|                                                                                                      | Common stock, class B, nonvoting convertible, 36 million
    shares issued and outstanding |                            |                           |                     |               |        |        |       |      
|                                                                                                      | Paid-in capital                                                                            |                            |                           | 12,484               |               |        |        | 11,942 |      
|                                                                                                      | Accumulated deficit                                                                        |                            |                           | (4,426               | )             |        |        | (6,363 | )    
|                                                                                                      | Deferred compensation, net                                                                 |                            |                           | (38                  | )             |        |        | (16    | )    
|                                                                                                      | Accumulated other comprehensive income                                                     |                            |                           | 231                  |               |        |        | 174    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | Total stockholders equity |                           |                      | 8,252         |        |        |        | 5,738 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | $                          | 21,669                    |                      |               | $      | 20,510 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       








3



---



##### 






NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES











Condensed Consolidated Statements of Operations and
Comprehensive Income








For the Six and Three Months Ended June 30, 2004 and
2003








(in millions, except per share amounts)








Unaudited








|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |       |   | 
|---------------------------------------------------- | -------------------------------------------------------------- | ------------------------------------------------------------------- | ----- | ----- | ------------------ | - | ----- | ------------- | -- | - | ------------- | ----- | --- | - | ----- | ----- | - | 
|                                                     |                                                                | Six Months Ended                                                    |       |       | Three Months Ended |  
|                                                     |                                                                | June 30,                                                            |       |       | June 30,           |  
|                                                     |                                                                |                                                                     |       |       |                    |  
|                                                     |                                                                | 2004                                                                |       |       | 2003               |   |       | 2004          |    |   | 2003          |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     |                                                                | (as restated)                                                       |       |       | (as restated)      |   |       | (as restated) |    |   | (as restated) |      
|                                                     |                                                                | see note 1                                                          |       |       | see note 1         |   |       | see note 1    |    |   | see note 1    |      
|Operating revenues                                   |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Service revenues                                               |                                                                     | $     | 5,715 |                    |   | $     | 4,595         |    |   | $             | 2,939 |     |   | $     | 2,385 |  
|                                                     | Handset and accessory revenues                                 |                                                                     |       | 677   |                    |   |       | 332           |    |   |               | 350   |     |   |       | 171   |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     |                                                                |                                                                     | 6,392 |       |                    |   | 4,927 |               |    |   | 3,289         |       |     |   | 2,556 |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Operating expenses                                   |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Cost of service (exclusive of depreciation included below)     |                                                                     |       | 891   |                    |   |       | 786           |    |   |               | 455   |     |   |       | 412   |  
|                                                     | Cost of handset and accessory revenues                         |                                                                     |       | 985   |                    |   |       | 625           |    |   |               | 496   |     |   |       | 315   |  
|                                                     | Selling, general and administrative                            |                                                                     |       | 2,049 |                    |   |       | 1,615         |    |   |               | 1,078 |     |   |       | 829   |  
|                                                     | Depreciation                                                   |                                                                     |       | 874   |                    |   |       | 807           |    |   |               | 442   |     |   |       | 408   |  
|                                                     | Amortization                                                   |                                                                     |       | 22    |                    |   |       | 28            |    |   |               | 11    |     |   |       | 14    |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     |                                                                |                                                                     | 4,821 |       |                    |   | 3,861 |               |    |   | 2,482         |       |     |   | 1,978 |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Operating income                                     |                                                                |                                                                     | 1,571 |       |                    |   | 1,066 |               |    |   | 807           |       |     |   | 578   |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Other income (expense)                               |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Interest expense                                               |                                                                     |       | (309  | )                  |   |       | (444          | )  |   |               | (155  | )   |   |       | (219  | )
|                                                     | Interest income                                                |                                                                     |       | 15    |                    |   |       | 22            |    |   |               | 7     |     |   |       | 10    |  
|                                                     | Loss on retirement of debt                                     |                                                                     |       | (51   | )                  |   |       | (7            | )  |   |               | (34   | )   |   |       | (2    | )
|                                                     | Equity in losses of unconsolidated affiliates, net             |                                                                     |       | (2    | )                  |   |       | (59           | )  |   |               | (2    | )   |   |       | (46   | )
|                                                     | Realized gain on sale of investments                           |                                                                     |       | 26    |                    |   |       |              |    |   |               |      |     |   |       |      |  
|                                                     | Other, net                                                     |                                                                     |       | 3     |                    |   |       |              |    |   |               | 2     |     |   |       |      |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     |                                                                |                                                                     | (318  | )     |                    |   | (488  | )             |    |   | (182          | )     |     |   | (257  | )    
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Income before income tax benefit (provision)         |                                                                |                                                                     | 1,253 |       |                    |   | 578   |               |    |   | 625           |       |     |   | 321   |      
|Income tax benefit (provision) (note 4)              |                                                                |                                                                     | 684   |       |                    |   | (49   | )             |    |   | 717           |       |     |   | (27   | )    
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Net income                                           |                                                                |                                                                     | 1,937 |       |                    |   | 529   |               |    |   | 1,342         |       |     |   | 294   |      
|                                                     | Loss on retirement of mandatorily redeemable preferred stock   |                                                                     |       |      |                    |   |       | (7            | )  |   |               |      |     |   |       | (5    | )
|                                                     | Mandatorily redeemable preferred stock dividends and accretion |                                                                     |       | (4    | )                  |   |       | (53           | )  |   |               | (2    | )   |   |       | (23   | )
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Income available to common stockholders              |                                                                | $                                                                   | 1,933 |       |                    | $ | 469   |               |    | $ | 1,340         |       |     | $ | 266   |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Earnings per common share                            |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Basic                                                          |                                                                     | $     | 1.74  |                    |   | $     | 0.46          |    |   | $             | 1.21  |     |   | $     | 0.26  |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     | Diluted                                                        |                                                                     | $     | 1.67  |                    |   | $     | 0.45          |    |   | $             | 1.16  |     |   | $     | 0.25  |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Weighted average number of common shares outstanding |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Basic                                                          |                                                                     |       | 1,108 |                    |   |       | 1,020         |    |   |               | 1,110 |     |   |       | 1,029 |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     | Diluted                                                        |                                                                     |       | 1,168 |                    |   |       | 1,050         |    |   |               | 1,173 |     |   |       | 1,052 |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Comprehensive income, net of income tax              |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |      
|                                                     | Unrealized gains (losses) on available-for-sale securities:    |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |       |  
|                                                     |                                                                | Net unrealized holding gains (losses) arising during the
    period |       | $     | 67                 |   |       | $             | 4  |   |               | $     | (10 | ) |       | $     | 4 | 
|                                                     |                                                                | Reclassification adjustment for gain included in net income         |       |       | (12                | ) |       |               |   |   |               |       |    |   |       |       |  | 
|                                                     | Foreign currency translation adjustment                        |                                                                     |       | 2     |                    |   |       | (3            | )  |   |               |      |     |   |       | (4    | )
|                                                     | Cash flow hedge:                                               |                                                                     |       |       |                    |   |       |               |    |   |               |       |     |   |       |       |  
|                                                     |                                                                | Reclassification of transition adjustment included in net income    |       |       |                   |   |       |               | 3  |   |               |       |    |   |       |       | 1 | 
|                                                     |                                                                | Unrealized gain on cash flow hedge                                  |       |       |                   |   |       |               | 11 |   |               |       |    |   |       |       | 6 | 
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|                                                     | Other comprehensive income (loss)                              |                                                                     |       | 57    |                    |   |       | 15            |    |   |               | (10   | )   |   |       | 7     |  
|                                                     | Net income                                                     |                                                                     |       | 1,937 |                    |   |       | 529           |    |   |               | 1,342 |     |   |       | 294   |  
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      
|Comprehensive income, net of income tax              |                                                                | $                                                                   | 1,994 |       |                    | $ | 544   |               |    | $ | 1,332         |       |     | $ | 301   |      
|                                                     |                                                                |                                                                     |       |       |                    |   |       |               |    |   |               |      




















4



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES





Condensed Consolidated Statement of Changes in
Stockholders Equity


For the Six Months Ended June 30, 2004


(in millions)


Unaudited





|                         |                                                                              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        |       |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       |       |  
|------------------------ | ---------------------------------------------------------------------------- | ------------ | ----- | - | ------------ | - | ------- | ------ |  | ----------- | ------ | -------------------- | ---------- | - | - | ----------------- | ------------- | - | ------------ | --- | - | ------------- | ------ | ----- | ---------- | - | --- | ----- | - | - | --- | -- |  | - | -- | - |  | - | ----- | ----- | -
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   | Accumulated Other |               |   |             
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        | Comprehensive Income |            |   |  
|                         |                                                                              | Class A      |       |   | Class B      |   |         |        |  |             |        |                      |            |   |   |                  
|                         |                                                                              | Common Stock |       |   | Common Stock |   |         |        |  |             |        |                      | Unrealized |   |   | Cumulative        |               |   |             
|                         |                                                                              |              |       |   |              |   | Paid-in |        |  | Accumulated |        |                      | Deferred   |   |   | Gain on           |               |   | Translation  |     |   |              
|                         |                                                                              | Shares       |       |   | Amount       |   |         | Shares |  |             | Amount |                      | Capital    |   |   | Deficit           |               |   | Compensation |     |   | Investments   |        |       | Adjustment |   |     | Total |  
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        |       |            |   |     |       |  
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        | (as restated)        |            |   |   |                   | (as restated) |   |              |     |   | (as restated) |       
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        | see note 1           |            |   |   |                   | see note 1    |   |              |     |   | see note 1    |       
|Balance, January 1, 2004 |                                                                              |              | 1,068 |   |              | $ | 1       |        |  |             | 36     |                      |            | $ |  |                   |               | $ | 11,942       |     |   | $             | (6,363 | )     |            | $ | (16 | )     |   | $ | 179 |    |  | $ | (5 | ) |  | $ | 5,738 |      
|                         | Net income                                                                   |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        | 1,937 |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       | 1,937 |  
|                         | Other comprehensive income                                                   |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        |       |            |   |     |       |   |   |     | 55 |  |   |    | 2 |  |   |       | 57    |  
|                         | Common stock issued under equity plans                                       |              |       | 9 |              |   |         |       |  |             |        |                      |            |   |   |                   |               |   |              | 128 |   |               |        |       |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       | 128   |  
|                         | Deferred compensation                                                        |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              | 28  |   |               |        |       |            |   |     | (22   | ) |   |     |    |  |   |    |   |  |   |       | 6     |  
|                         | Release of valuation allowance attributable to stock options
    (note 4)    |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              | 389 |   |               |        |       |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       | 389   |  
|                         | Increase on issuance of equity by affiliates, net of deferred
    income tax |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              | 1   |   |               |        |       |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       | 1     |  
|                         | Accretion on zero coupon mandatorily redeemable preferred stock              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              | (4  | ) |               |        |       |            |   |     |       |   |   |     |    |  |   |    |   |  |   |       | (4    | )
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        |       |            |   |     |       |   |  
|Balance, June 30, 2004.  |                                                                              |              | 1,077 |   |              | $ | 1       |        |  |             | 36     |                      |            | $ |  |                   |               | $ | 12,484       |     |   | $             | (4,426 | )     |            | $ | (38 | )     |   | $ | 234 |    |  | $ | (3 | ) |  | $ | 8,252 |      
|                         |                                                                              |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |     |   |               |        |       |            |   |     |       |   |  








5



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES





Condensed Consolidated Statements of Cash Flows


For the Six Months Ended June 30, 2004 and 2003


(in millions)


Unaudited





|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |      |        |        |     |      |        |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ------------- | ---- | ------ | ------ | --- | ---- | ------ | -
|                                                     |                                                                                           | 2004                                                                               |                                              |                                           | 2003          |     
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|                                                     |                                                                                           | (as restated)                                                                      |                                              |                                           | (as restated) |     
|                                                     |                                                                                           | see note 1                                                                         |                                              |                                           | see note 1    |     
|Cash flows from operating activities                 |                                                                                           |                                                                                    |                                              |                                           |               |      |        |       
|                                                     | Net income                                                                                |                                                                                    | $                                            | 1,937                                     |               |      | $      | 529    |    
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities:     |                                                                                    |                                              |                                           |               |      |        |        |    
|                                                     |                                                                                           | Amortization of debt financing costs and accretion of senior
    notes             |                                              |                                           | 11            |      |        |        | 32  |     
|                                                     |                                                                                           | Provision for losses on accounts receivable                                        |                                              |                                           | 68            |      |        |        | 81  |     
|                                                     |                                                                                           | Amortization of deferred gain from sale of towers                                  |                                              |                                           | (53           | )    |        |        | (53 | )   
|                                                     |                                                                                           | Depreciation and amortization                                                      |                                              |                                           | 896           |      |        |        | 835 |     
|                                                     |                                                                                           | Loss on retirement of debt                                                         |                                              |                                           | 51            |      |        |        | 7   |     
|                                                     |                                                                                           | Equity in losses of unconsolidated affiliates, net                                 |                                              |                                           | 2             |      |        |        | 59  |     
|                                                     |                                                                                           | Realized gain on sale of investments                                               |                                              |                                           | (26           | )    |        |        |    |     
|                                                     |                                                                                           | Net tax benefit from the release of the net operating loss
    valuation allowance |                                              |                                           | (761          | )    |        |        |    |     
|                                                     |                                                                                           | Income tax provision                                                               |                                              |                                           | 30            |      |        |        | 29  |     
|                                                     |                                                                                           | Other, net                                                                         |                                              |                                           | 19            |      |        |        | 15  |     
|                                                     |                                                                                           | Change in assets and liabilities, net of effects from
    acquisitions:            |                                              |                                           |               |      |        |        |     |     
|                                                     |                                                                                           |                                                                                    | Accounts and notes receivable                |                                           |               | (173 | )      |        |     | (140 | )     
|                                                     |                                                                                           |                                                                                    | Handset and accessory inventory              |                                           |               | (246 | )      |        |     | 24   |       
|                                                     |                                                                                           |                                                                                    | Prepaid expenses and other assets            |                                           |               | (237 | )      |        |     | 9    |       
|                                                     |                                                                                           |                                                                                    | Accounts payable, accrued expenses and other |                                           |               | 487  |        |        |     | 89   |       
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|                                                     |                                                                                           |                                                                                    |                                              | Net cash provided by operating activities |               |      | 2,005  |        |     |      | 1,516  |  
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|Cash flows from investing activities                 |                                                                                           |                                                                                    |                                              |                                           |               |      |        |       
|                                                     | Capital expenditures                                                                      |                                                                                    |                                              | (1,188                                    | )             |      |        | (727   | )  
|                                                     | Purchases of short-term investments                                                       |                                                                                    |                                              | (1,116                                    | )             |      |        | (1,191 | )  
|                                                     | Proceeds from maturities and sales of short-term investments                              |                                                                                    |                                              | 1,275                                     |               |      |        | 1,057  |    
|                                                     | Payments for purchases of licenses, investments and other, net
    of cash acquired       |                                                                                    |                                              | (243                                      | )             |      |        | (238   | )  
|                                                     | Proceeds from sale of investments and other                                               |                                                                                    |                                              | 77                                        |               |      |        |       |    
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|                                                     |                                                                                           |                                                                                    |                                              | Net cash used in investing activities     |               |      | (1,195 | )      |     |      | (1,099 | )
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|Cash flows from financing activities                 |                                                                                           |                                                                                    |                                              |                                           |               |      |        |       
|                                                     | Purchase and retirement of debt securities and mandatorily
    redeemable preferred stock |                                                                                    |                                              | (827                                      | )             |      |        | (707   | )  
|                                                     | Proceeds from issuance of debt securities                                                 |                                                                                    |                                              | 494                                       |               |      |        |       |    
|                                                     | Proceeds from issuance of stock                                                           |                                                                                    |                                              | 104                                       |               |      |        | 36     |    
|                                                     | Repayments under long-term credit facility                                                |                                                                                    |                                              | (139                                      | )             |      |        | (99    | )  
|                                                     | Borrowings under long-term credit facility                                                |                                                                                    |                                              |                                          |               |      |        | 69     |    
|                                                     | Payment for capital lease buy-out                                                         |                                                                                    |                                              | (156                                      | )             |      |        | (54    | )  
|                                                     | Repayments under capital lease obligation                                                 |                                                                                    |                                              | (9                                        | )             |      |        | (25    | )  
|                                                     | Mandatorily redeemable preferred stock dividends paid                                     |                                                                                    |                                              |                                          |               |      |        | (42    | )  
|                                                     | Other                                                                                     |                                                                                    |                                              | (1                                        | )             |      |        | (1     | )  
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|                                                     |                                                                                           |                                                                                    |                                              | Net cash used in financing activities     |               |      | (534   | )      |     |      | (823   | )
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|Net increase (decrease) in cash and cash equivalents |                                                                                           |                                                                                    | 276                                          |                                           |               |      | (406   | )     
|Cash and cash equivalents, beginning of period       |                                                                                           |                                                                                    | 806                                          |                                           |               |      | 1,846  |       
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     
|Cash and cash equivalents, end of period             |                                                                                           | $                                                                                  | 1,082                                        |                                           |               | $    | 1,440  |       
|                                                     |                                                                                           |                                                                                    |                                              |                                           |               |     








6



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES





Notes to Condensed Consolidated Financial Statements


Unaudited


Note 1.     Basis of Presentation




Earnings Per Common Share.





|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |      |    |   |       |      |    | 
|------------------------------------------------------------------ | ----------------------------------------------------------- | ----------------------------------------------------------------------- | ----- | ------------------ | -------- | - | ----- | ---- | -- | - | ----- | ---- | -- | - | ----- | ---- | -- | 
|                                                                   |                                                             |                                                                         |       | Three Months Ended |         
|                                                                   |                                                             | Six Months Ended June 30,                                               |       |                    | June 30, |  
|                                                                   |                                                             |                                                                         |       |                    |          |  
|                                                                   |                                                             | 2004                                                                    |       |                    | 2003     |   |       | 2004 |    |   | 2003  |     
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|                                                                   |                                                             | (in millions, except per share amounts)                                 |      
|Income available to common stockholders  basic                    |                                                             | $                                                                       | 1,933 |                    |          | $ | 469   |      |    | $ | 1,340 |      |    | $ | 266   |     
|                                                                   | Interest expense eliminated upon the assumed conversion of: |                                                                         |       |                    |          |   |       |      |    |   |       |      |    |   |       |      |   
|                                                                   |                                                             | 5.25% convertible senior notes due 2010.                                |       |                    |         |   |       |      |   |   |       |      | 8  |   |       |      |   | 
|                                                                   |                                                             | 6% convertible senior notes due 2011.                                   |       |                    | 16       |   |       |      |   |   |       |      | 7  |   |       |      |   | 
|                                                                   |                                                             | Zero coupon convertible preferred stock mandatorily redeemable
    2013 |       |                    | 5        |   |       |      |   |   |       |      | 3  |   |       |      |   | 
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|Income available to common stockholders 
    diluted              |                                                             | $                                                                       | 1,954 |                    |          | $ | 469   |      |    | $ | 1,358 |      |    | $ | 266   |     
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|Weighted average number of common shares
    outstanding  basic   |                                                             |                                                                         | 1,108 |                    |          |   | 1,020 |      |    |   | 1,110 |      |    |   | 1,029 |     
|                                                                   | Effect of dilutive securities:                              |                                                                         |       |                    |          |   |       |      |    |   |       |      |    |   |       |      |   
|                                                                   |                                                             | Equity plans                                                            |       |                    | 33       |   |       |      | 22 |   |       |      | 31 |   |       |      | 23 | 
|                                                                   |                                                             | 5.25% convertible senior notes due 2010.                                |       |                    |         |   |       |      |   |   |       |      | 8  |   |       |      |   | 
|                                                                   |                                                             | 6% convertible senior notes due 2011.                                   |       |                    | 22       |   |       |      |   |   |       |      | 19 |   |       |      |   | 
|                                                                   |                                                             | Zero coupon convertible preferred stock mandatorily redeemable
    2013 |       |                    | 5        |   |       |      |   |   |       |      | 5  |   |       |      |   | 
|                                                                   |                                                             | Class A convertible preferred stock                                     |       |                    |         |   |       |      | 8  |   |       |      |   |   |       |      |   | 
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|Weighted average number of common shares
    outstanding  diluted |                                                             |                                                                         | 1,168 |                    |          |   | 1,050 |      |    |   | 1,173 |      |    |   | 1,052 |     
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|Earnings per common share                                          |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |      |    |   |       |     
|                                                                   | Basic                                                       |                                                                         | $     | 1.74               |          |   | $     | 0.46 |    |   | $     | 1.21 |    |   | $     | 0.26 |   
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     
|                                                                   | Diluted                                                     |                                                                         | $     | 1.67               |          |   | $     | 0.45 |    |   | $     | 1.16 |    |   | $     | 0.25 |   
|                                                                   |                                                             |                                                                         |       |                    |          |   |       |      |    |   |       |     




7



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Stock-Based Compensation.







|                                                     |                                                                               |                                         |       |                    |          |   |     |      |   |   |       |     |   |   |     |     |  
|---------------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------- | ----- | ------------------ | -------- | - | --- | ---- | - | - | ----- | --- | - | - | --- | --- | -
|                                                     |                                                                               |                                         |       | Three Months Ended |         
|                                                     |                                                                               | Six Months Ended June 30,               |       |                    | June 30, |  
|                                                     |                                                                               |                                         |       |                    |          |  
|                                                     |                                                                               | 2004                                    |       |                    | 2003     |   |     | 2004 |   |   | 2003  |    
|                                                     |                                                                               |                                         |       |                    |          |   |     |      |   |   |       |    
|                                                     |                                                                               | (in millions, except per share amounts) |      
|Income available to common stockholders, as reported |                                                                               | $                                       | 1,933 |                    |          | $ | 469 |      |   | $ | 1,340 |     |   | $ | 266 |    
|                                                     | Stock-based compensation expense included in reported net income              |                                         |       | 5                  |          |   |     | 4    |   |   |       | 4   |   |   |     | 2   |  
|                                                     | Stock-based compensation expense determined under fair value
    based method |                                         |       | (118               | )        |   |     | (163 | ) |   |       | (63 | ) |   |     | (81 | )
|                                                     |                                                                               |                                         |       |                    |          |   |     |      |   |   |       |    
|Income available to common stockholders, pro forma   |                                                                               | $                                       | 1,820 |                    |          | $ | 310 |      |   | $ | 1,281 |     |   | $ | 187 |    
|                                                     |                                                                               |                                         |       |                    |          |   |     |      |   |   |       |    




8



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





|                          |             |                                         |  |                    |          |  |  |      |      |  |      |   |      |  |  |   |      | 
|------------------------- | ----------- | --------------------------------------- |  | ------------------ | -------- |  |  | ---- | ---- |  | ---- | - | ---- |  |  | - | ---- | 
|                          |             |                                         |  | Three Months Ended |         
|                          |             | Six Months Ended June 30,               |  |                    | June 30, | 
|                          |             |                                         |  |                    |          | 
|                          |             | 2004                                    |  |                    | 2003     |  |  | 2004 |      |  | 2003 |  
|                          |             |                                         |  |                    |          |  |  |      |      |  |      |  
|                          |             | (in millions, except per share amounts) | 
|Earnings per common share |             |                                         |  |                    |          |  |  |      |      |  |      |   |      |  |  |  
|                          | As reported |                                         |  |                    |          |  |  |      |      |  |      |   |      |  |  |   |     
|                          |             | Basic                                   |  | $                  | 1.74     |  |  | $    | 0.46 |  |      | $ | 1.21 |  |  | $ | 0.26 | 
|                          |             |                                         |  |                    |          |  |  |      |      |  |      |  
|                          |             | Diluted                                 |  | $                  | 1.67     |  |  | $    | 0.45 |  |      | $ | 1.16 |  |  | $ | 0.25 | 
|                          |             |                                         |  |                    |          |  |  |      |      |  |      |  
|                          | Pro forma   |                                         |  |                    |          |  |  |      |      |  |      |   |      |  |  |   |     
|                          |             | Basic                                   |  | $                  | 1.64     |  |  | $    | 0.30 |  |      | $ | 1.15 |  |  | $ | 0.18 | 
|                          |             |                                         |  |                    |          |  |  |      |      |  |      |  
|                          |             | Diluted                                 |  | $                  | 1.58     |  |  | $    | 0.30 |  |      | $ | 1.11 |  |  | $ | 0.18 | 
|                          |             |                                         |  |                    |          |  |  |      |      |  |      |  




Supplemental Cash Flow
Information.


|                                                     |                                                             |                  |       |       |      |   |     |     | 
|---------------------------------------------------- | ----------------------------------------------------------- | ---------------- | ----- | ----- | ---- | - | --- | --- | 
|                                                     |                                                             | Six Months Ended |      
|                                                     |                                                             | June 30,         |      
|                                                     |                                                             |                  |      
|                                                     |                                                             | 2004             |       |       | 2003 |  
|                                                     |                                                             |                  |       |       |      |  
|                                                     |                                                             | (in millions)    |      
|Capital expenditures, including capitalized interest |                                                             |                  |       |       |      |   |     |    
|                                                     | Cash paid for capital expenditures                          |                  | $     | 1,188 |      |   | $   | 727 | 
|                                                     | Changes in capital expenditures accrued, unpaid or financed |                  |       | (65   | )    |   |     |    | 
|                                                     |                                                             |                  |       |       |      |  
|                                                     |                                                             | $                | 1,123 |       |      | $ | 727 |    
|                                                     |                                                             |                  |       |       |      |  
|Interest costs                                       |                                                             |                  |       |       |      |   |     |    
|                                                     | Interest expense                                            |                  | $     | 309   |      |   | $   | 444 | 
|                                                     | Interest capitalized                                        |                  |       | 5     |      |   |     | 20  | 
|                                                     |                                                             |                  |       |       |      |  
|                                                     |                                                             | $                | 314   |       |      | $ | 464 |    
|                                                     |                                                             |                  |       |       |      |  
|Cash paid for interest, net of amounts capitalized   |                                                             | $                | 310   |       |      | $ | 368 |    
|                                                     |                                                             |                  |       |       |      |  
|Cash received for interest                           |                                                             | $                | 13    |       |      | $ | 16  |    
|                                                     |                                                             |                  |       |       |      |  
|Cash paid for income taxes                           |                                                             | $                | 38    |       |      | $ | 47  |    
|                                                     |                                                             |                  |       |       |      |  






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












9



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





































Condensed Consolidated Balance Sheets








(in millions)








Unaudited








|                                       |  |               |        |   |          |   |        |  
|-------------------------------------- |  | ------------- | ------ | - | -------- | - | ------ | -
|                                       |  | As previously |        |   | As       |  
|As of June 30, 2004                    |  | reported      |        |   | restated |  
|                                       |  |               |        |   |          |  
|Deferred income taxes                  |  | $             | 670    |   |          | $ | 638    |  
|Other liabilities                      |  |               | 205    |   |          |   | 293    |  
|Total liabilities                      |  |               | 13,258 |   |          |   | 13,314 |  
|Accumulated deficit                    |  |               | (4,361 | ) |          |   | (4,426 | )
|Accumulated other comprehensive income |  |               | 222    |   |          |   | 231    |  
|Total stockholders equity             |  |               | 8,308  |   |          |   | 8,252  |  







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




10



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





Condensed Consolidated Statements of Operations and
Comprehensive Income








(in millions, except per share data)








Unaudited








|                                             |         |               |       |      |          |   |       |      | 
|-------------------------------------------- | ------- | ------------- | ----- | ---- | -------- | - | ----- | ---- | 
|                                             |         | As previously |       |      | As       |  
|Six months ended June 30, 2004               |         | reported      |       |      | restated |  
|                                             |         |               |       |      |          |  
|Cost of service (exclusive of depreciation)  |         | $             | 895   |      |          | $ | 891   |     
|Operating income                             |         |               | 1,567 |      |          |   | 1,571 |     
|Income before income tax benefit (provision) |         |               | 1,249 |      |          |   | 1,253 |     
|Income tax benefit (provision)               |         |               | 646   |      |          |   | 684   |     
|Net income                                   |         |               | 1,895 |      |          |   | 1,937 |     
|Income available to common stockholders      |         | $             | 1,891 |      |          | $ | 1,933 |     
|Earnings per common share                    |         |               |       |      |          |   |       |     
|                                             | Basic   |               | $     | 1.71 |          |   | $     | 1.74 | 
|                                             | Diluted |               | $     | 1.64 |          |   | $     | 1.67 | 
|Comprehensive income, net of income tax      |         | $             | 1,952 |      |          | $ | 1,994 |     







|                                                   |         |               |       |      |          |   |       |      | 
|-------------------------------------------------- | ------- | ------------- | ----- | ---- | -------- | - | ----- | ---- | 
|                                                   |         | As previously |       |      | As       |  
|Six months ended June 30, 2003                     |         | reported      |       |      | restated |  
|                                                   |         |               |       |      |          |  
|Cost of service (exclusive of depreciation)        |         | $             | 777   |      |          | $ | 786   |     
|Operating income                                   |         |               | 1,075 |      |          |   | 1,066 |     
|Equity in losses of unconsolidated affiliates, net |         |               | (48   | )    |          |   | (59   | )   
|Income before income tax benefit (provision)       |         |               | 598   |      |          |   | 578   |     
|Net income                                         |         |               | 549   |      |          |   | 529   |     
|Income available to common stockholders            |         | $             | 489   |      |          | $ | 469   |     
|Earnings per common share                          |         |               |       |      |          |   |       |     
|                                                   | Basic   |               | $     | 0.48 |          |   | $     | 0.46 | 
|                                                   | Diluted |               | $     | 0.47 |          |   | $     | 0.45 | 
|Comprehensive income, net of income tax            |         | $             | 564   |      |          | $ | 544   |     




11



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





|                                             |         |               |       |      |          |   |       |      | 
|-------------------------------------------- | ------- | ------------- | ----- | ---- | -------- | - | ----- | ---- | 
|                                             |         | As previously |       |      | As       |  
|Three months ended June 30, 2004             |         | reported      |       |      | restated |  
|                                             |         |               |       |      |          |  
|Cost of service (exclusive of depreciation)  |         | $             | 457   |      |          | $ | 455   |     
|Operating income                             |         |               | 805   |      |          |   | 807   |     
|Income before income tax benefit (provision) |         |               | 623   |      |          |   | 625   |     
|Income tax benefit (provision)               |         |               | 679   |      |          |   | 717   |     
|Net income                                   |         |               | 1,302 |      |          |   | 1,342 |     
|Income available to common stockholders      |         | $             | 1,300 |      |          | $ | 1,340 |     
|Earnings per common share                    |         |               |       |      |          |   |       |     
|                                             | Basic   |               | $     | 1.17 |          |   | $     | 1.21 | 
|                                             | Diluted |               | $     | 1.12 |          |   | $     | 1.16 | 
|Comprehensive income, net of income tax      |         | $             | 1,292 |      |          | $ | 1,332 |     







|                                                   |         |               |     |      |          |   |     |      | 
|-------------------------------------------------- | ------- | ------------- | --- | ---- | -------- | - | --- | ---- | 
|                                                   |         | As previously |     |      | As       |  
|Three months ended June 30, 2003                   |         | reported      |     |      | restated |  
|                                                   |         |               |     |      |          |  
|Cost of service (exclusive of depreciation)        |         | $             | 408 |      |          | $ | 412 |     
|Operating income                                   |         |               | 582 |      |          |   | 578 |     
|Equity in losses of unconsolidated affiliates, net |         |               | (35 | )    |          |   | (46 | )   
|Income before income tax benefit (provision)       |         |               | 336 |      |          |   | 321 |     
|Net income                                         |         |               | 309 |      |          |   | 294 |     
|Income available to common stockholders            |         | $             | 281 |      |          | $ | 266 |     
|Earnings per common share                          |         |               |     |      |          |   |     |     
|                                                   | Basic   |               | $   | 0.27 |          |   | $   | 0.26 | 
|                                                   | Diluted |               | $   | 0.27 |          |   | $   | 0.25 | 
|Comprehensive income, net of income tax            |         | $             | 316 |      |          | $ | 301 |     







Condensed Consolidated Statement of Changes in
Stockholders Equity








(in millions)








Unaudited








|                               |  |               |        |   |          |   |        |  
|------------------------------ |  | ------------- | ------ | - | -------- | - | ------ | -
|                               |  | As previously |        |   | As       |  
|As of June 30, 2004            |  | reported      |        |   | restated |  
|                               |  |               |        |   |          |  
|Accumulated deficit            |  | $             | (4,361 | ) |          | $ | (4,426 | )
|Unrealized gain on investments |  | $             | 225    |   |          | $ | 234    |  







|                               |  |               |        |   |          |   |        |  
|------------------------------ |  | ------------- | ------ | - | -------- | - | ------ | -
|                               |  | As previously |        |   | As       |  
|As of January 1, 2004          |  | reported      |        |   | restated |  
|                               |  |               |        |   |          |  
|Accumulated deficit            |  | $             | (6,256 | ) |          | $ | (6,363 | )
|Unrealized gain on investments |  | $             | 170    |   |          | $ | 179    |  




12



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





Condensed Consolidated Statements of Cash Flows








(in millions)








Unaudited








|                                                                                                                         |  |               |       |   |          |   |       |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ----- | - | -------- | - | ----- | -
|                                                                                                                         |  | As previously |       |   | As       |  
|Six months ended June 30, 2004                                                                                           |  | reported      |       |   | restated |  
|                                                                                                                         |  |               |       |   |          |  
|Net income                                                                                                               |  | $             | 1,895 |   |          | $ | 1,937 |  
|Net tax benefit from the release of valuation allowance                                                                  |  |               | (726  | ) |          |   | (761  | )
|Income tax provision                                                                                                     |  |               | 33    |   |          |   | 30    |  
|Changes in assets and liabilities, net of effects from
    acquisitions
    Accounts payable, accrued expenses and other |  |               | 491   |   |          |   | 487   |  







|                                                                                                                         |  |               |     |  |          |   |     | 
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- |  | -------- | - | --- | 
|                                                                                                                         |  | As previously |     |  | As       |  
|Six months ended June 30, 2003                                                                                           |  | reported      |     |  | restated |  
|                                                                                                                         |  |               |     |  |          |  
|Net income                                                                                                               |  | $             | 549 |  |          | $ | 529 | 
|Equity in losses of unconsolidated affiliates, net                                                                       |  |               | 48  |  |          |   | 59  | 
|Changes in assets and liabilities, net of effects from
    acquisitions
    Accounts payable, accrued expenses and other |  |               | 80  |  |          |   | 89  | 




New Accounting Pronouncements.




Reclassifications.


13



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


Note 2.     Intangible Assets


|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       |  |   |    |    |  |   |       |       | 
|----------------------------- | ---------------------------------------------------- | ------------ |  | -------------- | ----- | - | ----------------- | ------------ | --- | -------- | ----- | ----- | -------- | ----- | ----- | ----------- | ------------ | - | -------- | ----- |  | - | -- | -- |  | - | ----- | ----- | 
|                              |                                                      |              |  | June 30, 2004  |       |   | December 31, 2003 |             
|                              |                                                      |              |  |                |       |   |                   |             
|                              |                                                      |              |  | Gross          |       |   |                   |              | Net |          |       | Gross |          |       |       |             | Net          |  
|                              |                                                      |              |  | Carrying       |       |   | Accumulated       |              |     | Carrying |       |       | Carrying |       |       | Accumulated |              |   | Carrying |      
|                              |                                                      | Useful Lives |  |                | Value |   |                   | Amortization |     |          | Value |       |          | Value |       |             | Amortization |   |          | Value | 
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 
|                              |                                                      |              |  | (in millions)  |      
|Amortized intangible assets   |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       |  |   |    |    |  |   |       |      
|                              | Customer lists                                       |              |  | 3 years        |       |   | $                 | 73           |     |          | $     | 64    |          |       | $     | 9           |              |   | $        | 98    |  |   | $  | 75 |  |   | $     | 23    | 
|                              | Spectrum sharing and noncompete agreements and other |              |  | Up to 20 years |       |   |                   | 80           |     |          |       | 21    |          |       |       | 59          |              |   |          | 82    |  |   |    | 17 |  |   |       | 65    | 
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 
|                              |                                                      |              |  |                |       |   | 153               |              |     |          | 85    |       |          |       | 68    |             |              |   | 180      |       |  |   | 92 |    |  |   | 88    |      
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 
|Unamortized intangible assets |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       |  |   |    |    |  |   |       |      
|                              | FCC licenses                                         |              |  | Indefinite     |       |   |                   | 7,124        |     |          |       |       |          |       |       | 7,124       |              |   |          | 6,922 |  |   |    |    |  |   |       | 6,922 | 
|                              | Goodwill                                             |              |  | Indefinite     |       |   |                   | 28           |     |          |       |       |          |       |       | 28          |              |   |          | 28    |  |   |    |    |  |   |       | 28    | 
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 
|                              |                                                      |              |  |                |       |   | 7,152             |              |     |          |       |       |          |       | 7,152 |             |              |   | 6,950    |       |  |   |    |    |  |   | 6,950 |      
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 
|Total intangible assets       |                                                      |              |  |                |       | $ | 7,305             |              |     | $        | 85    |       |          | $     | 7,220 |             |              | $ | 7,130    |       |  | $ | 92 |    |  | $ | 7,038 |      
|                              |                                                      |              |  |                |       |   |                   |              |     |          |       |       |          |       |       |             |              |   |          |       | 









14



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|Note 3. | Long-Term Debt, Mandatorily Redeemable Preferred Stock and
    Capital Lease Obligation

Long-Term Debt and
Mandatorily Redeemable Preferred Stock.


|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |     |  |   |       |       |      |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------------------- | ----- | ----------- | ------------ | - | ---- | ------------- | - | - | -------- | --- |  | - | ----- | ----- | ---- | -
|                                                                                                                                                                        |                      |                       |       | Retirements |              |   |      |               |  
|                                                                                                                                                                        |                      | December 31,          |       |             | and          |   |      | Debt-for-Debt |   |   | June 30, |    
|                                                                                                                                                                        |                      | 2003                  |       |             | Repayments   |   |      | Exchange and  |   |   | 2004     |    
|                                                                                                                                                                        |                      | Balance               |       |             | of Principal |   |      | Other         |   |   | Balance  |    
|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |    
|                                                                                                                                                                        |                      | (dollars in millions) |      
|9.375% senior serial redeemable notes due 2009                                                                                                                          |                      | $                     | 1,599 |             |              | $ |     |               |   | $ | (326     | )   |  | $ | 1,273 |      
|5.25% convertible senior notes due 2010                                                                                                                                 |                      |                       | 607   |             |              |   |     |               |   |   |         |     |  |   | 607   |      
|9.5% senior serial redeemable notes due 2011,
    net of a deferred premium of $36 and $27                                                                              |                      |                       | 895   |             |              |   | (171 | )             |   |   | (9       | )   |  |   | 715   |      
|6% convertible senior notes due 2011                                                                                                                                    |                      |                       | 608   |             |              |   | (608 | )             |   |   |         |     |  |   |      |      
|6.875% senior serial redeemable notes due 2013,
    net of an unamortized discount of $0 and $16                                                                        |                      |                       | 500   |             |              |   |     |               |   |   | 197      |     |  |   | 697   |      
|5.95% senior serial redeemable notes due 2014,
    net of an unamortized discount of $0 and $6                                                                          |                      |                       |      |             |              |   |     |               |   |   | 494      |     |  |   | 494   |      
|7.375% senior serial redeemable notes due 2015,
    net of an unamortized premium of $8 and unamortized discount of
    $3                                              |                      |                       | 2,008 |             |              |   |     |               |   |   | 126      |     |  |   | 2,134 |      
|Bank credit facility                                                                                                                                                    |                      |                       | 3,804 |             |              |   | (139 | )(a)          |   |   |         |     |  |   | 3,665 |      
|Other                                                                                                                                                                   |                      |                       | 26    |             |              |   | (1   | )             |   |   | (3       | )   |  |   | 22    |      
|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |    
|                                                                                                                                                                        | Total long-term debt |                       |       | 10,047      |              |   | $    | (919          | ) |   | $        | 479 |  |   |       | 9,607 |     
|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |    
|                                                                                                                                                                        |                      | Less current portion  |       |             | (322         | ) |      |               |   |   |          |     |  |   |       |       | (385 | )
|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |    
|                                                                                                                                                                        |                      | $                     | 9,725 |             |              |   |      |               |   |   |          |     |  | $ | 9,222 |      
|                                                                                                                                                                        |                      |                       |       |             |              |   |      |               |   |   |          |    
|Zero coupon convertible preferred stock mandatorily
    redeemable 2013, no dividend; stated at accreted liquidation
    preference value at 9.25% compounded quarterly |                      | $                     | 99    |             |              | $ |     |               |   | $ | 4        |     |  | $ | 103   |      






|    |                                         
|--- | ----------------------------------------
|(a) | Represents scheduled principal payments.

5.95% Senior Notes.


2004 Debt Retirements.


15



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






2003 Debt and Preferred Stock Retirements.




2004 Debt-for-Debt Exchanges.


Capital Lease Obligation.


16



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


Bank Credit Facility.




Note 4.     Income Taxes



















|                                                          |                                |                  |       |      |                    |  |      |      |   |  |       |      |  |  |      |      |  
|--------------------------------------------------------- | ------------------------------ | ---------------- | ----- | ---- | ------------------ |  | ---- | ---- | - |  | ----- | ---- |  |  | ---- | ---- | -
|                                                          |                                | Six Months Ended |       |      | Three Months Ended | 
|                                                          |                                | June 30,         |       |      | June 30,           | 
|                                                          |                                |                  |       |      |                    | 
|                                                          |                                | 2004             |       |      | 2003               |  |      | 2004 |   |  | 2003  |     
|                                                          |                                |                  |       |      |                    |  |      |      |   |  |       |     
|                                                          |                                | (in millions)    |      
|Federal and state current and deferred income tax expense |                                |                  | $(217 | )    |                    |  | $(49 | )    |   |  | $(184 | )    |  |  | $(27 | )   
|Valuation allowance release                               |                                |                  | 901   |      |                    |  |     |      |   |  | 901   |      |  |  |     |     
|                                                          |                                |                  |       |      |                    |  |      |      |   |  |       |     
|                                                          | Income tax benefit (provision) |                  |       | $684 |                    |  |      | $(49 | ) |  |       | $717 |  |  |      | $(27 | )
|                                                          |                                |                  |       |      |                    |  |      |      |   |  |       |     






Note 5.     Related Party
Transactions




17



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








Note 6.     Derivative Instruments
and Hedging Activities








18



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Note 7.     Commitments and
Contingencies








Note 8.     Subsequent Events


Spectrum Realignment Plan.


19



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Global Positioning System and Enhanced 911 Services.








20



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Bank Credit Facility.


21



---



##### 









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














































































22



---



##### 








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

A. Overview


























Company Overview.




SM SM tm


23



---



##### 















Managements Summary.






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





24



---



##### 







| |   |                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we extended the reach of Direct Connect service in North America
    and into selected markets in Latin America in the second quarter
    2004;                                                                                                                                                                                  
|
| |  | we placed about 800 transmitter and receiver sites in service in
    the first six months of 2004 to improve both our geographic
    coverage and to meet the capacity needs of our growing customer
    base, and plan to place additional sites in service by the end
    of the year;                                         
|
| |  | we have begun to introduce handsets in the third quarter 2004,
    that, together with software installed on our network
    infrastructure, are designed to more efficiently utilize radio
    spectrum to significantly increase our network capacity once
    these handsets are in use and the network software is activated;
|
| |  | we plan to begin the deployment of an enhancement to our
    existing iDEN technology, known as
    WiDENSM,
    designed to increase the data speeds of our network by up to
    four times the current speeds by the end of the year; and                                                                                      
|
| |  | we are continuing the field trial of Nextel Wireless
    BroadbandSM,
    an easy-to-use and secure service that connects customers to the
    Internet at broadband speeds, with the full mobility of wireless
    service.                                                                                                     

tm tm








25



---



##### 



tm








26



---



##### 







Global Positioning System and Enhanced 911
Services.










Critical Accounting Policies and Estimates.




Revenue Recognition.


27



---



##### 





Cost of Handsets.


Allowance for Doubtful Accounts.


Valuation and Recoverability of Long-Lived Assets.


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



28



---



##### 







Valuation and Recoverability of Intangible Assets.






Recoverability of Capitalized Software.





Net Operating Loss Valuation Allowance.





29



---



##### 





B. Results of Operations










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



30



---



##### 







Selected Financial and Operating Data.


|                                                         |  |                  |        |  |                    |  |        |      |  |  |        |  |  |  |        | 
|-------------------------------------------------------- |  | ---------------- | ------ |  | ------------------ |  | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                                                         |  | Six Months Ended |        |  | Three Months Ended | 
|                                                         |  | June 30,         |        |  | June 30,           | 
|                                                         |  |                  |        |  |                    | 
|                                                         |  | 2004             |        |  | 2003               |  |        | 2004 |  |  | 2003   | 
|                                                         |  |                  |        |  |                    |  |        |      |  |  |        | 
|Handsets in service, end of period (in thousands)(1)     |  |                  | 13,902 |  |                    |  | 11,683 |      |  |  | 13,902 |  |  |  | 11,683 | 
|Net handset additions (in thousands)(1)                  |  |                  | 1,020  |  |                    |  | 1,071  |      |  |  | 546    |  |  |  | 591    | 
|Average monthly minutes of use per handset(1)            |  |                  | 765    |  |                    |  | 680    |      |  |  | 780    |  |  |  | 720    | 
|System minutes of use (in billions)(1)                   |  |                  | 61.5   |  |                    |  | 45.7   |      |  |  | 31.9   |  |  |  | 24.5   | 
|Net transmitter and receiver sites placed in service     |  |                  | 820    |  |                    |  | 270    |      |  |  | 420    |  |  |  | 170    | 
|Transmitter and receiver sites in service, end of period |  |                  | 18,320 |  |                    |  | 16,570 |      |  |  | 18,320 |  |  |  | 16,570 | 
|Nextel stores in service, end of period                  |  |                  | 697    |  |                    |  | 501    |      |  |  | 697    |  |  |  | 501    | 






|    |                                                                 
|--- | ----------------------------------------------------------------
|(1) | Excludes amounts attributable to Boost Mobile pre-paid services.







31



---



##### 



Service Revenues and Cost of Service.





|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |   |       |       |  |  |    |    |  
|------------------------------------------- | ------------------------------- | -------- | ----- | ----- | --------- | --------------------- | -- | -------- | ---- | ----------- | --------- | ------------- | - | ------- | -- | - | ------- | - | ----- | ----- |  |  | -- | -- | -
|                                            |                                 |          |       |       |           |                       |    |          |      | Change from |          
|                                            |                                 |          |       | % of  |           |                       |    |          | % of |             |           | Previous Year |  
|                                            |                                 | June 30, |       |       | Operating |                       |    | June 30, |      |             | Operating |               |   |         |   
|                                            |                                 | 2004     |       |       | Revenues  |                       |    | 2003     |      |             | Revenues  |               |   | Dollars |    |   | Percent |  
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                            |                                 |          |       |       |           | (dollars in millions) |    |          |      |             |          
|Six Months Ended                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |   |       |       |  |  |    |   
|Service revenues                            |                                 | $        | 5,715 |       |           |                       | 89 | %        |      | $           | 4,595     |               |   |         | 93 | % |         | $ | 1,120 |       |  |  | 24 | % 
|Cost of service (exclusive of depreciation) |                                 |          | 891   |       |           |                       | 14 | %        |      |             | 786       |               |   |         | 16 | % |         |   | 105   |       |  |  | 13 | % 
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin            |          | $     | 4,824 |           |                       |    |          |      |             | $         | 3,809         |   |         |    |   |         |   | $     | 1,015 |  |  |    | 27 | %
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin percentage |          |       | 84    | %         |                       |    |          |      |             |           | 83            | % |         |    |   |         |   |       |       |  |  |    |    |  
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                           
|Three Months Ended                          |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |   |       |       |  |  |    |   
|Service revenues                            |                                 | $        | 2,939 |       |           |                       | 89 | %        |      | $           | 2,385     |               |   |         | 93 | % |         | $ | 554   |       |  |  | 23 | % 
|Cost of service (exclusive of depreciation) |                                 |          | 455   |       |           |                       | 14 | %        |      |             | 412       |               |   |         | 16 | % |         |   | 43    |       |  |  | 10 | % 
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin            |          | $     | 2,484 |           |                       |    |          |      |             | $         | 1,973         |   |         |    |   |         |   | $     | 511   |  |  |    | 26 | %
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin percentage |          |       | 85    | %         |                       |    |          |      |             |           | 83            | % |         |    |   |         |   |       |       |  |  |    |    |  
|                                            |                                 |          |       |       |           |                       |    |          |      |             |           |               |   |         |    |   |         |  




Service Revenues.






| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our differentiated products and services, including our Direct
    Connect walkie-talkie service, including the impact of the
    launch of our Nationwide Direct Connect service in July 2003,
    and our Nextel Online services;          
|
| |  | increased brand name recognition as a result of increased
    advertising and marketing campaigns;                                                                                                                                           
|
| |  | the high quality of our network;                                                                                                                                                                                                             
|
| |  | the improvement in subscriber retention that we attribute to our
    ongoing focus on customer care and other retention efforts and
    our focus on attracting high quality subscribers;                                                    
|
| |  | the introduction of more competitive service pricing plans
    targeted at meeting more of our customers needs, including
    a variety of fixed-rate plans offering bundled monthly minutes
    and other integrated services and features;
|
| |  | selected handset pricing promotions and improved handset
    choices; and                                                                                                                                                                    
|
| |  | increased sales and marketing staff, including staff associated
    with our Nextel stores, and selling efforts targeted at specific
    vertical markets.                                                                                   

32



---



##### 






Cost of Service.







| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  | a 14% and 12% net increase in costs incurred in the operation
    and maintenance of our network and fixed interconnection costs;
    and
|
|
| |  | a 29% and 26% increase in costs incurred to operate our handset
    service and repair program; partially offset by                      
|
| |  | a 5% and 8% decrease in variable interconnection fees.                                                                                   





| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in roaming fees paid to Nextel Partners due to the
    increase in our customer base and the launch of Nationwide
    Direct Connect service in July 2003;                                                                                                                                        
|
| |  | an increase in transmitter and receiver and switch related
    operational costs due to an 11% increase in transmitter and
    receiver sites placed into service from June 30, 2003 to
    June 30, 2004;                                                                                                    
|
| |  | an increase in headcount and related employee costs to support
    our expanding network and customer base; and                                                                                                                                                                                               
|
| |  | an increase in royalties paid to online service providers as we
    increase the data services available to subscribers, such as
    wireless email, ring-tones and wallpaper applications; partially
    offset by                                                                                           
|
| |  | a decrease in fixed interconnection costs as a result of
    initiatives implemented to gain efficiencies in our network by
    taking advantage of lower facility fees and more technologically
    advanced network equipment that provides for additional capacity
    but requires less leased facilities.







33



---



##### 








Service Gross Margin.





Handset and Accessory Revenues and Cost of Handset and
Accessory Revenues.




|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |     |     |  
|-------------------------------------------------- | -------------------------------------- | --------------------- | ---- | ---- | --------- |  | -- | -------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | --- | --- |  |  | --- | --- | -
|                                                   |                                        |                       |      |      |           |  |    |          |      | Change from |          
|                                                   |                                        |                       |      | % of |           |  |    |          | % of |             |           | Previous Year | 
|                                                   |                                        | June 30,              |      |      | Operating |  |    | June 30, |      |             | Operating |               |  |         |   
|                                                   |                                        | 2004                  |      |      | Revenues  |  |    | 2003     |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                   |                                        | (dollars in millions) |     
|Six Months Ended                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |     |    
|Current period handset and accessory sales         |                                        | $                     | 677  |      |           |  | 11 | %        |      | $           | 502       |               |  |         | 10 | %  |         | $ | 175 |     |  |  | 35  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %        |      |             | (170      | )             |  |         | (3 | )% |         |   | 170 |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                   | Handset and accessory revenues         |                       |      | 677  |           |  |    | 11       | %    |             |           | 332           |  |         |    | 7  | %       |   |     | 345 |  |  |     | 104 | %
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Current period cost of handset and accessory sales |                                        |                       | 985  |      |           |  | 15 | %        |      |             | 795       |               |  |         | 16 | %  |         |   | 190 |     |  |  | 24  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %        |      |             | (170      | )             |  |         | (3 | )% |         |   | 170 |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                   | Cost of handset and accessory revenues |                       |      | 985  |           |  |    | 15       | %    |             |           | 625           |  |         |    | 13 | %       |   |     | 360 |  |  |     | 58  | %
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Handset and accessory net subsidy                  |                                        | $                     | (308 | )    |           |  |    |          |      | $           | (293      | )             |  |         |    |    |         | $ | (15 | )   |  |  | (5  | )% 
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Handset and accessory net subsidy percentage       |                                        |                       | (45  | )%   |           |  |    |          |      |             | (58       | )%            |  |         |    |    |         |   |     |     |  |  |     |    
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                  
|Three Months Ended                                 |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |     |    
|Current period handset and accessory sales         |                                        | $                     | 350  |      |           |  | 11 | %        |      | $           | 252       |               |  |         | 10 | %  |         | $ | 98  |     |  |  | 39  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %        |      |             | (81       | )             |  |         | (3 | )% |         |   | 81  |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                   | Handset and accessory revenues         |                       |      | 350  |           |  |    | 11       | %    |             |           | 171           |  |         |    | 7  | %       |   |     | 179 |  |  |     | 105 | %
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Current period cost of handset and accessory sales |                                        |                       | 496  |      |           |  | 15 | %        |      |             | 396       |               |  |         | 15 | %  |         |   | 100 |     |  |  | 25  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %        |      |             | (81       | )             |  |         | (3 | )% |         |   | 81  |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                                                   | Cost of handset and accessory revenues |                       |      | 496  |           |  |    | 15       | %    |             |           | 315           |  |         |    | 12 | %       |   |     | 181 |  |  |     | 57  | %
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Handset and accessory net subsidy                  |                                        | $                     | (146 | )    |           |  |    |          |      | $           | (144      | )             |  |         |    |    |         | $ | (2  | )   |  |  | (1  | )% 
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|Handset and accessory net subsidy percentage       |                                        |                       | (42  | )%   |           |  |    |          |      |             | (57       | )%            |  |         |    |    |         |   |     |     |  |  |     |    
|                                                   |                                        |                       |      |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  

34



---



##### 



Handset and Accessory Revenues.




Cost of Handset and Accessory Revenues.




Handset and Accessory Net Subsidy.






Selling, General and Administrative Expenses.


|                           |                                     |                       |       |       |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | -------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |       |       |           |  |    |          |      | Change from |          
|                           |                                     |                       |       | % of  |           |  |    |          | % of |             |           | Previous Year | 
|                           |                                     | June 30,              |       |       | Operating |  |    | June 30, |      |             | Operating |               |  |         |   
|                           |                                     | 2004                  |       |       | Revenues  |  |    | 2003     |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                           |                                     |                       |       |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                           |                                     | (dollars in millions) |      
|Six Months Ended           |                                     |                       |       |       |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |   
|Selling and marketing      |                                     | $                     | 1,029 |       |           |  | 16 | %        |      | $           | 855       |               |  |         | 17 | %  |         | $ | 174 |     |  |  | 20 | % 
|General and administrative |                                     |                       | 1,020 |       |           |  | 16 | %        |      |             | 760       |               |  |         | 15 | %  |         |   | 260 |     |  |  | 34 | % 
|                           |                                     |                       |       |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                           | Selling, general and administrative |                       | $     | 2,049 |           |  |    | 32       | %    |             | $         | 1,615         |  |         |    | 32 | %       |   | $   | 434 |  |  |    | 27 | %
|                           |                                     |                       |       |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  

35



---



##### 



|                           |                                     |                       |     |       |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | --- | ----- | --------- |  | -- | -------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |     |       |           |  |    |          |      | Change from |          
|                           |                                     |                       |     | % of  |           |  |    |          | % of |             |           | Previous Year | 
|                           |                                     | June 30,              |     |       | Operating |  |    | June 30, |      |             | Operating |               |  |         |   
|                           |                                     | 2004                  |     |       | Revenues  |  |    | 2003     |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                           |                                     |                       |     |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                           |                                     | (dollars in millions) |    
|Three Months Ended         |                                     |                       |     |       |           |  |    |          |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |   
|Selling and marketing      |                                     | $                     | 534 |       |           |  | 16 | %        |      | $           | 444       |               |  |         | 17 | %  |         | $ | 90  |     |  |  | 20 | % 
|General and administrative |                                     |                       | 544 |       |           |  | 17 | %        |      |             | 385       |               |  |         | 15 | %  |         |   | 159 |     |  |  | 41 | % 
|                           |                                     |                       |     |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                           | Selling, general and administrative |                       | $   | 1,078 |           |  |    | 33       | %    |             | $         | 829           |  |         |    | 32 | %       |   | $   | 249 |  |  |    | 30 | %
|                           |                                     |                       |     |       |           |  |    |          |      |             |           |               |  |         |    |    |         |  

Selling and Marketing.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an $82 million and $46 million increase in advertising
    expenses as a result of general marketing campaigns directed at
    increasing brand awareness and promoting our differentiated
    services, such as our new branding campaign launched in the
    third quarter 2003, our affiliation with NASCAR beginning in the
    first quarter 2004, the promotion of Nationwide Direct Connect
    services and advertising and promotional costs related to our
    expansion of the areas in which we offer Boost Mobile pre-paid
    services that began in the first quarter 2004;
|
| |  | a $64 million and $29 million increase in marketing
    payroll and related expenses primarily associated with our
    opening an additional 196 Nextel stores between June 30,
    2003 and June 30, 2004 and increased employee commissions;
    and                                                                                                                                                                                                                                                                                                                                    
|
| |  | a $28 million and $15 million increase primarily
    reflecting an increase in the rate of commissions and residuals
    earned by indirect dealers and distributors in the first half of
    2004 compared to the same period in 2003, partially offset by
    the decrease in volume of indirect sales and the decrease in
    commissions paid with respect to handset sales as more handsets
    were delivered through our direct handset fulfillment system in
    2004.                                                                                                            

General and Administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $165 million and $92 million increase in personnel,
    facilities and general corporate expenses due to increases in
    headcount and related facility costs, information technology
    initiatives, legal and professional fees and settlement costs,
    research and development costs related to the field trial of
    Nextel Wireless Broadband and our enterprise resource planning,
    or ERP, system implementation;
|
| |  | a $108 million and $58 million increase in expenses
    related to billing, collection, customer retention and customer
    care activities primarily due to the costs to support a larger
    customer base, including Boost, and the focus on our customer
    Touch Point strategy in addition to increased costs associated
    with the implementation of wireless number portability in the
    fourth quarter 2003; and     
|
| |  | a $13 million decrease and $9 million increase in bad
    debt expense. Bad debt expense decreased from $81 million,
    or 1.6% of operating revenues, for the six months ended
    June 30, 2003 to $68 million, or 1.1% of operating
    revenues, for the six months ended June 30, 2004. The
    decrease in both the                                                                                                         

36



---



##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | aggregate amount of the bad debt expense and bad debt expense as
    a percentage of operating revenues reflects actions taken over
    the past two years that were focused on strengthening our credit
    and collection policies and procedures, limiting the account
    sizes for high-risk accounts and strengthening identity
    verification processes at the point of credit applications. Our
    allowance for doubtful accounts as a percentage of accounts
    receivable has also improved from June 30, 2003 to
    June 30, 2004. Bad debt expense in the future could be
    adversely affected by general economic conditions and
    competitive conditions within the wireless industry, including
    those related to wireless number portability or to the extent we
    adjust our credit standards to be more competitive. See
     Forward-Looking Statements.







| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased costs to acquire new customers and to support a
    growing customer base, including costs associated with billing,
    collection, customer retention and customer care activities;                                   
|
| |  | increased marketing and advertising expenses in connection with
    sponsorships and branding and promotional initiatives that are
    designed to increase brand awareness in our markets, including
    our NASCAR sponsorship;
|
| |  | increased costs relating to the expansion of our Boost Mobile
    service into new markets;                                                                                                                                      
|
| |  | increased costs associated with opening additional Nextel
    stores; and                                                                                                                                                        
|
| |  | increased costs related to the field trial of Nextel Wireless
    Broadband, which we account for as research and development
    expense; partially offset by                                                                   
|
| |  | additional savings expected from obtaining an increasing
    percentage of sales from our lower-cost customer convenient
    channels, such as web sales, telesales and Nextel stores.                                           

Depreciation and Amortization.


|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |    |    |  |  |     |    |  
|------------------ | ----------------------------- | --------------------- | --- | ---- | --------- |  | -- | -------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | -- | -- |  |  | --- | -- | -
|                   |                               |                       |     |      |           |  |    |          |      | Change from |          
|                   |                               |                       |     | % of |           |  |    |          | % of |             |           | Previous Year | 
|                   |                               | June 30,              |     |      | Operating |  |    | June 30, |      |             | Operating |               |  |         |   
|                   |                               | 2004                  |     |      | Revenues  |  |    | 2003     |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                   |                               | (dollars in millions) |    
|Six Months Ended   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |    |    |  |  |     |   
|Depreciation       |                               | $                     | 874 |      |           |  | 13 | %        |      | $           | 807       |               |  |         | 16 | %  |         | $ | 67 |    |  |  | 8   | % 
|Amortization       |                               |                       | 22  |      |           |  | 1  | %        |      |             | 28        |               |  |         | 1  | %  |         |   | (6 | )  |  |  | (21 | )%
|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                   | Depreciation and amortization |                       | $   | 896  |           |  |    | 14       | %    |             | $         | 835           |  |         |    | 17 | %       |   | $  | 61 |  |  |     | 7  | %
|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                  
|Three Months Ended |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |   |    |    |  |  |     |   
|Depreciation       |                               | $                     | 442 |      |           |  | 13 | %        |      | $           | 408       |               |  |         | 16 | %  |         | $ | 34 |    |  |  | 8   | % 
|Amortization       |                               |                       | 11  |      |           |  | 1  | %        |      |             | 14        |               |  |         | 1  | %  |         |   | (3 | )  |  |  | (21 | )%
|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  
|                   | Depreciation and amortization |                       | $   | 453  |           |  |    | 14       | %    |             | $         | 422           |  |         |    | 17 | %       |   | $  | 31 |  |  |     | 7  | %
|                   |                               |                       |     |      |           |  |    |          |      |             |           |               |  |         |    |    |         |  



37



---



##### 





Interest and Other.





|                                                   |  |                       |       |             |               |   |      |         |  |   |         |   |  |  |     |   
|-------------------------------------------------- |  | --------------------- | ----- | ----------- | ------------- | - | ---- | ------- |  | - | ------- | - |  |  | --- | --
|                                                   |  |                       |       | Change from |              
|                                                   |  | June 30,              |       |             | Previous Year |  
|                                                   |  |                       |       |             |               |  
|                                                   |  | 2004                  |       |             | 2003          |   |      | Dollars |  |   | Percent |  
|                                                   |  |                       |       |             |               |   |      |         |  |   |         |  
|                                                   |  | (dollars in millions) |      
|Six Months Ended                                   |  |                       |       |             |               |   |      |         |  |   |         |   |  |  |     |   
|Interest expense                                   |  | $                     | (309  | )           |               | $ | (444 | )       |  | $ | 135     |   |  |  | 30  | % 
|Interest income                                    |  |                       | 15    |             |               |   | 22   |         |  |   | (7      | ) |  |  | (32 | )%
|Loss on retirement of debt                         |  |                       | (51   | )           |               |   | (7   | )       |  |   | (44     | ) |  |  | NM  |   
|Equity in losses of unconsolidated affiliates, net |  |                       | (2    | )           |               |   | (59  | )       |  |   | 57      |   |  |  | 97  | % 
|Realized gain on sale of investments               |  |                       | 26    |             |               |   |     |         |  |   | 26      |   |  |  | 100 | % 
|Other, net                                         |  |                       | 3     |             |               |   |     |         |  |   | 3       |   |  |  | 100 | % 
|Income tax benefit (provision)                     |  |                       | 684   |             |               |   | (49  | )       |  |   | 733     |   |  |  | NM  |   
|Income available to common stockholders            |  |                       | 1,933 |             |               |   | 469  |         |  |   | 1,464   |   |  |  | NM  |   
|                                                  
|Three Months Ended                                 |  |                       |       |             |               |   |      |         |  |   |         |   |  |  |     |   
|Interest expense                                   |  | $                     | (155  | )           |               | $ | (219 | )       |  | $ | 64      |   |  |  | 29  | % 
|Interest income                                    |  |                       | 7     |             |               |   | 10   |         |  |   | (3      | ) |  |  | (30 | )%
|Loss on retirement of debt                         |  |                       | (34   | )           |               |   | (2   | )       |  |   | (32     | ) |  |  | NM  |   
|Equity in losses of unconsolidated affiliates, net |  |                       | (2    | )           |               |   | (46  | )       |  |   | 44      |   |  |  | 96  | % 
|Other, net                                         |  |                       | 2     |             |               |   |     |         |  |   | 2       |   |  |  | 100 | % 
|Income tax benefit (provision)                     |  |                       | 717   |             |               |   | (27  | )       |  |   | 744     |   |  |  | NM  |   
|Income available to common stockholders            |  |                       | 1,340 |             |               |   | 266  |         |  |   | 1,074   |   |  |  | NM  |   







NM  Not Meaningful


Interest Expense.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $189 million and $94 million decrease in interest
    expense attributable to the reductions in the aggregate
    outstanding principal amount of our senior notes, as discussed
    below;                                                                                                                                                                                                                      
|
| |  | a $32 million and $15 million decrease in interest
    expense resulting from the combined effect of the reduction in
    the weighted average interest rates related to our bank credit
    facility from 4.1% during the six months ended June 30,
    2003 to 3.0% during the six months ended June 30, 2004 and
    the lower average principal amount of the bank credit facility
    outstanding in 2004; and

38



---



##### 





| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $21 million and $12 million decrease resulting from
    interest expense recorded in prior years related to the
    derivatives that were settled in the third quarter 2003;
    partially offset by
|
| |  | a $101 million and $54 million increase in interest
    expense attributable to our new senior notes issued since the
    third quarter 2003.                                                         



Interest Income.


Loss on Retirement of Debt.





Equity in Losses of Unconsolidated Affiliates.





Realized Gain on Investments.





Income Tax Benefit (Provision).







39



---



##### 





C. Liquidity and Capital Resources








Cash Flows.


|                                      |  |                       |        |   |               |   |        |         |  |   |         |   |  |  |    |   
|------------------------------------- |  | --------------------- | ------ | - | ------------- | - | ------ | ------- |  | - | ------- | - |  |  | -- | --
|                                      |  | Six Months Ended      |        |   | Change from   |  
|                                      |  | June 30,              |        |   | Previous Year |  
|                                      |  |                       |        |   |               |  
|                                      |  | 2004                  |        |   | 2003          |   |        | Dollars |  |   | Percent |  
|                                      |  |                       |        |   |               |   |        |         |  |   |         |  
|                                      |  | (dollars in millions) |       
|Cash provided by operating activities |  | $                     | 2,005  |   |               | $ | 1,516  |         |  | $ | 489     |   |  |  | 32 | % 
|Cash used in investing activities     |  |                       | (1,195 | ) |               |   | (1,099 | )       |  |   | (96     | ) |  |  | (9 | )%
|Cash used in financing activities     |  |                       | (534   | ) |               |   | (823   | )       |  |   | 289     |   |  |  | 35 | % 



40



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##### 







| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | a $461 million increase in cash paid for capital
    expenditures; partially offset by
|
| |  | a $293 million increase in net proceeds from short term
    investments, and          
|
| |  | a $77 million increase in proceeds from the sale of
    investments and other.        





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









| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $827 million paid for the purchase and retirement of our
    senior notes and convertible senior notes;                                                                                                    
|
| |  | $165 million in repayments related to our remaining capital
    lease obligation, including a payment of $156 million
    associated with the early buy-out option of this capital lease
    agreement and;
|
| |  | $139 million in repayments under our bank credit facility;
    partially offset by                                                                                                                         
|
| |  | $494 million of net proceeds from the sale of our 5.95%
    senior notes; and                                                                                                                              
|
| |  | $104 million of net proceeds from the issuance of shares of
    our class A common stock primarily under our incentive equity
    plan.                                                                    





41



---



##### 



D. Future Capital Needs and Resources


Capital Resources.








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





42



---



##### 













Capital Needs.






| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | operating expenses relating to our network;                                                                                                                                                                                            
|
| |  | capital expenditures, as discussed immediately below under
     Capital Expenditures;                                                                                                                                               
|
| |  | future investments, potential spectrum purchases and investments
    in new business opportunities;                                                                                                                                    
|
| |  | potential payments to the FCC and other third parties and
    potential costs to reconfigure our spectrum in connection with
    the FCCs recently announced decision relating to the
    realignment of spectrum in the 800 MHz band;
|
| |  | potential material increases in the cost of compliance with
    regulatory mandates, particularly the requirement to deploy
    location-based Phase II E911 capabilities;                                                             

43



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##### 





| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | scheduled principal and interest payments related to our
    long-term debt and any additional amounts that we choose to
    redeem; and
|
| |  | other general corporate expenditures including the anticipated
    impact of becoming a full cash taxpayer sometime during 2006.        

Capital Expenditures.




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



Future Contractual Obligations.


44



---



##### 








|                                  |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            |  |   |       |  |  |   |        | 
|--------------------------------- |  | ------------- | ------ | --------- | ------- | - | ----- | ---- |  | - | ----- |  |  | ---- | -------- |  | ---- | - | ----- | ---------- |  | - | ----- |  |  | - | ------ | 
|                                  |  |               |        | Remainder |         |   |       |      |  |   |       |  |  |      | 2009 and | 
|Future Contractual Obligations    |  | Total         |        |           | of 2004 |   |       | 2005 |  |   | 2006  |  |  | 2007 |          |  | 2008 |   |       | Thereafter | 
|                                  |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 
|                                  |  | (in millions) |       
|Public senior notes               |  | $             | 9,798  |           |         | $ | 226   |      |  | $ | 453   |  |  | $    | 453      |  |      | $ | 453   |            |  | $ | 453   |  |  | $ | 7,760  | 
|Bank credit facility(1)(2)        |  |               | 4,758  |           |         |   | 255   |      |  |   | 602   |  |  |      | 627      |  |      |   | 667   |            |  |   | 183   |  |  |   | 2,424  | 
|Preferred stock cash payments     |  |               | 245    |           |         |   |      |      |  |   |      |  |  |      |         |  |      |   |      |            |  |   |      |  |  |   | 245    | 
|Operating leases                  |  |               | 2,757  |           |         |   | 216   |      |  |   | 433   |  |  |      | 414      |  |      |   | 393   |            |  |   | 362   |  |  |   | 939    | 
|Purchase obligations and other(3) |  |               | 2,553  |           |         |   | 326   |      |  |   | 516   |  |  |      | 452      |  |      |   | 283   |            |  |   | 241   |  |  |   | 735    | 
|                                  |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 
|Total                             |  | $             | 20,111 |           |         | $ | 1,023 |      |  | $ | 2,004 |  |  | $    | 1,946    |  |      | $ | 1,796 |            |  | $ | 1,239 |  |  | $ | 12,103 | 
|                                  |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 









|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts include principal amortization and estimated
    interest payments based on managements expectation as to
    future interest rates, assume the current payment schedule and
    exclude any additional drawdown under the revolving loan
    commitment.
|   
|(2) | These amounts do not include the effect of the July 2004
    amendment to our bank credit facility as discussed above.                                                                                                                                                  
|   
|(3) | These amounts do not take into account any potential payments to
    the FCC or other third parties in connection with the Report and
    Order adopted by the FCC to resolve the problem of interference
    with public safety systems operating in the 800 MHz band. 





45



---



##### 





Future Outlook.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the anticipated level of capital expenditures;                                                                                                                                                                                                                                                                                                                                                              
|
| |  | our scheduled debt service requirements;                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | our current expectations regarding the anticipated timing and
    amount of our funding obligations, and the related requirement
    that we deliver letters of credit in the amount of
    $2,500 million securing those obligations, pursuant to the
    FCCs recently announced decision relating to the
    realignment of spectrum in the 800 MHz band as described in the
    FCCs news release; and
|
| |  | other future contractual obligations.                                                                                                                                                                                                                                                                                                                                                                       









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



46



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##### 







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



Forward-Looking Statements


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




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the success of efforts to improve, and satisfactorily address
    any issues relating to, our network performance;                                                                                                                                                                                                                                                                                                                             
|
| |  | the timely development and availability of new handsets with
    expanded applications and features, including those that operate
    using the 6:1 voice coder;                                                                                                                                                                                                                                                                               
|
| |  | the timely development and deployment of higher speed data
    infrastructure and software designed to significantly increase
    the data speeds of our network;                                                                                                                                                                                                                                                                              
|
| |  | market acceptance of our data service offerings, including our
    Nextel Online services;                                                                                                                                                                                                                                                                                                                                                     
|
| |  | the timely delivery and successful implementation of new
    technologies deployed in connection with any future enhanced
    iDEN or next generation or other advanced services we may offer;                                                                                                                                                                                                                                                 
|
| |  | no significant adverse change in Motorolas ability or
    willingness to provide handsets and related equipment and
    software applications, to develop new technologies or features
    for us, or to reimburse us for our costs related to the A-GPS
    software design defect, or in our relationship with it, as a
    result of the spin-off of its semiconductor unit, recent changes
    in its senior management team or otherwise;
|
| |  | the ability to achieve and maintain market penetration and
    subscriber revenue levels sufficient to provide financial
    viability to our network business;                                                                                                                                                                                                                                                                                
|
| |  | our ability to successfully scale, in some circumstances in
    conjunction with third parties under our outsourcing
    arrangements, our billing, collection, customer care and similar
    back-office operations to keep pace with customer growth,
    increased system usage rates and growth in levels of accounts
    receivable being generated by our customers;                                                                     
|
| |  | access to sufficient debt or equity capital to meet any
    operating and financing needs;                                                                                                                                                                                                                                                                                                                                                     

47



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##### 





| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the quality and price of similar or comparable wireless
    communications services offered or to be offered by our
    competitors, including providers of cellular and personal
    communication services including, for example, two-way
    walkie-talkie services first introduced by several of our
    competitors in 2003;
|
| |  | future legislation or regulatory actions relating to specialized
    mobile radio services, other wireless communications services or
    telecommunications generally;                                                                                                                                                            
|
| |  | the costs of compliance with regulatory mandates, particularly
    requirements related to the FCCs recently announced
    decision relating to the realignment of spectrum in the 800 MHz
    band as described in the FCCs news release and the
    requirement to deploy Phase II location-based E911
    capabilities; and   
|
| |  | other risks and uncertainties described from time to time in our
    reports filed with the Securities and Exchange Commission,
    including our annual report on Form 10-K for the year ended
    December 31, 2003 and our subsequent quarterly report on
    Form 10-Q.                                                        






|        |                                                                
|------- | ---------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk.









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



48



---



##### 





|                                                                                  |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |       | 
|--------------------------------------------------------------------------------- | --------------------- | --------------------- | - | --- | ---- |  | - | ---- | ---- |  | ---- | --- | - | ---- | - | --- | ---------- |  | - | ----- | - |  | ----- | ----- | - |  | - | ----- | - |  | - | ----- | 
|                                                                                  |                       | Year of Maturity      |   |     |      |  |   |      |     
|                                                                                  |                       |                       |   |     |      |  |   |      | Fair | 
|                                                                                  |                       | 2004                  |   |     | 2005 |  |   | 2006 |      |  | 2007 |     |   | 2008 |   |     | Thereafter |  |   | Total |   |  | Value |      
|                                                                                  |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |      
|                                                                                  |                       | (dollars in millions) |  
|I. Interest Rate Sensitivity                                                      |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |      
|Mandatorily Redeemable Preferred Stock, Long-term Debt and
    Finance Obligation |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |      
|                                                                                  | Fixed rate            |                       | $ |    |      |  | $ | 1    |      |  | $    | 1   |   |      | $ | 5   |            |  | $ |      |   |  | $     | 6,163 |   |  | $ | 6,170 |   |  | $ | 6,200 | 
|                                                                                  | Average interest rate |                       |   | 8   | %    |  |   | 8    | %    |  |      | 8   | % |      |   | 8   | %          |  |   |      |   |  |       | 8     | % |  |   | 8     | % |  |   |       | 
|                                                                                  | Variable rate         |                       | $ | 182 |      |  | $ | 427  |      |  | $    | 460 |   |      | $ | 499 |            |  | $ | 22    |   |  | $     | 2,090 |   |  | $ | 3,680 |   |  | $ | 3,694 | 
|                                                                                  | Average interest rate |                       |   | 2   | %    |  |   | 2    | %    |  |      | 2   | % |      |   | 2   | %          |  |   | 4     | % |  |       | 4     | % |  |   | 3     | % |  |   |       | 







Item 4.     Controls and
Procedures.













































49



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##### 






PART II  OTHER INFORMATION.





Item 1.     Legal
Proceedings.











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






Proposal 1 To elect directors to hold office
for a three-year term ending on the date of our annual meeting
of stockholders in 2007.




|              |  |     |             |  |          |  |            | 
|------------- |  | --- | ----------- |  | -------- |  | ---------- | 
|Name          |  | For |             |  | Withheld | 
|              |  |     |             |  |          | 
|Keith J. Bane |  |     | 923,332,295 |  |          |  | 23,644,264 | 
|V. Janet Hill |  |     | 883,589,796 |  |          |  | 63,386,763 | 



Directors Holding Office Until 2005:


Directors Holding Office Until 2006:


Proposal 2 To ratify the appointment of
Deloitte & Touche LLP as our independent auditors to audit
our consolidated financial statements for the fiscal year ending
December 31, 2004.




|      |  |     |             |  |         |  |            |                |  |  |            |  |  |  |           | 
|----- |  | --- | ----------- |  | ------- |  | ---------- | -------------- |  |  | ---------- |  |  |  | --------- | 
|      |  | For |             |  | Against |  |            | Broker Nonvote |  |  | Abstention | 
|      |  |     |             |  |         |  |            |                |  |  |            | 
|Total |  |     | 851,702,025 |  |         |  | 88,622,390 |                |  |  | 0          |  |  |  | 6,652,144 | 

50



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##### 



Proposal 3 To approve the Nextel
Communications, Inc. Amended and Restated Associate Stock
Purchase Plan.




|      |  |     |             |  |         |  |            |                |  |  |             |  |  |  |           | 
|----- |  | --- | ----------- |  | ------- |  | ---------- | -------------- |  |  | ----------- |  |  |  | --------- | 
|      |  | For |             |  | Against |  |            | Broker Nonvote |  |  | Abstention  | 
|      |  |     |             |  |         |  |            |                |  |  |             | 
|Total |  |     | 772,357,407 |  |         |  | 19,837,027 |                |  |  | 148,831,689 |  |  |  | 5,950,436 | 




Item 5.     Other
Information.


Proposed Public Safety Spectrum Realignment.






Global Positioning System and Enhanced 911 Services.




51



---



##### 









Local Number Portability.


Consumer Protection Rules.


MMDS Rebanding.


Outage Reporting.


52



---



##### 






Item 6.     Exhibits and
Reports on Form 8-K.







|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 4  | .1                 |  | Second Amended and Restated Credit Agreement, dated
    July 15, 2004, among Nextel Communications, Inc., Nextel
    Finance Company and the other Restricted Companies party
    thereto, the Revolving Credit Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent and Collateral Agent.                                             
|        | 10 | .1                 |  | Nextel Communications, Inc. Amended and Restated Associate Stock
    Purchase Plan (filed on April 6, 2004 as Annex A to the
    proxy statement in connection with the 2004 annual meeting of
    stockholders of Nextel Communications, Inc. and
    incorporated herein by reference).                                                                    
|        | 10 | .2                 |  | Amendment No. 9 to Amended and Restated Shareholders
    Agreement by and among Nextel Partners, Inc. and the
    stockholders named therein. (filed by Nextel Partners on
    May 10, 2004 as Exhibit 10.2(i) to Nextel Partners
    quarterly report on Form 10-Q for the quarterly period
    ended March 31, 2004 and incorporated herein by reference).
|        | 10 | .3                 |  | Form of Indemnification Agreement between Nextel Communications,
    Inc. and each of its directors and officers.                                                                                                                                                                                                                                            
|        | 15 |                     |  | Letter in Lieu of Consent for Review Report.                                                                                                                                                                                                                                                                                                                 
|        | 31 |                     |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                                                                                                                                                                                     
|        | 32 |                     |  | Section 1350 Certifications.                                                                                                                                                                                                                                                                                                                                 












|  |                                          
|- | -----------------------------------------
| | Previously filed with Original Form 10-Q.








| |    |                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Current report on Form 8-K dated and filed April 22,
    2004, reporting certain financial and operating results under
    Item 5 and furnishing a press release announcing certain
    financial and operating results for the first quarter of 2004
    under Item 12.
|
| | 2. | Current report on Form 8-K dated and filed May 24,
    2004, furnishing a press release announcing that financial
    guidance would be reaffirmed at a conference under Item 9.                                                                                        

53



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##### 



SIGNATURE






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



| |     |                      
| | --- | ---------------------
| | By: | /s/ William G. Arendt

| |                                     
| | ------------------------------------
| |                                     
| | William G. Arendt                   
| | Senior Vice President and Controller
| | (Principal Accounting Officer)      









54



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##### 



EXHIBIT INDEX





|        |    |                     |  |                                                                                                                                                                                                                                                                                                                 
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 4  | .1                 |  | Second Amended and Restated Credit Agreement, dated
    July 15, 2004, among Nextel Communications, Inc., Nextel
    Finance Company and the other Restricted Companies party
    thereto, the Revolving Credit Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent and Collateral Agent.
|        | 10 | .3                 |  | Form of Indemnification Agreement between Nextel Communications,
    Inc. and each of its directors and officers.                                                                                                                                                                                               
|        | 15 |                     |  | Letter in Lieu of Consent for Review Report.                                                                                                                                                                                                                                                                    
|        | 31 |                     |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                                                                                                                                        
|        | 32 |                     |  | Section 1350 Certifications.                                                                                                                                                                                                                                                                                    












|  |                                          
|- | -----------------------------------------
| | Previously filed with Original Form 10-Q.