##### Table of Contents









UNITED STATES



Washington, D.C. 20549


FORM 10-Q

(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,
	2001
|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.

(Exact name of registrant as specified in its
charter)


|                                                                                     |  |                                               
|------------------------------------------------------------------------------------ |  | ----------------------------------------------
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|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                  

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

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date.

|                                                  |  |                              |             | 
|------------------------------------------------- |  | ---------------------------- | ----------- | 
|                                                  |  | Number of Shares Outstanding
|Title of Class                                    |  | on July 31, 2001            
|                                                  |  |                             
|Class A Common Stock, $0.001 par value            |  |                              | 740,261,908 | 
|Class B Nonvoting Common Stock,
	$0.001 par value |  |                              | 35,660,000  | 



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TABLE OF CONTENTS



|                                        |                                                                                                |                                                                        |  |  |  |  |  | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION.       
|                                        | Item 1. Financial Statements -- Unaudited.                                                    
|                                        |                                                                                                | Condensed Consolidated Balance Sheets                                 
|                                        |                                                                                                | Condensed Consolidated Statements of Operations and Comprehensive Loss
|                                        |                                                                                                | Condensed Consolidated Statement of Changes in Stockholders Equity   
|                                        |                                                                                                | Condensed Consolidated Statements of Cash Flows                       
|                                        |                                                                                                | Notes to Condensed Consolidated Financial Statements                  
|                                        | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                        | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                           
|PART II -- OTHER INFORMATION.          
|                                        | Item 1. Legal Proceedings.                                                                    
|                                        | Item 2. Changes in Securities.                                                                
|                                        | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|                                        | Item 5. Other Information.                                                                    
|                                        | Item 6. Exhibits and Reports on Form 8-K.                                                     
|                                        | SIGNATURE                                                                                     
|Ex-10.1 Amendment to Purchase Agreement



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES

INDEX

| |          |  |  |                        |  |                                                                                                                                    |  |  |    | 
| | -------- |  |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
| |          |  |  |                        |  | Page                                                                                                                              
| |          |  |  |                        |  |                                                                                                                                   
| | Part  I  |  |  | Financial Information.
| |          |  |  | Item 1.                |  | Financial Statements  Unaudited.                                                                                                  |  |  |    | 
| |          |  |  |                        |  | Condensed Consolidated Balance Sheets                                                                                              |  |  |    | 
|
|
|
|
| |          |  |  |                        |  | As of June 30, 2001 and
	December 31, 2000                                                                                         |  |  | 3  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statements of Operations
	and Comprehensive Loss For the Six and Three Months Ended
	June 30, 2001 and 2000 |  |  | 4  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statement of Changes in
	Stockholders Equity For the Six Months Ended June 30,
	2001                       |  |  | 5  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statements of Cash Flows
	For the Six Months Ended June 30, 2001 and 2000                                   |  |  | 6  | 
|
|
|
|
| |          |  |  |                        |  | Notes to Condensed Consolidated Financial
	Statements                                                                              |  |  | 7  | 
|
|
|
|
| |          |  |  | Item 2.                |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations                                             |  |  | 13 | 
|
|
|
|
| |          |  |  | Item 3.                |  | Quantitative and Qualitative Disclosures about
	Market Risk                                                                        |  |  | 25 | 
|
|
|
|
| | Part  II |  |  | Other Information.    
|
|
|
|
| |          |  |  | Item 1.                |  | Legal Proceedings                                                                                                                  |  |  | 28 | 
|
|
|
|
| |          |  |  | Item 2.                |  | Changes in Securities                                                                                                              |  |  | 28 | 
|
|
|
|
| |          |  |  | Item 4.                |  | Submission of Matters to a Vote of Security
	Holders                                                                               |  |  | 28 | 
|
|
|
|
| |          |  |  | Item 5.                |  | Other Information                                                                                                                  |  |  | 29 | 
|
|
|
|
| |          |  |  | Item 6.                |  | Exhibits and Reports on Form 8-K                                                                                                   |  |  | 31 | 



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##### Table of Contents






PART I  FINANCIAL INFORMATION.




Item 1.  Financial
Statements  Unaudited.

NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






Condensed Consolidated Balance
Sheets


As of June 30, 2001 and December 31,
2000


(in millions)


Unaudited


|                                                                                    |                                                                                       |                            |        |        |        |   |        |        |        | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                                    |                                                                                       | 2001                       |        | 2000  
|                                                                                    |                                                                                       |                            |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|ASSETS                                                                             
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Current assets                                                                      |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Cash and cash equivalents, of which $224 and $474
	is restricted                      |                            | $      | 3,456  |        |   | $      | 2,609  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Short-term investments                                                                |                            |        | 1,280  |        |   |        | 2,065  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accounts and notes receivable, less allowance for
	doubtful accounts of $149 and $104 |                            |        | 986    |        |   |        | 864    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Handset and accessory inventory                                                       |                            |        | 256    |        |   |        | 183    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Prepaid expenses and other current assets                                             |                            |        | 537    |        |   |        | 737    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total current assets       |        |        | 6,515  |   |        |        | 6,458  | 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Investments                                                                         |                                                                                       |                            | 563    |        |        |   | 756    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Property, plant and equipment,net of accumulated depreciation of
	$3,171 and $2,482 |                                                                                       |                            | 9,792  |        |        |   | 8,791  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Intangible assets,net of accumulated amortization of
	$1,176 and $1,101             |                                                                                       |                            | 6,501  |        |        |   | 5,982  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Other assets                                                                        |                                                                                       |                            | 781    |        |        |   | 699    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | $                          | 24,152 |        |        | $ | 22,686 |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                              
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Current liabilities                                                                 |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accounts payable, accrued expenses and other                                          |                            | $      | 2,136  |        |   | $      | 2,197  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Due to related parties                                                                |                            |        | 324    |        |   |        | 423    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Current portion of long-term debt, capital lease
	and finance obligations             |                            |        | 131    |        |   |        | 102    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total current liabilities  |        |        | 2,591  |   |        |        | 2,722  | 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Long-term debt                                                                      |                                                                                       |                            | 16,232 |        |        |   | 13,763 |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Capital lease and finance
	obligations                                              |                                                                                       |                            | 919    |        |        |   | 866    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Deferred income taxes and other                                                     |                                                                                       |                            | 1,392  |        |        |   | 1,426  |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total liabilities          |        |        | 21,134 |   |        |        | 18,777 | 
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|Contingencies (note 4)                                                              |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Mandatorily redeemable preferred
	stock                                             |                                                                                       |                            | 1,994  |        |        |   | 1,881  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Stockholders equity                                                                |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Convertible preferred stock, 8 shares issued
	and outstanding                         |                            |        | 283    |        |   |        | 283    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Common stock, class A, 730 and 727 shares
	issued and outstanding                     |                            |        | 1      |        |   |        | 1      |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Common stock, class B, nonvoting convertible,
	36 shares issued and outstanding       |                            |        |       |        |   |        |       |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Paid-in capital                                                                       |                            |        | 8,288  |        |   |        | 8,370  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accumulated deficit                                                                   |                            |        | (7,295 | )      |   |        | (6,554 | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Treasury stock, at cost                                                               |                            |        |       |        |   |        | (2     | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Deferred compensation, net                                                            |                            |        | (23    | )      |   |        | (28    | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accumulated other comprehensive loss                                                  |                            |        | (230   | )      |   |        | (42    | )     
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total stockholders equity |        |        | 1,024  |   |        |        | 2,028  | 
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | $                          | 24,152 |        |        | $ | 22,686 |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       

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

3



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statements of
Operations and Comprehensive Loss

For the Six and Three Months Ended
June 30, 2001 and 2000


(in millions, except per share
amounts)


Unaudited


|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |       |     |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------------------- | ----- | ------------------ | ---- | ---- | ----- | ----- | --- | - | ----- | ----- | -- | - | ----- | ----- | --- | -
|                                                                                |                                                                     |                                                                 |       |                   
|                                                                                |                                                                     | Six Months Ended                                                |       | Three Months Ended
|                                                                                |                                                                     | June 30,                                                        |       | June 30,          
|                                                                                |                                                                     |                                                                 |       |                   
|                                                                                |                                                                     | 2001                                                            |       | 2000               |      | 2001 |       | 2000 
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |      
|Operating revenues                                                              |                                                                     | $                                                               | 3,623 |                    |      | $    | 2,540 |       |     | $ | 1,881 |       |    | $ | 1,365 |      
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Operating expenses                                                              |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cost of revenues                                                    |                                                                 |       | 1,382              |      |      |       | 962   |     |   |       | 684   |    |   |       | 526   |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Selling, general and administrative                                 |                                                                 |       | 1,473              |      |      |       | 1,060 |     |   |       | 747   |    |   |       | 549   |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Restructuring charge                                                |                                                                 |       | 22                 |      |      |       |      |     |   |       | 22    |    |   |       |      |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation and amortization                                       |                                                                 |       | 821                |      |      |       | 583   |     |   |       | 427   |    |   |       | 303   |    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                                |                                                                     |                                                                 | 3,698 |                    |      |      | 2,605 |       |     |   | 1,880 |       |    |   | 1,378 |      
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Operating (loss) income                                                         |                                                                     |                                                                 | (75   | )                  |      |      | (65   | )     |     |   | 1     |       |    |   | (13   | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Other income (expense)                                                          |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest expense                                                    |                                                                 |       | (717               | )    |      |       | (579  | )   |   |       | (359  | )  |   |       | (301  | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Interest income                                                     |                                                                 |       | 135                |      |      |       | 187   |     |   |       | 56    |    |   |       | 104   |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Equity in losses of unconsolidated affiliates                       |                                                                 |       | (45                | )    |      |       | (71   | )   |   |       | (24   | )  |   |       | (36   | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Foreign currency transaction (losses) gains,
	net                   |                                                                 |       | (55                | )    |      |       | 6     |     |   |       | (45   | )  |   |       | (6    | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other, net                                                          |                                                                 |       | (11                | )    |      |       | (14   | )   |   |       | (11   | )  |   |       | 3     |    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                                |                                                                     |                                                                 | (693  | )                  |      |      | (471  | )     |     |   | (383  | )     |    |   | (236  | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Loss before income tax benefit and
	extraordinary item                          |                                                                     |                                                                 | (768  | )                  |      |      | (536  | )     |     |   | (382  | )     |    |   | (249  | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Income tax benefit                                                              |                                                                     |                                                                 | 27    |                    |      |      | 16    |       |     |   | 13    |       |    |   | 8     |      
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Loss before extraordinary item                                                  |                                                                     |                                                                 | (741  | )                  |      |      | (520  | )     |     |   | (369  | )     |    |   | (241  | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Extraordinary item  loss on early
	retirement of debt, net of income tax of $0 |                                                                     |                                                                 |      |                    |      |      | (104  | )     |     |   |      |       |    |   |      |      
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Net loss                                                                        |                                                                     |                                                                 | (741  | )                  |      |      | (624  | )     |     |   | (369  | )     |    |   | (241  | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Mandatorily redeemable preferred stock
	dividends                               |                                                                     |                                                                 | (113  | )                  |      |      | (103  | )     |     |   | (57   | )     |    |   | (51   | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Loss attributable to common
	stockholders                                       |                                                                     | $                                                               | (854  | )                  |      | $    | (727  | )     |     | $ | (426  | )     |    | $ | (292  | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Loss per share attributable to common
	stockholders, basic and diluted          |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Loss before extraordinary item attributable to
	common stockholders |                                                                 | $     | (1.12              | )    |      | $     | (0.83 | )   |   | $     | (0.56 | )  |   | $     | (0.38 | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Extraordinary item                                                  |                                                                 |       |                   |      |      |       | (0.14 | )   |   |       |      |    |   |       |      |    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                                |                                                                     | $                                                               | (1.12 | )                  |      | $    | (0.97 | )     |     | $ | (0.56 | )     |    | $ | (0.38 | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Weighted average number of common shares
	outstanding                           |                                                                     |                                                                 | 765   |                    |      |      | 751   |       |     |   | 765   |       |    |   | 760   |      
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|Comprehensive loss, net of income
	tax                                          |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Unrealized (loss) gain on available-for-sale
	securities, net       |                                                                 | $     | (110               | )    |      | $     | (35   | )   |   | $     | 52    |    |   | $     | (72   | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Foreign currency translation adjustment                             |                                                                 |       | (59                | )    |      |       | 8     |     |   |       | (13   | )  |   |       | (11   | )  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cash flow hedge:                                                    |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |       |    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                                     | Cumulative effect of accounting change                          |       |                    | (20  | )    |       |       |    |   |       |       |   |   |       |       |    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                                     | Reclassification of transition adjustment
	included in net loss |       |                    | 4    |      |       |       |    |   |       |       | 2  |   |       |       |    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                                     | Unrealized (loss) gain on cash flow hedge                       |       |                    | (3   | )    |       |       |    |   |       |       | 9  |   |       |       |    |  
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                                |                                                                     | Other comprehensive (loss) income                               |       |                    | (188 | )    |       |       | (27 | ) |       |       | 50 |   |       |       | (83 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Net loss                                                            |                                                                 |       | (741               | )    |      |       | (624  | )   |   |       | (369  | )  |   |       | (241  | )  
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      
|                                                                                |                                                                     | $                                                               | (929  | )                  |      | $    | (651  | )     |     | $ | (319  | )     |    | $ | (324  | )    
|                                                                                |                                                                     |                                                                 |       |                    |      |      |       |       |     |   |       |       |    |   |       |      

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

4



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statement of Changes in
Stockholders Equity

For the Six Months Ended June 30,
2001


(in millions)


Unaudited


|                          |                                                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      |    | 
|------------------------- | ------------------------------------------------ | ---------------------------- | - | ------------ |  | ------------ | --- | ------- |  | ----------- | --- | -------------- | - | -------- | - | ------------- | - | ------ | -- | ------ |  | ------------ | - | ---- |  | ----- | ----- | ---- | -- | - | ------ | ---- | - |  | - |  | - | - | -- | - | - | - | --- | - |  | - | ---- | ---- | - | - | ----- | ---- | -- | 
|                          |                                                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |       
|                          |                                                  | Convertible                  |   | Class A      |  | Class B      |     |         |  |             |     |                |   |          |   | Accumulated   |   |       
|                          |                                                  | Preferred Stock              |   | Common Stock |  | Common Stock |     |         |  |             |     | Treasury Stock |   |          |   | Other         |   |       
|                          |                                                  |                              |   |              |  |              |     | Paid-in |  | Accumulated |     |                |   | Deferred |   | Comprehensive |   |       
|                          |                                                  | Shares                       |   | Amount       |  | Shares       |     | Amount  |  | Shares      |     | Amount         |   | Capital  |   | Deficit       |   | Shares |    | Amount |  | Compensation |   | Loss |  | Total
|                          |                                                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |      
|Balance, January  1, 2001 |                                                  |                              | 8 |              |  | $            | 283 |         |  |             | 727 |                |   | $        | 1 |               |   |        | 36 |        |  | $            |  |      |  | $     | 8,370 |      |    | $ | (6,554 | )    |   |  |  |  |   | $ | (2 | ) |   | $ | (28 | ) |  | $ | (42  | )    |   | $ | 2,028 |     
|                         
|                         
|                         
|                         
|                          | Net loss                                         |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        | (741 | ) |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       | (741 | ) 
|                         
|                         
|                         
|                         
|                          | Other comprehensive loss                         |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      | (188 | ) |   |       | (188 | ) 
|                         
|                         
|                         
|                         
|                          | Issuance of common stock:                        |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      |   
|                         
|                         
|                         
|                         
|                          |                                                  | Exercise of options          |   |              |  |              |     |         |  |             |     |                | 2 |          |   |               |  |        |    |        |  |              |   |      |  |       |       |      | 15 |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      | 15 | 
|                         
|                         
|                         
|                         
|                          |                                                  | Employee stock purchase plan |   |              |  |              |     |         |  |             |     |                | 1 |          |   |               |  |        |    |        |  |              |   |      |  |       |       |      | 9  |   |        |      |   |  |   |  |  |   |    |   | 2 |   |     |   |  |   |      |      |   |   |       |      | 11 | 
|                         
|                         
|                         
|                         
|                          | Deferred compensation and other                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       | 7    |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     | 5 |  |   |      |      |   |   |       | 12   |   
|                         
|                         
|                         
|                         
|                          | Mandatorily redeemable preferred stock dividends |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       | (113 | )  |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       | (113 | ) 
|                          |                                                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |     
|Balance, June 30, 2001    |                                                  |                              | 8 |              |  | $            | 283 |         |  |             | 730 |                |   | $        | 1 |               |   |        | 36 |        |  | $            |  |      |  | $     | 8,288 |      |    | $ | (7,295 | )    |   |  |  |  |   | $ |   |   |   | $ | (23 | ) |  | $ | (230 | )    |   | $ | 1,024 |     
|                          |                                                  |                              |   |              |  |              |     |         |  |             |     |                |   |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |    |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |     

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

5



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statements of Cash
Flows

For the Six Months Ended June 30, 2001
and 2000


(in millions)


Unaudited


|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |        |     |      |        |  
|----------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ----------------------------------------- | --- | ---- | ------ | ------ | --- | ---- | ------ | -
|                                                |                                                                                  | 2001                                                                                                                           |                                              | 2000                                     
|                                                |                                                                                  |                                                                                                                                |                                              |                                          
|Cash flows from operating activities            |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Net loss                                                                         |                                                                                                                                | $                                            | (741                                      | )   |      | $      | (624   | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Adjustments to reconcile net loss to net cash
	provided by operating activities: |                                                                                                                                |                                              |                                           |     |      |        |        |    
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Amortization of debt financing costs and
	accretion of senior redeemable discount notes, net of accreted
	interest capitalized |                                              |                                           | 258 |      |        |        | 199 |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Provision for losses on accounts receivable                                                                                    |                                              |                                           | 157 |      |        |        | 69  |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Stock-based compensation and other                                                                                             |                                              |                                           | 17  |      |        |        | (5  | )   
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Depreciation and amortization                                                                                                  |                                              |                                           | 821 |      |        |        | 583 |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Equity in losses of unconsolidated affiliates                                                                                  |                                              |                                           | 45  |      |        |        | 71  |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Foreign currency transaction losses (gains), net                                                                               |                                              |                                           | 55  |      |        |        | (6  | )   
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Income tax benefit                                                                                                             |                                              |                                           | (27 | )    |        |        | (16 | )   
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Extraordinary loss on early retirement of debt                                                                                 |                                              |                                           |    |      |        |        | 104 |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  | Change in assets and liabilities, net of effects
	from acquisitions:                                                           |                                              |                                           |     |      |        |        |     |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  |                                                                                                                                | Accounts and notes receivable                |                                           |     | (277 | )      |        |     | (180 | )     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  |                                                                                                                                | Handset and accessory inventory              |                                           |     | (86  | )      |        |     | (57  | )     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  |                                                                                                                                | Prepaid and other assets                     |                                           |     | 175  |        |        |     | (54  | )     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                  |                                                                                                                                | Accounts payable, accrued expenses and other |                                           |     | 61   |        |        |     | 130  |       
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                                |                                                                                  |                                                                                                                                |                                              | Net cash provided by operating activities |     |      | 458    |        |     |      | 214    |  
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|Cash flows from investing activities            |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Capital expenditures                                                             |                                                                                                                                |                                              | (1,912                                    | )   |      |        | (1,403 | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from maturities and sales of short-term
	investments                    |                                                                                                                                |                                              | 2,979                                     |     |      |        | 1,800  |    
|                                               
|                                               
|                                               
|                                               
|                                                | Purchases of short-term investments                                              |                                                                                                                                |                                              | (2,154                                    | )   |      |        | (2,278 | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Payments for licenses, acquisitions and other
	investments, net of cash acquired |                                                                                                                                |                                              | (739                                      | )   |      |        | (206   | )  
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                                |                                                                                  |                                                                                                                                |                                              | Net cash used in investing activities     |     |      | (1,826 | )      |     |      | (2,087 | )
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|Cash flows from financing activities            |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Issuance of debt securities                                                      |                                                                                                                                |                                              | 2,250                                     |     |      |        | 1,150  |    
|                                               
|                                               
|                                               
|                                               
|                                                | Retirement of debt securities                                                    |                                                                                                                                |                                              |                                          |     |      |        | (1,208 | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Borrowings under long-term credit facilities                                     |                                                                                                                                |                                              |                                          |     |      |        | 1,938  |    
|                                               
|                                               
|                                               
|                                               
|                                                | Repayments under long-term credit facilities                                     |                                                                                                                                |                                              | (53                                       | )   |      |        | (27    | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from exercise of stock options                                          |                                                                                                                                |                                              | 15                                        |     |      |        | 63     |    
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from finance obligation                                                 |                                                                                                                                |                                              | 33                                        |     |      |        | 50     |    
|                                               
|                                               
|                                               
|                                               
|                                                | Debt financing costs and other                                                   |                                                                                                                                |                                              | (30                                       | )   |      |        | (45    | )  
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|                                                |                                                                                  |                                                                                                                                |                                              | Net cash provided by financing activities |     |      | 2,215  |        |     |      | 1,921  |  
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|Net increase in cash and cash
	equivalents      |                                                                                  |                                                                                                                                | 847                                          |                                           |     |      | 48     |       
|                                               
|                                               
|                                               
|                                               
|Cash and cash equivalents, beginning of
	period |                                                                                  |                                                                                                                                | 2,609                                        |                                           |     |      | 4,701  |       
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       
|Cash and cash equivalents, end of
	period       |                                                                                  | $                                                                                                                              | 3,456                                        |                                           |     | $    | 4,749  |       
|                                                |                                                                                  |                                                                                                                                |                                              |                                           |     |      |        |       

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

6



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






Notes to Condensed Consolidated Financial
Statements


Unaudited


Note 1.  Basis of
Presentation

Our unaudited condensed consolidated financial
statements have been prepared under the rules and regulations of
the Securities and Exchange Commission and reflect all
adjustments that are necessary for a fair presentation of the
results for interim periods. All adjustments made were normal
recurring accruals.

You should read the condensed consolidated
financial statements in conjunction with the consolidated
financial statements and notes contained in our annual report on
Form 10-K for the year ended December 31, 2000 and our
subsequent quarterly report on Form 10-Q for the quarter
ended March 31, 2001. You should also read Nextel
International, Inc.s annual report on Form 10-K
for the year ended December 31, 2000 and its subsequent
quarterly reports on Form 10-Q for matters related to the
operations of Nextel International, our indirect, substantially
wholly owned subsidiary. You should not expect the results of
operations of interim periods to be an indication of the results
for a full year.

Restricted Cash and Cash Equivalents.Nextel International and its
subsidiaries held cash and cash equivalents of $224 million
at June 30, 2001 and $474 million at December 31,
2000 that were not available to fund any of the cash needs of
our domestic operations due to restrictions contained in their
financing agreements.



| |                                       
| | --------------------------------------
| | Accumulated Other Comprehensive
	Loss.

|                                                              |  |               |      |              |  |   |      |  
|------------------------------------------------------------- |  | ------------- | ---- | ------------ |  | - | ---- | -
|                                                              |  | June 30,      |      | December 31,
|                                                              |  | 2001          |      | 2000        
|                                                              |  |               |      |             
|                                                              |  |              
|                                                              |  | (in millions)
|                                                             
|                                                             
|                                                             
|                                                             
|Unrealized (loss) gain on available-for-sale
	securities, net |  | $             | (18  | )            |  | $ | 92   |  
|                                                             
|                                                             
|                                                             
|                                                             
|Cumulative foreign currency translation adjustment            |  |               | (193 | )            |  |   | (134 | )
|                                                             
|                                                             
|                                                             
|                                                             
|Cumulative effect of accounting change                        |  |               | (16  | )            |  |   |     |  
|                                                             
|                                                             
|                                                             
|                                                             
|Unrealized loss on cash flow hedge                            |  |               | (3   | )            |  |   |     |  
|                                                              |  |               |      |              |  |   |      |  
|                                                              |  | $             | (230 | )            |  | $ | (42  | )
|                                                              |  |               |      |              |  |   |      |  



| |                                     
| | ------------------------------------
| | Supplemental Cash Flow
	Information.

|                                                  |                                                                                   |               |       |       |   |   |       |       | 
|------------------------------------------------- | --------------------------------------------------------------------------------- | ------------- | ----- | ----- | - | - | ----- | ----- | 
|                                                  |                                                                                   |              
|                                                  |                                                                                   | Six Months   
|                                                  |                                                                                   | Ended        
|                                                  |                                                                                   | June 30,     
|                                                  |                                                                                   |              
|                                                  |                                                                                   | 2001          |       | 2000 
|                                                  |                                                                                   |               |       |      
|                                                  |                                                                                   |              
|                                                  |                                                                                   | (in millions)
|                                                 
|                                                 
|                                                 
|                                                 
|Capital expenditures                              |                                                                                   |               |       |       |   |   |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash paid for capital expenditures, including
	interest capitalized               |               | $     | 1,912 |   |   | $     | 1,403 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Changes in noncash capital expenditures,
	including accreted interest capitalized |               |       | (220  | ) |   |       | 230   | 
|                                                  |                                                                                   |               |       |       |   |   |       |      
|                                                  |                                                                                   | $             | 1,692 |       |   | $ | 1,633 |      
|                                                  |                                                                                   |               |       |       |   |   |       |      
|Cash paid for interest,net of amounts capitalized |                                                                                   | $             | 404   |       |   | $ | 391   |      
|                                                  |                                                                                   |               |       |       |   |   |       |      

Accounting Change and New Accounting
Pronouncements.Effective
January 1, 2001, we adopted Statement of Financial
Accounting Standards, or SFAS, No. 133, Accounting
for Derivative Instruments and Hedging Activities, which,
as amended by SFAS No. 138, establishes accounting and
reporting standards for derivative instruments, including some
derivative instruments embedded in other contracts, and for
hedging activities. Upon adoption of SFAS No. 133, we
recorded a $20 million transition adjustment in other
comprehensive loss as a cumulative effect of a change in
accounting principle. We will reclassify this

7



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

amount into interest expense over the lives of
the respective interest rate swaps, including $8 million
during the twelve months ending December 31, 2001.

We hedge the cash flows on some of our long-term
debt using interest rate swaps. We enter into these derivative
contracts to manage our exposure to interest rate movements by
achieving a desired proportion of fixed rate versus variable
rate debt. In an interest rate swap, we agree to exchange the
difference between a variable interest rate and either a fixed
or another variable interest rate, multiplied by a notional
principal amount.

As of June 30, 2001, we have recognized all
derivatives at their fair values of $78 million in other
current and other noncurrent liabilities on our balance sheet.
For our interest rate swap that qualifies for cash flow hedge
accounting, an unrealized loss of $3 million, representing
the effective portion of the change in its fair value, is
reported in other comprehensive loss and will be reclassified
into interest expense in the same period during which the hedged
item affects interest expense. The ineffective portion of the
change in fair value of our cash flow hedge and changes in the
fair values of our derivative instruments not qualifying for
hedge accounting are recognized in our statement of operations
in the period of the change. For the six months ended
June 30, 2001, interest expense includes a loss of
$6 million representing changes in the fair values of our
derivative instruments not qualifying as hedges and $0 relating
to the ineffective portion of the change in fair value of our
cash flow hedge.

In May 2000, the Emerging Issues Task Force, or
EITF, reached a consensus on EITF Issue No. 00-14,
Accounting for Certain Sales Incentives, which
addresses the recognition, measurement and statement of
operations classification for sales incentives offered
voluntarily by vendors, without cost to consumers, as a result
of a single exchange transaction. The adoption of EITF Issue
No. 00-14 on April 1, 2001 did not have a material
impact on our financial position or results of operations.

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

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets, which
addresses the accounting and reporting for acquired goodwill and
other intangible assets. SFAS No. 142 requires goodwill and
intangible assets with indefinite useful lives to no longer be
amortized but to be tested for impairment at least annually.
Intangible assets that have finite lives will continue to be
amortized over their useful lives. The amortization and
nonamortization provisions of SFAS No. 142 will be applied
to all goodwill and intangible assets acquired after
June 30, 2001. Effective January 1, 2002, we are
required to and will apply all other provisions of SFAS
No. 142 to all goodwill and intangible assets recognized on
our financial statements at that date. We are in the process of
evaluating the impact of applying these provisions on our
financial position and results of operations.

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

As a result of our adoption of Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial
Statements, we recognized revenues from digital handset
sales of $135 million during the six months ended
June 30, 2001, $160 million during the six months
ended June 30, 2000, $62 million during the three
months ended June 30, 2001 and $79 million during the
three months ended June 30, 2000 and equal amounts of cost
of revenues for these periods, attributable to handset sales
previously reported in periods prior to 2000.

8



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

Note 2.  Significant
Transactions

Acquisitions.In May 2001, we purchased from
Mobex Communications, Inc. 800 MHz and 900 MHz
specialized mobile radio licenses and related assets and an
equity interest in a subsidiary of Mobex for a total cash
purchase price of $117 million. Also in May 2001, we
purchased from Arch Wireless, Inc. 900 MHz specialized
mobile radio licenses and Arch Wireless redeemable cumulative
preferred stock for an aggregate cash purchase price of
$250 million. In June 2001, we purchased from
Motorola, Inc. 900 MHz specialized mobile radio
licenses and related assets for a cash purchase price of
$58 million. Each of these acquisitions was accounted for
under the purchase method. As the purchase prices for some of
these acquisitions were allocated on a preliminary basis,
further adjustments may be necessary.

Restructuring Charge.In May 2001, we announced a
restructuring to reduce domestic payroll and other operating
costs by implementing a 5% workforce reduction and streamlining
our operations. The workforce reduction, completed during the
second quarter, affected about 800 employees across the entire
domestic organization. As a result of the restructuring, we
recorded a $22 million charge consisting of
$15 million related to severance and fringe benefits and
$7 million related to the write-off of information
technology development projects that we abandoned as a result of
the reduced headcount. As of June 30, 2001, liabilities
related to the workforce reduction had been substantially paid.

Note 3.  Long-Term Debt,
Capital Lease and Finance Obligations

|                                                                                                                                        |                      |                       |        |              |     |   |        |        |     |  
|--------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------------------- | ------ | ------------ | --- | - | ------ | ------ | --- | -
|                                                                                                                                        |                      | June 30,              |        | December 31,
|                                                                                                                                        |                      | 2001                  |        | 2000        
|                                                                                                                                        |                      |                       |        |             
|                                                                                                                                        |                      |                      
|                                                                                                                                        |                      | (dollars in millions)
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|13% senior redeemable discount notes due
	2007,issued by Nextel International,
	net of unamortized discount of $102 and $156            |                      | $                     | 849    |              |     | $ | 795    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|10.65% senior redeemable discount notes
	due 2007,net of unamortized discount
	of $99 and $136                                          |                      |                       | 741    |              |     |   | 704    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.75% senior serial redeemable discount
	notes due 2007,net of unamortized
	discount of $134 and $180                                   |                      |                       | 995    |              |     |   | 949    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|4.75% convertible senior notes due
	2007                                                                                                |                      |                       | 354    |              |     |   | 354    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.95% senior serial redeemable discount
	notes due 2008,net of unamortized
	discount of $237 and $303                                   |                      |                       | 1,390  |              |     |   | 1,324  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12.125% senior serial redeemable discount
	notes due 2008,issued by Nextel
	International, net of unamortized discount of $138 and $172 |                      |                       | 592    |              |     |   | 558    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12% senior serial redeemable notes due
	2008,net of unamortized discount of
	$4 and $4                                                  |                      |                       | 296    |              |     |   | 296    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.375% senior serial redeemable notes due
	2009                                                                                         |                      |                       | 2,000  |              |     |   | 2,000  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|5.25% convertible senior notes due
	2010                                                                                                |                      |                       | 1,150  |              |     |   | 1,150  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12.75% senior serial redeemable notes due
	2010,issued by Nextel International,
	net of unamortized discount of $9 and $9               |                      |                       | 641    |              |     |   | 641    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.5% senior serial redeemable notes due
	2011                                                                                           |                      |                       | 1,250  |              |     |   |       |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|6% convertible senior notes due
	2011                                                                                                   |                      |                       | 1,000  |              |     |   |       |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Bank credit facility                                                                                                                    |                      |                       | 4,500  |              |     |   | 4,500  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Nextel International credit
	facilities                                                                                                 |                      |                       | 507    |              |     |   | 524    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Other long-term debt                                                                                                                    |                      |                       | 1      |              |     |   | 2      |       
|                                                                                                                                        |                      |                       |        |              |     |   |        |       
|                                                                                                                                        | Total long-term debt |                       |        | 16,266       |     |   |        | 13,797 |    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        |                      | Less current portion  |        |              | (34 | ) |        |        | (34 | )
|                                                                                                                                        |                      |                       |        |              |     |   |        |       
|                                                                                                                                        |                      | $                     | 16,232 |              |     | $ | 13,763 |       
|                                                                                                                                        |                      |                       |        |              |     |   |        |       

9



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

|                          |                                              |                       |     |              |     |   |     |     |     |  
|------------------------- | -------------------------------------------- | --------------------- | --- | ------------ | --- | - | --- | --- | --- | -
|                          |                                              | June 30,              |     | December 31,
|                          |                                              | 2001                  |     | 2000        
|                          |                                              |                       |     |             
|                          |                                              |                      
|                          |                                              | (dollars in millions)
|                         
|                         
|                         
|                         
|Capital lease obligations |                                              | $                     | 331 |              |     | $ | 260 |    
|                         
|                         
|                         
|                         
|Finance obligation        |                                              |                       | 685 |              |     |   | 674 |    
|                          |                                              |                       |     |              |     |   |     |    
|                          | Total capital lease and finance
	obligations |                       |     | 1,016        |     |   |     | 934 |    
|                         
|                         
|                         
|                         
|                          |                                              | Less current portion  |     |              | (97 | ) |     |     | (68 | )
|                          |                                              |                       |     |              |     |   |     |    
|                          |                                              | $                     | 919 |              |     | $ | 866 |    
|                          |                                              |                       |     |              |     |   |     |    

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

6% Convertible
Notes.In May 2001, we completed
the issuance and sale in a private placement of
$1.0 billion in principal amount of 6% convertible
notes due 2011, generating $980 million in net cash
proceeds. Cash interest is payable semiannually on these notes
beginning December 1, 2001 at a rate of 6% per year.
We may redeem some or all of these notes starting June 4,
2004 at an initial redemption price of 104% of the aggregate
principal amount of these notes, plus accrued and unpaid
interest. These notes are convertible at the option of the
holders into our class A common stock at any time prior to
redemption, repurchase or maturity at a conversion price of
about $23.84 per share, subject to adjustment. These notes
are senior unsecured indebtedness of ours and rank equal in
right of payment with all our other unsubordinated, unsecured
indebtedness. We have agreed to specific registration rights
with respect to these notes. If these notes are not registered
with the Securities and Exchange Commission by December 1,
2001, the interest rate on the notes will increase by
0.5% per year until the notes are registered or until other
specified conditions are met.

Lease Transaction.Effective April 1, 2001, a
sale-leaseback transaction, previously accounted for as an
operating lease, has been accounted for as a capital lease due
to a modification to the lease provisions. As of June 30,
2001, the gross amount of assets recorded under capital lease
included in property, plant and equipment resulting from this
transaction is $84 million.

Note 4.  Contingencies

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

See Part II, Item 1. Legal
Proceedings for a discussion of other legal matters.

10



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

Note 5.  Mandatorily Redeemable
Preferred Stock

|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ----- | ------------ |  | - | ----- | 
|                                                                                                                                                                                                                                                                                                 |  | June 30,              |       | December 31,
|                                                                                                                                                                                                                                                                                                 |  | 2001                  |       | 2000        
|                                                                                                                                                                                                                                                                                                 |  |                       |       |             
|                                                                                                                                                                                                                                                                                                 |  |                      
|                                                                                                                                                                                                                                                                                                 |  | (dollars in millions)
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Series D exchangeable preferred stock
	mandatorily redeemable 2009,13%
	cumulative annual dividend; 806,136 and 756,185 shares
	issued; 806,125 and 756,174 shares outstanding; stated at
	liquidation value                                                                                     |  | $                     | 828   |              |  | $ | 777   | 
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Series E exchangeable preferred stock
	mandatorily redeemable 2010,11.125%
	cumulative annual dividend; 1,072,664 and 1,015,397 shares
	issued; 1,072,650 and 1,015,383 shares outstanding; stated
	at liquidation value                                                                         |  |                       | 1,088 |              |  |   | 1,029 | 
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Zero coupon convertible preferred stock
	mandatorily redeemable 2013,no
	dividend; convertible into 4,779,386  shares of class A
	common stock; 245,245 shares issued and outstanding; stated
	at fair value when issued plus accretion of liquidation
	preference at 9.25% compounded quarterly |  |                       | 78    |              |  |   | 75    | 
|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 
|                                                                                                                                                                                                                                                                                                 |  | $                     | 1,994 |              |  | $ | 1,881 | 
|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 

11



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

Note 6.  Segment
Reporting

We operate in two business segments, domestic and
international. These reportable segments are strategic business
units in different phases of development that we manage and
finance separately based on the fundamental differences in their
operations. We evaluate performance based on earnings
(losses) before restructuring charge, interest, income tax
benefit, depreciation, amortization and other nonoperating
charges, referred to as segment earnings (losses).

|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|------------------------------------------------------ |  | ------------------------------ | ----- | ------------------------------ |  | ------------ | ---- | ------------ |  | ------------ | -- | ------------- |  | ------------ | ----- | ------------ |  | - | ----- | - |  | - | ---- | - |  | - | - |  |  | - | ----- | -
|                                                       |  |                                |       |                               
|                                                       |  | Six Months Ended June 30, 2001 |       | Six Months Ended June 30, 2000
|                                                       |  |                                |       |                               
|                                                       |  |                                |       | Intercompany                   |  |              |      |              |  | Intercompany |    |              
|                                                       |  | Domestic                       |       | International                  |  | Eliminations |      | Consolidated |  | Domestic     |    | International |  | Eliminations |       | Consolidated
|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |             
|                                                       |  |                               
|                                                       |  | (in millions)                 
|                                                      
|                                                      
|                                                      
|                                                      
|Operating revenues                                     |  | $                              | 3,325 |                                |  | $            | 300  |              |  | $            | (2 | )             |  | $            | 3,623 |              |  | $ | 2,419 |   |  | $ | 121  |   |  | $ |  |  |  | $ | 2,540 |  
|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Segment earnings (losses)                              |  | $                              | 836   |                                |  | $            | (67  | )            |  | $            | (1 | )             |  | $            | 768   |              |  | $ | 585   |   |  | $ | (67  | ) |  | $ |  |  |  | $ | 518   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Restructuring charge                                   |  |                                | (22   | )                              |  |              |     |              |  |              |   |               |  |              | (22   | )            |  |   |      |   |  |   |     |   |  |   |  |  |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Depreciation and amortization                          |  |                                | (707  | )                              |  |              | (114 | )            |  |              |   |               |  |              | (821  | )            |  |   | (518  | ) |  |   | (65  | ) |  |   |  |  |  |   | (583  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest expense                                       |  |                                | (570  | )                              |  |              | (147 | )            |  |              |   |               |  |              | (717  | )            |  |   | (472  | ) |  |   | (107 | ) |  |   |  |  |  |   | (579  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |  |                                | 127   |                                |  |              | 8    |              |  |              |   |               |  |              | 135   |              |  |   | 182   |   |  |   | 5    |   |  |   |  |  |  |   | 187   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Other expense, net                                     |  |                                | (50   | )                              |  |              | (61  | )            |  |              |   |               |  |              | (111  | )            |  |   | (72   | ) |  |   | (7   | ) |  |   |  |  |  |   | (79   | )
|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Loss before income tax benefit and extraordinary
	item |  | $                              | (386  | )                              |  | $            | (381 | )            |  | $            | (1 | )             |  | $            | (768  | )            |  | $ | (295  | ) |  | $ | (241 | ) |  | $ |  |  |  | $ | (536  | )
|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Capital expenditures                                   |  | $                              | 1,298 |                                |  | $            | 394  |              |  | $            |   |               |  | $            | 1,692 |              |  | $ | 1,373 |   |  | $ | 260  |   |  | $ |  |  |  | $ | 1,633 |  
|                                                       |  |                                |       |                                |  |              |      |              |  |              |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  

|                                                       |  |                                  |       |                                  |  |   |      |   |  |   |    |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|------------------------------------------------------ |  | -------------------------------- | ----- | -------------------------------- |  | - | ---- | - |  | - | -- | - |  | - | ----- | - |  | - | ----- | - |  | - | ---- | - |  | - | - |  |  | - | ----- | -
|                                                       |  |                                  |       |                                 
|                                                       |  | Three Months Ended June 30, 2001 |       | Three Months Ended June 30, 2000
|                                                       |  |                                  |       |                                 
|                                                       |  |                                  |       |                                  |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Operating revenues                                     |  | $                                | 1,722 |                                  |  | $ | 161  |   |  | $ | (2 | ) |  | $ | 1,881 |   |  | $ | 1,296 |   |  | $ | 69   |   |  | $ |  |  |  | $ | 1,365 |  
|                                                       |  |                                  |       |                                  |  |   |      |   |  |   |    |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Segment earnings (losses)                              |  | $                                | 483   |                                  |  | $ | (33  | ) |  | $ |   |   |  | $ | 450   |   |  | $ | 323   |   |  | $ | (33  | ) |  | $ |  |  |  | $ | 290   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Restructuring charge                                   |  |                                  | (22   | )                                |  |   |     |   |  |   |   |   |  |   | (22   | ) |  |   |      |   |  |   |     |   |  |   |  |  |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Depreciation and amortization                          |  |                                  | (369  | )                                |  |   | (58  | ) |  |   |   |   |  |   | (427  | ) |  |   | (271  | ) |  |   | (32  | ) |  |   |  |  |  |   | (303  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest expense                                       |  |                                  | (284  | )                                |  |   | (75  | ) |  |   |   |   |  |   | (359  | ) |  |   | (246  | ) |  |   | (55  | ) |  |   |  |  |  |   | (301  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |  |                                  | 53    |                                  |  |   | 3    |   |  |   |   |   |  |   | 56    |   |  |   | 99    |   |  |   | 5    |   |  |   |  |  |  |   | 104   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Other expense, net                                     |  |                                  | (29   | )                                |  |   | (51  | ) |  |   |   |   |  |   | (80   | ) |  |   | (24   | ) |  |   | (15  | ) |  |   |  |  |  |   | (39   | )
|                                                       |  |                                  |       |                                  |  |   |      |   |  |   |    |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Loss before income tax benefit and extraordinary
	item |  | $                                | (168  | )                                |  | $ | (214 | ) |  | $ |   |   |  | $ | (382  | ) |  | $ | (119  | ) |  | $ | (130 | ) |  | $ |  |  |  | $ | (249  | )
|                                                       |  |                                  |       |                                  |  |   |      |   |  |   |    |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Capital expenditures                                   |  | $                                | 638   |                                  |  | $ | 174  |   |  | $ |   |   |  | $ | 812   |   |  | $ | 698   |   |  | $ | 143  |   |  | $ |  |  |  | $ | 841   |  
|                                                       |  |                                  |       |                                  |  |   |      |   |  |   |    |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  

|                                   |  |               |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 
|---------------------------------- |  | ------------- | ------ | ----------------- |  | - | ----- |  |  | - | --- | - |  | - | ------ |  |  | - | ------ |  |  | - | ----- |  |  | - | ---- | - |  | - | ------ | 
|                                   |  |               |        |                  
|                                   |  | June 30, 2001 |        | December 31, 2000
|                                   |  |               |        |                  
|                                   |  |               |        |                   |  |   |       | 
|                                  
|                                  
|                                  
|                                  
|Property, plant and equipment, net |  | $             | 8,489  |                   |  | $ | 1,303 |  |  | $ |    |   |  | $ | 9,792  |  |  | $ | 7,721  |  |  | $ | 1,070 |  |  | $ |     |   |  | $ | 8,791  | 
|                                   |  |               |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 
|Identifiable assets                |  | $             | 21,067 |                   |  | $ | 3,101 |  |  | $ | (16 | ) |  | $ | 24,152 |  |  | $ | 19,687 |  |  | $ | 3,193 |  |  | $ | (194 | ) |  | $ | 22,686 | 
|                                   |  |               |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 

Note 7.  Subsequent
Events

In July 2001, various members of the McCaw family
(and entities affiliated with them) who previously were members
of Digital Radio, L.L.C., an affiliate of Craig O.
McCaw, exercised in full options to purchase an aggregate of
10 million shares of our class A common stock for an
aggregate purchase price of about $108 million.

12



---



##### Table of Contents






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

Overview

The following is a discussion and analysis of:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | our consolidated financial condition and results
	of operations for the six- and three-month periods ended
	June 30, 2001 and 2000; and
|
| |  | significant factors that could affect our
	prospective financial condition and results of operations.                                  

You should read this discussion in conjunction
with our 2000 annual report on Form 10-K and our quarterly
report on Form 10-Q for the quarter ended March 31,
2001. Historical results may not indicate future performance.
See Forward Looking Statements.

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

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

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



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

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

As of June 30, 2001:



| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we provided service to about 7,684,400 digital
	handsets in the United States;                                                                                                                                                                                      
|
| |  | our digital mobile network and the compatible
	digital mobile network of Nextel Partners, Inc., our
	affiliate providing service in small and medium sized markets,
	was operational in 188 of the top 200 metropolitan statistical
	areas in the United States; and
|
| |  | Nextel International provided service to about
	1,044,400 digital handsets in its managed markets.                                                                                                                                                                  

In April 2001, we announced that James F.
Mooney had been named our Executive Vice President and Chief
Operating Officer, replacing Steven P. Dussek. In May 2001,
William E. Kennard, former chairman of the Federal
Communications Commission, joined our board of directors.

13



---



##### Table of Contents



In April 2001, we introduced the
i85s and the i50sx handsets,
which are part of a new platform of digital handsets with
embedded Java technology. These new handsets, developed
and manufactured by Motorola, combine the qualities of our
Internet capable handsets with additional features and
functionality such as the ability to download Java-based
applications, wireless synchronization capabilities and voice
activated dialing and recorder features. As more Java-based
applications are developed, we expect our customers to be able
to download the associated new software onto their handsets from
our website.

In May 2001, we purchased a substantial portion
of the operations, assets and rights associated with about 200
retail stores from Lets Talk Cellular &
Wireless, Inc., a specialty cellular and wireless retailer,
for a cash purchase price of about $32 million, subject to
adjustments. The stores are being rebranded as Nextel stores and
will serve as additional points of contact for existing and new
customers.

In July 2001, we initiated operations in our
sixth customer care center near Bremerton, Washington and expect
it to be fully operational by the end of 2001.

Results of Operations

Operating revenues.

|                          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |    |  
|------------------------- | ------------------ | --------------------- | ----- | ------------ |  | -------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | --- | - | - | --- | ----- |  |  | --- | -- | -
|                          |                    |                       |       |              |  |          |    |              |   |              
|                          |                    |                       |       | % of         |  |          |    | % of         |   | Change from  
|                          |                    |                       |       | Consolidated |  |          |    | Consolidated |   | Previous Year
|                          |                    | June 30,              |       | Operating    |  | June 30, |    | Operating    |   |              
|                          |                    | 2001                  |       | Revenues     |  | 2000     |    | Revenues     |   | Dollars       |       | Percent
|                          |                    |                       |       |              |  |          |    |              |   |               |       |        
|                          |                    |                      
|                          |                    | (dollars in millions)
|Six Months Ended          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                    | $                     | 3,325 |              |  |          | 92 | %            |   | $             | 2,419 |         |  |  | 95 | %   |   | $ | 906 |       |  |  | 37  | % 
|                         
|                         
|                         
|                         
|International             |                    |                       | 300   |              |  |          | 8  | %            |   |               | 121   |         |  |  | 5  | %   |   |   | 179 |       |  |  | 148 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                    |                       | (2    | )            |  |          |   |              |   |               |      |         |  |  |   |     |   |   | (2  | )     |  |  |    |   
|                          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   
|                          | Operating revenues |                       | $     | 3,623        |  |          |    | 100          | % |               | $     | 2,540   |  |  |    | 100 | % |   | $   | 1,083 |  |  |     | 43 | %
|                          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   
|Three Months Ended        |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                    | $                     | 1,722 |              |  |          | 91 | %            |   | $             | 1,296 |         |  |  | 95 | %   |   | $ | 426 |       |  |  | 33  | % 
|                         
|                         
|                         
|                         
|International             |                    |                       | 161   |              |  |          | 9  | %            |   |               | 69    |         |  |  | 5  | %   |   |   | 92  |       |  |  | 133 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                    |                       | (2    | )            |  |          |   |              |   |               |      |         |  |  |   |     |   |   | (2  | )     |  |  |    |   
|                          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   
|                          | Operating revenues |                       | $     | 1,881        |  |          |    | 100          | % |               | $     | 1,365   |  |  |    | 100 | % |   | $   | 516   |  |  |     | 38 | %
|                          |                    |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |     |   |   |     |       |  |  |     |   

|                                                                                                    |               |  |  |       |  |  |  |   |  |          |  |         |  |  |  |   |  |  |  |       |  |  |  |     |  
|--------------------------------------------------------------------------------------------------- | ------------- |  |  | ----- |  |  |  | - |  | -------- |  | ------- |  |  |  | - |  |  |  | ----- |  |  |  | --- | -
|                                                                                                    |               |  |  |       |  |  |  |   |  | Handsets |  | Percent
|                                                                                                    |               |  |  |       |  |  |  |   |  |          |  |        
|Digital handsets in service at end of period
	for consolidated subsidiaries (handsets in thousands) |               |  |  |       |  |  |  |   |  |          |  |         |  |  |  |   |  |  |  |       |  |  |  |    
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Domestic      |  |  | 7,684 |  |  |  |  |  |          |  | 5,617   |  |  |  |  |  |  |  | 2,067 |  |  |  | 37  | %
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | International |  |  | 1,044 |  |  |  |  |  |          |  | 469     |  |  |  |  |  |  |  | 575   |  |  |  | 123 | %

The increase in domestic operating revenues from
the six months ended June 30, 2000 to the six months ended
June 30, 2001 consists of a 40% increase in wireless
service and other revenues of $883 million to
$3.11 billion and a 12% increase in revenues from digital
handset and accessory sales of $23 million to
$214 million. The increase in domestic operating revenues
from the three months ended June 30, 2000 to the three
months ended June 30, 2001 consists of a 35% increase in
wireless service and other revenues of $420 million to
$1.62 billion and a 6% increase in revenues from digital
handset and accessory sales of $6 million to
$106 million. We continue to sell handsets at prices below
our cost to attract new customers and as handset upgrade and
retention inducements for existing customers. Additionally, as
competition has intensified, the prices at which we sell
handsets to our new and existing customers have declined from
the first half of 2000. Accordingly, revenues from domestic
digital handset and accessory sales have not increased in
proportion to the increase in the number of handsets sold. To
mitigate this effect, during the second quarter of 2001, we
began to raise prices on existing handsets and introduce more
feature rich and higher priced

14



---



##### Table of Contents



handsets, in an effort to limit the level of
subsidy offered to attract and retain customers in our targeted
segments.


Domestic service and other revenues increased
principally as a result of a 37% increase in domestic handsets
in service. Average monthly revenue per domestic handset
decreased slightly from about $74 during the second quarter of
2000 to about $72 during the second quarter of 2001.
Additionally, as compared to the second quarter of 2000, average
monthly minutes of use per subscriber increased 21% in the
second quarter of 2001 to about 580 minutes, which we attribute
to increased phone usage primarily driven by the introduction of
pricing plans designed to provide additional value to our
customers. These new pricing plans, developed in part to meet
competitive demands, generally provide lower per-minute rates
made available in conjunction with fixed-rate service plans.
These plans typically include a fixed amount of interconnect
minutes combined with an unlimited or fixed amount of digital
two-way radio service, unlimited Nextel Wireless Web services,
free incoming calls or free long distance service, all for a
stated package price. The growth in handsets in service is the
result of a number of factors, principally:



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the introduction of more competitive service
	pricing plans targeted at meeting more of our customers
	needs, including a variety of fixed-rate plans offering bundled
	monthly minutes and other integrated services and features;
|
| |  | our differentiated products and services,
	including Nextel Direct Connect;                                                                                                                                                         
|
| |  | increased brand name recognition through our
	indirect distribution channels;                                                                                                                                                       
|
| |  | aggressive handset pricing promotions during the
	fourth quarter of 2000 and the first quarter of 2001;                                                                                                                             
|
| |  | increased advertising and marketing campaigns;                                                                                                                                                                                      
|
| |  | increased sales force and marketing
	staff; and                                                                                                                                                                                     
|
| |  | improved quality of service.                                                                                                                                                                                                        

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



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

The increase in international operating revenues
from the six months ended June 30, 2000 to the six months
ended June 30, 2001 consists of a 157% increase in wireless
service and other revenues of $174 million to
$285 million and a 50% increase in revenues from digital
handset and accessory sales of $5 million to
$15 million. The increase in international operating
revenues from the three months ended June 30, 2000 to the
three months ended June 30, 2001 consists of a 139%
increase in wireless service and other revenues of
$89 million to $153 million and a 60% increase in
revenues from digital handset and accessory sales of
$3 million to $8 million. Operating revenues for our
international operations increased from the six and three months
ended June 30, 2000 to the six and three months ended
June 30, 2001 primarily as a result of a 123% increase in
the number of digital handsets in service in Nextel
Internationals managed markets, particularly in its
Brazilian and Mexican markets. Additionally, the introduction of
higher priced service plans, primarily in Mexico, also
contributed to the increase.

15



---



##### Table of Contents



Cost of revenues.

|                          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    |  
|------------------------- | ---------------- | --------------------- | ----- | ------------ |  | -------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | --- | -- | -
|                          |                  |                       |       |              |  |          |    |              |   |              
|                          |                  |                       |       | % of         |  |          |    | % of         |   | Change from  
|                          |                  |                       |       | Consolidated |  |          |    | Consolidated |   | Previous Year
|                          |                  | June 30,              |       | Operating    |  | June 30, |    | Operating    |   |              
|                          |                  | 2001                  |       | Revenues     |  | 2000     |    | Revenues     |   | Dollars       |     | Percent
|                          |                  |                       |       |              |  |          |    |              |   |               |     |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Six Months Ended          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                  | $                     | 1,229 |              |  |          | 34 | %            |   | $             | 894 |         |  |  | 35 | %  |   | $ | 335 |     |  |  | 37  | % 
|                         
|                         
|                         
|                         
|International             |                  |                       | 155   |              |  |          | 4  | %            |   |               | 68  |         |  |  | 3  | %  |   |   | 87  |     |  |  | 128 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (2    | )            |  |          |   |              |   |               |    |         |  |  |   |    |   |   | (2  | )   |  |  |    |   
|                          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|                          | Cost of revenues |                       | $     | 1,382        |  |          |    | 38           | % |               | $   | 962     |  |  |    | 38 | % |   | $   | 420 |  |  |     | 44 | %
|                          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|Three Months Ended        |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                  | $                     | 602   |              |  |          | 32 | %            |   | $             | 489 |         |  |  | 36 | %  |   | $ | 113 |     |  |  | 23  | % 
|                         
|                         
|                         
|                         
|International             |                  |                       | 84    |              |  |          | 4  | %            |   |               | 37  |         |  |  | 3  | %  |   |   | 47  |     |  |  | 127 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (2    | )            |  |          |   |              |   |               |    |         |  |  |   |    |   |   | (2  | )   |  |  |    |   
|                          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|                          | Cost of revenues |                       | $     | 684          |  |          |    | 36           | % |               | $   | 526     |  |  |    | 39 | % |   | $   | 158 |  |  |     | 30 | %
|                          |                  |                       |       |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   

The increase in cost of revenues from the six
months ended June 30, 2000 to the six months ended
June 30, 2001 for our domestic operations consists of a 38%
increase in cost of providing wireless services of
$170 million to $614 million and a 37% increase in
cost of digital handset and accessory sales of $165 million
to $615 million. The increase in cost of revenues from the
three months ended June 30, 2000 to the three months ended
June 30, 2001 for our domestic operations consists of a 30%
increase in cost of providing wireless services of
$73 million to $317 million and a 16% increase in cost
of digital handset and accessory sales of $40 million to
$285 million. Cost of digital handset and accessory sales
increased due to:



| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | the increase in the number of handsets sold to
	new and existing customers;  and
|
| |  | an increase in the provision for slow-moving
	handset inventory of $11  million,

partially offset by a decrease in the weighted
average cost we paid for the handsets sold.

Domestic cost of service revenues increased
primarily as a result of variable costs related to interconnect
fees on higher minutes of use and increased fixed costs related
to direct switch and transmitter and receiver site costs
including rent, utility and interconnection fees that we
incurred. Total system minutes of use grew 69% from the first
half of 2000 to the first half of 2001, principally due to the
larger number of handsets in service as well as the 21% increase
in average monthly minutes of use per subscriber in the second
quarter of 2001 compared to the same period in 2000. The fixed
transmitter and receiver site and switch costs increased due to
a 36% increase in transmitter and receiver sites and related
equipment and a 24% increase in the number of switches we placed
in service from June 30, 2000 to June 30, 2001.

The increase in international cost of revenues
from the six months ended June 30, 2000 to the six months
ended June 30, 2001 consists of an increase in cost of
providing wireless services of $52 million or 173%, and an
increase in cost of digital handset and accessory sales of
$35 million or 92%. The increase in international cost of
revenues from the three months ended June 30, 2000 to the
three months ended June 30, 2001 consists of an increase in
cost of providing wireless services of $31 million or 194%,
and an increase in cost of digital handset and accessory sales
of $16 million or 76%. The increase in the cost of
providing international wireless services is primarily
attributable to:



| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in variable costs related to
	interconnect fees on significantly increased minutes of use, as
	well as higher fixed interconnect costs per minute, primarily in
	Brazil; and                                                            
|
| |  | an increase in site ground lease and utility
	expenses incurred due to an 83% increase in the number of
	transmitter and receiver sites placed in service by Nextel
	Internationals consolidated subsidiaries from
	June 30, 2000 to June 30, 2001.

16



---



##### Table of Contents



The increase in international cost of digital
handset and accessory sales is primarily due to the increase in
the number of digital handsets sold, partially offset by a
decrease in the average cost Nextel International paid for the
handsets sold.

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

Selling, general and administrative
expenses.

|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|----------------------------------- | -------------------------- | --------------------- | ----- | ------------ |  | -------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                                    |                            |                       |       |              |  |          |    |              |   |              
|                                    |                            |                       |       | % of         |  |          |    | % of         |   | Change from  
|                                    |                            |                       |       | Consolidated |  |          |    | Consolidated |   | Previous Year
|                                    |                            | June 30,              |       | Operating    |  | June 30, |    | Operating    |   |              
|                                    |                            | 2001                  |       | Revenues     |  | 2000     |    | Revenues     |   | Dollars       |       | Percent
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |        
|                                    |                            |                      
|                                    |                            | (dollars in millions)
|Six Months Ended                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                            | $                     | 1,473 |              |  |          | 40 | %            |   | $             | 1,060 |         |  |  | 42 | %  |   | $ | 413 |     |  |  | 39 | % 
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 628   |              |  |          | 17 | %            |   | $             | 496   |         |  |  | 20 | %  |   | $ | 132 |     |  |  | 27 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 104   |              |  |          | 3  | %            |   |               | 63    |         |  |  | 2  | %  |   |   | 41  |     |  |  | 65 | % 
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 732          |  |          |    | 20           | % |               | $     | 559     |  |  |    | 22 | % |   | $   | 173 |  |  |    | 31 | %
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 632   |              |  |          | 17 | %            |   | $             | 444   |         |  |  | 18 | %  |   | $ | 188 |     |  |  | 42 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 108   |              |  |          | 3  | %            |   |               | 57    |         |  |  | 2  | %  |   |   | 51  |     |  |  | 89 | % 
|                                   
|                                   
|                                   
|                                   
|Intercompany eliminations           |                            |                       | 1     |              |  |          |   |              |   |               |      |         |  |  |   |    |   |   | 1   |     |  |  |   |   
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 741          |  |          |    | 20           | % |               | $     | 501     |  |  |    | 20 | % |   | $   | 240 |  |  |    | 48 | %
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Three Months Ended                  |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                            | $                     | 747   |              |  |          | 40 | %            |   | $             | 549   |         |  |  | 40 | %  |   | $ | 198 |     |  |  | 36 | % 
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 301   |              |  |          | 16 | %            |   | $             | 247   |         |  |  | 18 | %  |   | $ | 54  |     |  |  | 22 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 57    |              |  |          | 3  | %            |   |               | 35    |         |  |  | 3  | %  |   |   | 22  |     |  |  | 63 | % 
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 358          |  |          |    | 19           | % |               | $     | 282     |  |  |    | 21 | % |   | $   | 76  |  |  |    | 27 | %
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 336   |              |  |          | 18 | %            |   | $             | 237   |         |  |  | 17 | %  |   | $ | 99  |     |  |  | 42 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 53    |              |  |          | 3  | %            |   |               | 30    |         |  |  | 2  | %  |   |   | 23  |     |  |  | 77 | % 
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 389          |  |          |    | 21           | % |               | $     | 267     |  |  |    | 19 | % |   | $   | 122 |  |  |    | 46 | %
|                                    |                            |                       |       |              |  |          |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   

The increase in domestic selling and marketing
expenses from the six and three months ended June 30, 2000
to the six and three months ended June 30, 2001 primarily
reflects increased costs incurred in connection with higher
sales of handsets including:



| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $50 million and $10 million, or a 23%
	and a 9%, increase in commissions and residuals earned by
	indirect dealers and distributors as a result of increased
	handset sales through these channels;                       
|
| |  | $44 million and $23 million, or a 45%
	and a 53%, increase in advertising expenses, due to aggressive
	marketing campaigns directed at growing our customer base and
	promoting our services, such as Nextel Wireless Web;
|
| |  | $29 million and $16 million, or a 17%
	and a 20%, increase in sales and marketing payroll and related
	expenses including increased commissions attributable to a
	larger direct sales force; and                         
|
| |  | $9 million and $5 million, or an 83%
	and a 90%, increase in other general marketing expenses.                                                                                                                            

The increase in international selling and
marketing expenses from the six and three months ended
June 30, 2000 to the six and three months ended
June 30, 2001 is primarily due to increased direct sales
labor costs attributable to a larger direct sales force and
increased commissions from higher levels of digital handset
sales.

17



---



##### Table of Contents



Domestic general and administrative expenses
increased from the six and three months ended June 30, 2000
to the six and three months ended June 30, 2001 primarily
as a result of activities to support a larger customer base,
specifically:



| |   |                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $90 million and $54 million, or a 57%
	and a 67%, increase in expenses related to billing, collection,
	customer retention and customer care activities, including the
	costs associated with our fifth customer care center which
	commenced operations in January 2001;                                                                                           
|
| |  | $80 million and $48 million, or a 133%
	and a 130%, increase in bad debt expense, which has increased as
	a percentage of domestic operating revenues primarily due to the
	impact of a slowing economy and aggressive promotions in the
	fourth quarter of 2000 and the first quarter of 2001, resulting
	in an ongoing increased focus on our credit policies; and
|
| |  | $18 million and $(3) million, or an 8%
	and a (3)%, change in personnel, facilities costs and general
	corporate expenses.                                                                                                                                                                                                                                          

International general and administrative expenses
increased from the six and three months ended June 30, 2000
to the six and three months ended June 30, 2001 primarily
due to an increase in billing and customer care, information
technology, facilities and other general corporate expenses to
support a growing customer base.

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



| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing commission and residual payments owed
	to indirect dealers and distributors as we sell more handsets
	through these channels, partially offset by efforts initiated in
	the second quarter 2001 to lower domestic commissions and to
	generate more domestic handset sales through our lower cost
	distribution channels;
|
| |  | increasing customer care costs as a result of our
	sixth domestic customer care center, which opened in July 2001
	and is expected to become fully operational by the end of 2001;                                                                                                                                                  
|
| |  | costs associated with operating recently acquired
	domestic retail stores;                                                                                                                                                                                                                                                          
|
| |  | increasing costs associated with the
	implementation of our new billing system for domestic operations;                                                                                                                                                                                                                             
|
| |  | continuing aggressive marketing and advertising
	campaigns in response to increasing competition for wireless
	subscribers; and                                                                                                                                                                                                     
|
| |  | increasing costs associated with customer
	retention and handset upgrade activities.                                                                                                                                                                                                                                                

Segment earnings (losses).

|                          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |     | 
|------------------------- | ---------------- | --------------------- | --- | ------------ |  | -------- | --- | ------------ |  | ------------- | --- | ------- |  |  | --- | --- |  | - | --- | --- |  |  | --- | --- | 
|                          |                  |                       |     |              |  |          |     |              |  |              
|                          |                  |                       |     | % of         |  |          |     | % of         |  | Change from  
|                          |                  |                       |     | Consolidated |  |          |     | Consolidated |  | Previous Year
|                          |                  | June 30,              |     | Operating    |  | June 30, |     | Operating    |  |              
|                          |                  | 2001                  |     | Revenues     |  | 2000     |     | Revenues     |  | Dollars       |     | Percent
|                          |                  |                       |     |              |  |          |     |              |  |               |     |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Six Months Ended          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    
|                         
|                         
|                         
|                         
|Domestic earnings         |                  | $                     | 836 |              |  |          | 23% |              |  | $             | 585 |         |  |  | 23% |     |  | $ | 251 |     |  |  | 43% |    
|                         
|                         
|                         
|                         
|International losses      |                  |                       | (67 | )            |  |          | (2  | )%           |  |               | (67 | )       |  |  | (3  | )%  |  |   |    |     |  |  |    |    
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (1  | )            |  |          |    |              |  |               |    |         |  |  |    |     |  |   | (1  | )   |  |  |    |    
|                          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    
|                          | Segment earnings |                       | $   | 768          |  |          |     | 21%          |  |               | $   | 518     |  |  |     | 20% |  |   | $   | 250 |  |  |     | 48% | 
|                          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    
|Three Months Ended        |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    
|                         
|                         
|                         
|                         
|Domestic earnings         |                  | $                     | 483 |              |  |          | 26% |              |  | $             | 323 |         |  |  | 23% |     |  | $ | 160 |     |  |  | 50% |    
|                         
|                         
|                         
|                         
|International losses      |                  |                       | (33 | )            |  |          | (2  | )%           |  |               | (33 | )       |  |  | (2  | )%  |  |   |    |     |  |  |    |    
|                          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    
|                          | Segment earnings |                       | $   | 450          |  |          |     | 24%          |  |               | $   | 290     |  |  |     | 21% |  |   | $   | 160 |  |  |     | 55% | 
|                          |                  |                       |     |              |  |          |     |              |  |               |     |         |  |  |     |     |  |   |     |     |  |  |     |    

18



---



##### Table of Contents



We define segment earnings as earnings before
restructuring charge, interest, income tax benefit,
depreciation, amortization and other nonoperating charges. Based
on the current stage of development of each of our reportable
segments, most of our operating revenues and identifiable
assets, as well as all of our segment earnings pertain to our
domestic operations. Domestic segment earnings continued to
represent 23% of consolidated operating revenues for the six
months ended June 30, 2001 and 2000. In the first quarter
of 2001, our domestic segment earnings decreased as a percentage
of consolidated operating revenues as compared to the same
period in 2000 primarily due to customer acquisition, retention
and handset upgrade activities. As described in Future
Capital Needs and Resources, beginning in the second
quarter of 2001, we initiated various actions designed to reduce
costs and increase domestic segment earnings. As a result of
those actions, domestic segment earnings as a percentage of
consolidated revenues for the three months ended June 30,
2001 improved to 26% as compared to 20% for the three months
ended March 31, 2001 and as compared to 23% for the three
months ended June 30, 2000. However, we cannot be sure that
our actions will continue to be successful in further decreasing
our overall operating costs or increasing domestic segment
earnings. Additionally, if general economic conditions worsen or
if our new handset offerings are not well received, we may see
declines in demand for our product and service offerings, which
may adversely affect our domestic segment earnings. See
Forward Looking Statements.

International segment losses were unchanged due
to increasing operating revenues from growth in digital handset
sales offset by increased costs attributable to:



| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the build-out of our international digital mobile
	networks, higher customer usage as well as higher fixed
	interconnect costs per minute, primarily in Brazil;
|
| |  | increased aggregate amounts of digital handset
	costs and related commissions resulting from increased handset
	sales; and                                     
|
| |  | increased general corporate expenses to support
	the larger customer base.                                                                                     

We expect international segment losses to
continue while we are building out our digital mobile networks
and expanding our presence in international markets.

Depreciation and
amortization.

|                   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------------ | ----------------------------- | --------------------- | --- | ------------ |  | -------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                   |                               |                       |     |              |  |          |    |              |   |              
|                   |                               |                       |     | % of         |  |          |    | % of         |   | Change from  
|                   |                               |                       |     | Consolidated |  |          |    | Consolidated |   | Previous Year
|                   |                               | June 30,              |     | Operating    |  | June 30, |    | Operating    |   |              
|                   |                               | 2001                  |     | Revenues     |  | 2000     |    | Revenues     |   | Dollars       |     | Percent
|                   |                               |                       |     |              |  |          |    |              |   |               |     |        
|                   |                               |                      
|                   |                               | (dollars in millions)
|Six Months Ended   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|                  
|                  
|                  
|                  
|Depreciation       |                               | $                     | 700 |              |  |          | 19 | %            |   | $             | 488 |         |  |  | 19 | %  |   | $ | 212 |     |  |  | 43 | % 
|                  
|                  
|                  
|                  
|Amortization       |                               |                       | 121 |              |  |          | 3  | %            |   |               | 95  |         |  |  | 4  | %  |   |   | 26  |     |  |  | 27 | % 
|                   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|                   | Depreciation and amortization |                       | $   | 821          |  |          |    | 22           | % |               | $   | 583     |  |  |    | 23 | % |   | $   | 238 |  |  |    | 41 | %
|                   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|Three Months Ended |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|                  
|                  
|                  
|                  
|Depreciation       |                               | $                     | 365 |              |  |          | 20 | %            |   | $             | 255 |         |  |  | 19 | %  |   | $ | 110 |     |  |  | 43 | % 
|                  
|                  
|                  
|                  
|Amortization       |                               |                       | 62  |              |  |          | 3  | %            |   |               | 48  |         |  |  | 3  | %  |   |   | 14  |     |  |  | 29 | % 
|                   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   
|                   | Depreciation and amortization |                       | $   | 427          |  |          |    | 23           | % |               | $   | 303     |  |  |    | 22 | % |   | $   | 124 |  |  |    | 41 | %
|                   |                               |                       |     |              |  |          |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |    |   

Depreciation increased from the six and three
months ended June 30, 2000 to the six and three months
ended June 30, 2001 primarily as a result of placing into
service, as well as modifying, additional switches and
transmitter and receiver sites in existing domestic and
international markets primarily to enhance the coverage and
capacity of our digital mobile networks. We expect the amount of
depreciation to continue to increase as we place additional
switches and transmitter and receiver sites into service.

The increase in amortization is primarily
attributable to international acquisition activities completed
during the second half of 2000. We expect the amount of
amortization to increase as we acquire, place into service and
continue to amortize intangible assets such as licenses and
customer lists, offset by the impact of the nonamortization
provisions of SFAS No. 142.

19



---



##### Table of Contents



Restructuring charge, interest and
other.

|                                                   |  |                       |      |              |  |          |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|-------------------------------------------------- |  | --------------------- | ---- | ------------ |  | -------- | --- | ------------ |  | ------------- | ---- | ------- |  |  | --- | -- |  | - | ---- | - |  |  | --- | --
|                                                   |  |                       |      |              |  |          |     |              |  |              
|                                                   |  |                       |      | % of         |  |          |     | % of         |  | Change from  
|                                                   |  |                       |      | Consolidated |  |          |     | Consolidated |  | Previous Year
|                                                   |  | June 30,              |      | Operating    |  | June 30, |     | Operating    |  |              
|                                                   |  | 2001                  |      | Revenues     |  | 2000     |     | Revenues     |  | Dollars       |      | Percent
|                                                   |  |                       |      |              |  |          |     |              |  |               |      |        
|                                                   |  |                      
|                                                   |  | (dollars in millions)
|Six Months Ended                                   |  |                       |      |              |  |          |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|                                                  
|                                                  
|                                                  
|                                                  
|Restructuring charge                               |  | $                     | (22  | )            |  |          | (1  | )%           |  | $             |     |         |  |  |    |    |  | $ | (22  | ) |  |  |    |   
|                                                  
|                                                  
|                                                  
|                                                  
|Interest expense                                   |  |                       | (717 | )            |  |          | (20 | )%           |  |               | (579 | )       |  |  | (23 | )% |  |   | (138 | ) |  |  | (24 | )%
|                                                  
|                                                  
|                                                  
|                                                  
|Interest income                                    |  |                       | 135  |              |  |          | 4   | %            |  |               | 187  |         |  |  | 7   | %  |  |   | (52  | ) |  |  | (28 | )%
|                                                  
|                                                  
|                                                  
|                                                  
|Equity in losses of unconsolidated affiliates      |  |                       | (45  | )            |  |          | (1  | )%           |  |               | (71  | )       |  |  | (3  | )% |  |   | 26   |   |  |  | 37  | % 
|                                                  
|                                                  
|                                                  
|                                                  
|Foreign currency transaction (losses) 
	gains, net |  |                       | (55  | )            |  |          | (2  | )%           |  |               | 6    |         |  |  |    |    |  |   | (61  | ) |  |  | NM  |   
|                                                  
|                                                  
|                                                  
|                                                  
|Other expense, net                                 |  |                       | (11  | )            |  |          |    |              |  |               | (14  | )       |  |  | (1  | )% |  |   | 3    |   |  |  | 21  | % 
|                                                  
|                                                  
|                                                  
|                                                  
|Income tax benefit                                 |  |                       | 27   |              |  |          | 1   | %            |  |               | 16   |         |  |  | 1   | %  |  |   | 11   |   |  |  | 69  | % 
|                                                  
|                                                  
|                                                  
|                                                  
|Extraordinary loss                                 |  |                       |     |              |  |          |    |              |  |               | (104 | )       |  |  | (4  | )% |  |   | 104  |   |  |  | NM  |   
|                                                  
|                                                  
|                                                  
|                                                  
|Loss attributable to common stockholders           |  |                       | (854 | )            |  |          | (24 | )%           |  |               | (727 | )       |  |  | (29 | )% |  |   | (127 | ) |  |  | (17 | )%
|                                                  
|Three Months Ended                                 |  |                       |      |              |  |          |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|                                                  
|                                                  
|                                                  
|                                                  
|Restructuring charge                               |  | $                     | (22  | )            |  |          | (1  | )%           |  | $             |     |         |  |  |    |    |  | $ | (22  | ) |  |  |    |   
|                                                  
|                                                  
|                                                  
|                                                  
|Interest expense                                   |  |                       | (359 | )            |  |          | (19 | )%           |  |               | (301 | )       |  |  | (22 | )% |  |   | (58  | ) |  |  | (19 | )%
|                                                  
|                                                  
|                                                  
|                                                  
|Interest income                                    |  |                       | 56   |              |  |          | 3   | %            |  |               | 104  |         |  |  | 8   | %  |  |   | (48  | ) |  |  | (46 | )%
|                                                  
|                                                  
|                                                  
|                                                  
|Equity in losses of unconsolidated affiliates      |  |                       | (24  | )            |  |          | (1  | )%           |  |               | (36  | )       |  |  | (3  | )% |  |   | 12   |   |  |  | 33  | % 
|                                                  
|                                                  
|                                                  
|                                                  
|Foreign currency transaction losses, net           |  |                       | (45  | )            |  |          | (2  | )%           |  |               | (6   | )       |  |  |    |    |  |   | (39  | ) |  |  | NM  |   
|                                                  
|                                                  
|                                                  
|                                                  
|Other (expense) income,
	net                       |  |                       | (11  | )            |  |          | (1  | )%           |  |               | 3    |         |  |  |    |    |  |   | (14  | ) |  |  | NM  |   
|                                                  
|                                                  
|                                                  
|                                                  
|Income tax benefit                                 |  |                       | 13   |              |  |          | 1   | %            |  |               | 8    |         |  |  | 1   | %  |  |   | 5    |   |  |  | 63  | % 
|                                                  
|                                                  
|                                                  
|                                                  
|Loss attributable to common stockholders           |  |                       | (426 | )            |  |          | (23 | )%           |  |               | (292 | )       |  |  | (21 | )% |  |   | (134 | ) |  |  | (46 | )%





---

NMNot Meaningful


In May 2001, we announced a restructuring to
reduce domestic payroll and other operating costs by
implementing a 5% workforce reduction and streamlining our
operations. The workforce reduction, completed during the second
quarter, affected about 800 employees across the entire
domestic organization. As a result of the restructuring, we
recorded a $22 million charge consisting of
$15 million related to severance and fringe benefits and
$7 million related to the write-off of information
technology development projects that we abandoned as a result of
the reduced headcount. As of June 30, 2001, liabilities
related to the workforce reduction have been substantially paid.
We expect any savings in operating expenses as a result of the
workforce reduction will be offset by operating expenses
attributable to headcount increases in our direct sales force
and customer care, as well as costs associated with our recently
acquired retail stores and new customer care centers.

The increase in interest expense from the six and
three months ended June 30, 2000 to the six and
three months ended June 30, 2001 resulted primarily
from the issuance of our senior notes in January 2001 and our
convertible notes in May 2001 and Nextel Internationals
senior notes in August 2000, as well as a higher average level
of outstanding borrowings under our credit facilities, offset by
a reduction in the weighted average interest rate for our
domestic bank credit facility.

The decrease in interest income from the six and
three months ended June 30, 2000 to the six and
three months ended June 30, 2001 is primarily due to a
decrease in interest rates during 2001 as well as a lower
average cash balance in 2001.

20



---



##### Table of Contents



The decrease in equity in losses of
unconsolidated affiliates from the six and three months
ended June 30, 2000 to the six and three months ended
June 30, 2001 is due to $9 million and $2 million
of decreased losses attributable to our equity method investment
in Nextel Partners, Inc. The remaining decrease is
attributable to our Philippine affiliate, which we began
consolidating in the third quarter of 2000, and to our Japanese
investment, which was written off in the fourth quarter of 2000.

The foreign currency transaction loss in 2001 is
due primarily to the weakening of the Brazilian real relative to
the U.S. dollar as a result of the current economic
environment in both Brazil and Argentina. The foreign currency
transaction gain in 2000 is primarily attributable to the
strengthening of the Brazilian real. We expect the weakening of
the Brazilian real relative to the U.S. dollar to continue
into the third quarter of 2001.

The extraordinary loss in 2000 relates to the
early retirement of some of our senior notes during the first
quarter of 2000.

Liquidity and Capital Resources

We had losses attributable to common stockholders
of $854 million for the six months ended June 30,
2001 and $727 million for the six months ended
June 30, 2000. The operating expenses and capital
expenditures associated with developing, enhancing and operating
our digital mobile network have more than offset operating
revenues. Our operating expenses, debt service obligations and
anticipated capital expenditures are expected to continue to
more than offset operating revenues for the next several years.
We have consistently used external sources of funds, primarily
from debt incurrences and equity issuances, to fund operations,
capital expenditures, acquisitions and other nonoperating needs.

Cash Flows.Net cash provided by operating
activities of $458 million during the six months ended
June 30, 2001 improved by $244 million compared to net
cash provided by operating activities of $214 million
during the six months ended June 30, 2000. This
improvement in net cash provided by operating activities is
primarily attributable to domestic operations, reflecting
improved domestic performance resulting from the economies of
scale achieved from the growth in our customer base, offset in
part by increasing interest payments on outstanding debt.

Capital expenditures to fund the continued
expansion and enhancement of our digital mobile network continue
to represent the largest use of our funds for investing
activities. Net cash used in investing activities of
$1.83 billion during the six months ended June 30,
2001 decreased as compared to $2.09 billion during the six
months ended June 30, 2000 primarily due to a
$1.3 billion increase in net proceeds from short-term
investing activities, offset by a $533 million increase in
cash paid for licenses, acquisitions and other investments and a
$509 million increase in cash paid for capital
expenditures. Cash payments for capital expenditures totaled
$1.91 billion during the six months ended June 30,
2001 and $1.4 billion during the six months ended
June 30, 2000, including $365 million during 2001 and
$141 million during 2000 for international capital
expenditures. Cash paid for capital expenditures during the six
months ended June 30, 2001 increased primarily due to an
increase in the number of switches and transmitter and receiver
sites and related equipment placed in service during the fourth
quarter of 2000 and the first half of 2001. The increase in cash
paid for licenses, acquisitions and other investments is
primarily due to $405 million paid in 2001 to Arch
Wireless, Mobex and Motorola for the acquisition of 800 MHz
and 900 MHz licenses and related assets, as well as
$32 million to Lets Talk Cellular and Wireless for
the purchase of retail stores. We also purchased significantly
more Federal Communications Commission, or FCC, licenses from
small operators of specialized mobile radio licenses in the
first half of 2001 than in the first half of 2000.

Net cash provided by financing activities of
$2.22 billion during 2001 consisted primarily of
$2.22 billion in net proceeds from the private placement of
our 9.5% senior serial redeemable notes due 2011 and our
6% convertible senior notes due 2011. Net cash provided by
financing activities of $1.92 billion during 2000 was
primarily attributable to $1.13 billion in net proceeds
from the sale of debt securities and $1.85 billion in
proceeds from borrowings under our domestic bank credit
facility, offset by $1.21 billion for the retirement of
debt securities.

21



---



##### Table of Contents



Future Capital Needs and Resources

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



| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expenditures for the expansion and enhancement of
	our digital mobile networks, including potential payments in
	connection with any implementation of advanced digital
	technology, sometimes referred to as third
	generation or 3G technology;
|
| |  | operating expenses relating to our digital mobile
	networks;                                                                                                                                                                                         
|
| |  | potential acquisitions, including any negotiated
	acquisitions, of spectrum from third parties and any future
	governmental auctions of spectrum;                                                                                                    
|
| |  | debt service requirements; and                                                                                                                                                                                                                       
|
| |  | other general corporate expenditures.                                                                                                                                                                                                                

We anticipate that our cash utilization for
capital expenditures and other investing activities will
continue to exceed our positive cash flows from domestic
operating activities throughout 2001, as we build out, expand
and enhance our digital mobile networks. See Forward
Looking Statements.

During the first quarter of 2001, our domestic
operations began to feel the impact of a slowing economy. We
incurred higher operating costs in our business primarily
attributable to customer acquisition and retention and handset
upgrade activities. As a result, we experienced lower segment
earnings from our domestic business in the first quarter of 2001
as compared to the fourth quarter of 2000. To respond to and
counter these developments, we initiated various actions in the
second quarter of 2001, including:



| |   |                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | reducing the average subsidy on our handsets by
	increasing the selling prices of some of our existing handsets
	and introducing new feature rich and higher priced handsets;                                                                                         
|
| |  | implementing strategies designed to lower
	commission costs on domestic handset sales;                                                                                                                                                                                
|
| |  | focusing more of our customer acquisition
	activities on lower cost distribution channels such as company
	owned retail stores, acquired in May 2001, Internet sales
	through our website and telemarketing sales; and                                                
|
| |  | reducing payroll and other operating costs by
	restructuring and streamlining our domestic organization to
	improve operating efficiencies by implementing a 5% workforce
	reduction, while continuing to invest in our customer care
	centers and direct sales force.

As a result of these actions, domestic operating
costs decreased and segment earnings improved in the second
quarter of 2001. However, we cannot be sure that our actions
will continue to be successful in further decreasing our overall
operating costs or increasing domestic segment earnings during
the remainder of 2001. See Forward Looking
Statements.

As of June 30, 2001, our domestic bank
credit facility provided for total secured financing capacity of
up to $6.0 billion, subject to the satisfaction or waiver
of applicable borrowing conditions. This facility consists of a
$1.5 billion revolving loan and $4.5 billion in term
loans that mature over a period from December 31, 2007 to
March 31, 2009. At June 30, 2001, the entire
$4.5 billion of term loans available under our bank credit
facility was outstanding. Amounts outstanding under this bank
credit facility are secured by liens on assets of substantially
all our domestic subsidiaries and bear interest payable
quarterly at an adjustable rate calculated based either on the
U.S. prime rate or the U.S. London Interbank Offered
Rate, or LIBOR. The maturity dates of the loans can accelerate
if our credit ratings are below specified levels and if the
aggregate amount of specified debt obligations that mature
before June 30, 2009, including the redemption price of
redeemable stock that is mandatorily redeemable before
June 30, 2009, exceed specified amounts. The availability
of financing under this bank credit facility is subject to
requirements under the indentures governing our public notes and
the terms applicable to some of our preferred stock. As of
June 30, 2001, we were able to access the entire
$6.0 billion available under our bank credit agreement in
compliance with our financial ratio tests, the

22



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debt incurrence covenants contained in our
indentures and the relevant terms of applicable issues of
preferred stock.


Our capital spending is expected to be driven by
several factors, including:



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

Nextel International will require a significant
amount of capital to fund its operations and any planned network
build-out for at least the next several years. We have
historically provided Nextel International with significant
financial support. In April and July 2001, through a wholly
owned subsidiary, we contributed an aggregate of
$500 million to Nextel International in exchange for
5,000 shares of its series A exchangeable redeemable
preferred stock. In addition, we have committed to provide
Nextel International with $250 million in additional
funding in the form of a loan secured by some of its assets.
Nextel International is also reviewing various other potential
sources of financing, including public or private debt or equity
financing and sales of nonstrategic assets. However, Nextel
International may not be able to obtain any such funds from
those other sources on satisfactory terms, if at all.

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

Based on available cash resources and the
anticipated cash needs of our domestic and international
operations for capital expenditures and acquisitions and the
combined anticipated operating cash flow of our domestic and
international wireless businesses, we believe that we will be
able to fully fund both our domestic and international
operations through calendar year 2001. See Forward Looking
Statements. In making this assessment, we have considered:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidated cash, cash equivalents and
	short-term investments on hand as of June 30, 2001 of
	$4.74 billion;                        
|
| |  | the availability of $1.5 billion of
	incremental funding over the amounts outstanding under our
	domestic bank credit facility;       
|
| |  | our receipt of about $108 million from
	option exercises that occurred in July 2001;                                                  
|
| |  | the anticipated level of domestic capital
	expenditures during the remainder of 2001;                                                 
|
| |  | domestic and international debt service
	requirements during the remainder of 2001; and                                               
|
| |  | our participation in supplying the funding
	expected to be required for Nextel Internationals
	operations during 2001 outlined above.

If our or Nextel Internationals business
plans change, or if economic conditions in any of our combined
markets generally or competitive practices in the mobile
wireless telecommunications industry change materially from
those currently prevailing or from those now anticipated in
2001, or if other presently unexpected circumstances are
encountered that have a material effect on the cash flow or
profitability of the

23



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##### Table of Contents



domestic or international mobile wireless
businesses conducted by us or Nextel International, the
anticipated cash needs of those businesses, and the conclusions
as to the adequacy of the available sources, each also could
change significantly. Finally, our conclusion that we will be
able to fully fund both our domestic and international
operations through 2001 does not take into account the impact of
our participation in any auctions for the purchase of licenses
other than those already concluded or any significant
acquisition transactions or the pursuit of any significant new
business opportunities other than those currently being pursued
by us or Nextel International. Any acquisition or new business
opportunity could involve significant additional funding needs
in excess of the identified currently available sources, and
could require us or Nextel International to raise additional
equity and debt funding to meet those needs.


The availability of borrowings under our domestic
bank credit facility is subject to certain conditions and
limitations, and we cannot be sure that those conditions will be
met. The instruments relating to our financing arrangements and
preferred stock contain provisions that operate to limit the
amount of borrowings that we may incur. The terms of the
domestic bank credit facility and Nextel Internationals
financing agreements also require us and our relevant
subsidiaries, and Nextel International and its relevant
subsidiaries, at specified times to maintain compliance with
specified operating and financial covenants or ratios, including
specified covenants and ratios related to leverage, which become
more stringent over time.

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



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

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

Forward Looking Statements

Safe Harbor Statement under the
Private Securities Litigation Reform Act of
1995.A number of statements made
in the foregoing Managements Discussion and Analysis
of Financial Condition and Results of Operations are not
historical or current facts, but deal with potential future
circumstances and developments. They can be identified by the
use of forward looking words such as believes,
expects, plans, may,
will, would, could,
should or anticipates or other
comparable words, or by discussions of strategy that may involve
risks and uncertainties. We caution you that these forward
looking statements are only predictions, which are subject to
risks and uncertainties including financial variations, changes
in the regulatory environment, industry growth and trend
predictions. We have attempted to identify, in context, some of
the factors that we currently believe may cause actual future
experience and results to differ from our current expectations
regarding the relevant matter or subject area. The operation and
results of our wireless communications business also may be
subject to the effect of other risks and uncertainties in

24



---



##### Table of Contents



addition to the relevant qualifying factors
identified in the foregoing Managements Discussion
and Analysis of Financial Condition and Results of
Operations including, but not limited to:




| |   |                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general economic conditions in the geographic
	areas and occupational market segments that we are targeting for
	our digital mobile network service;                                                                                                                                                                                                                                     
|
| |  | the availability of adequate quantities of system
	infrastructure and subscriber equipment and components to meet
	service deployment and marketing plans and customer demand;                                                                                                                                                                                                           
|
| |  | the availability and cost of acquiring additional
	spectrum;                                                                                                                                                                                                                                                                                                                             
|
| |  | the timely development and availability of new
	handsets with expanded applications and features;                                                                                                                                                                                                                                                                                        
|
| |  | the success of efforts to improve, and
	satisfactorily address any issues relating to, our digital
	mobile network performance;                                                                                                                                                                                                                                                          
|
| |  | the continued successful performance of the
	technology being deployed in our various market areas and the
	success of the technology deployed in connection with our Nextel
	Wireless Web services;                                                                                                                                                                                     
|
| |  | market acceptance of our new handset and service
	offerings, including our Nextel Wireless Web services and Nextel
	Worldwide;                                                                                                                                                                                                                                                           
|
| |  | the successful implementation of new technologies
	deployed in connection with any future third
	generation or 3G services we may offer;                                                                                                                                                                                                                                             
|
| |  | the ability to achieve market penetration and
	average subscriber revenue levels sufficient to provide
	financial viability to our digital mobile network business;                                                                                                                                                                                                                      
|
| |  | our ability to timely and successfully accomplish
	required scale-up of our billing, collection, customer care and
	similar back-office operations to keep pace with customer
	growth, increased system usage rates and growth in levels of
	accounts receivables being generated by the digital mobile
	network customer base;                                                          
|
| |  | access to sufficient debt or equity capital to
	meet operating and financing needs;                                                                                                                                                                                                                                                                                                      
|
| |  | the quality and price of similar or comparable
	wireless communications services offered or to be offered by our
	competitors, including providers of cellular and personal
	communication services;                                                                                                                                                                                     
|
| |  | future legislation or regulatory actions relating
	to specialized mobile radio services, other wireless
	communications services or telecommunications generally; and                                                                                                                                                                                                                    
|
| |  | other risks and uncertainties described from time
	to time in our reports and, with specific reference to risk
	factors relating to international operations, in Nextel
	Internationals reports, filed with the Securities and
	Exchange Commission, including our annual reports on
	Form 10-K for the year ended December 31, 2000 and our
	subsequent quarterly reports on Form 10-Q.




Item 3.  Quantitative and
Qualitative Disclosures about Market Risk.

We primarily use senior notes, bank and vendor
credit facilities and mandatorily redeemable preferred stock, to
finance our obligations. To the extent the interest rates on
these financial instruments are variable, they expose us to
interest rate risk. Our primary interest rate risk exposure
results from changes in U.S. LIBOR, the U.S. prime
rate, Eurodollar Rate and Adjusted Base Rate, which are used to
determine the interest rates that are applicable to borrowings
under our bank and vendor credit agreements. We use interest
rate swap agreements to partially hedge interest rate exposure
associated with our long-term debt. All of our derivative
financial instrument transactions are entered into for
non-trading purposes.

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

25



---



##### Table of Contents



As of June 30, 2001, we held
$1.28 billion of short-term investments consisting of debt
securities in the form of commercial paper and corporate bonds.
As the weighted average maturity from the date of purchase was
about four months, these short-term investments do not expose us
to a significant amount of interest rate risk.

As of June 30, 2001, we had investments in
the common stock of publicly traded companies, which had an
aggregate fair value of $389 million. These investments are
reported at their market value in our financial statements.
Negative fluctuations in the stock prices of these companies
expose us to equity price risks. A 10% decline in their stock
price would result in a $39 million decrease in the fair
value of our investments in these public companies.

The information below summarizes our market risks
associated with fluctuations in interest rates as of
June 30, 2001 in U.S. dollars. To the extent that our
financial instruments expose us to interest rate and foreign
currency exchange risks, these instruments are presented within
each market risk category in the table below. The table presents
principal cash flows and related interest rates by year of
maturity for our senior notes, bank and vendor credit
facilities, capital lease and finance obligations and
mandatorily redeemable preferred stock in effect at
June 30, 2001. In the case of the mandatorily redeemable
preferred stock and senior notes, the table excludes the
potential exercise of the relevant redemption or conversion
features. This table also assumes that we will repay our senior
notes to levels necessary to avoid an earlier repayment
obligation with respect to our domestic bank credit agreement.
See Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations 
Future Capital Needs and Resources. For interest rate swap
agreements, the table presents notional amounts and the related
reference interest rates by year of maturity. Fair values
included in this section have been determined based on:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | quoted market prices for senior notes and
	mandatorily redeemable preferred stock;                                              
|
| |  | carrying value for the bank and vendor credit
	facilities at June 30, 2001 as interest rates are reset
	periodically;           
|
| |  | estimates for the capital lease and finance
	obligations based on interest rates for current term loans with
	similar terms; and
|
| |  | estimates obtained from bankers to settle
	interest rate swap agreements.                                                       

26



---



##### Table of Contents



Descriptions of our senior notes, bank and vendor
credit facilities, capital lease and finance obligations,
interest rate swap agreements and mandatorily redeemable
preferred stock are contained in notes 4, 6, 7 and 10 to
the consolidated financial statements included in our 2000
annual report on Form 10-K and should be read in
conjunction with the following table. The change in the total
and fair values of our long-term debt and capital lease and
finance obligations as compared to December 31, 2000
reflect the January 2001 issuance of senior notes, the May 2001
issuance of convertible notes, repayments under our
international vendor credit facilities, the April 2001 lease
transaction and the changes in the applicable market conditions.
The $100 million decrease in the notional amount maturing
in 2001 for variable to variable interest rate swaps is
attributable to the termination of a swap in the second quarter
of 2001 in accordance with its original terms. There was no
realized gain or loss associated with this termination.
Additionally, in July 2001, we entered into three interest rate
swap agreements totaling $500 million in notional amount to
hedge the risk of changes in fair value attributable to changes
in U.S. LIBOR associated with $500 million of our
9.5% senior serial redeemable notes due 2011.

|                                                                                                   |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------- | --------------------- | -------------------------- | - | ---- | - | ---- | - | ---- | - | ---- | - | ---------- | - | ----- | - | ---------- | - |  | - | --- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                   |                       |                            |   |      |   |     
|                                                                                                   |                       | Year of Maturity           |   |      |   |     
|                                                                                                   |                       |                            |   |      |   |     
|                                                                                                   |                       | 2001                       |   | 2002 |   | 2003 |   | 2004 |   | 2005 |   | Thereafter |   | Total |   | Fair Value
|                                                                                                   |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |           
|                                                                                                   |                       |                           
|                                                                                                   |                       | (U.S. dollars in millions)
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|I. Interest Rate Sensitivity                                                                       |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       
|Long-Term Debt, Capital Lease and Finance
	Obligations and Mandatorily Redeemable Preferred
	Stock |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Fixed Rate            |                            | $ | 57   |   |      | $ | 115  |   |      | $ | 118        |   |       | $ | 112        |   |  | $ | 97  |   |  | $ | 14,990 |   |  | $ | 15,489 |   |  | $ | 10,054 |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 9    | % |      |   | 9    | % |      |   | 9          | % |       |   | 9          | % |  |   | 9   | % |  |   | 10     | % |  |   | 10     | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable Rate         |                            | $ | 17   |   |      | $ | 121  |   |      | $ | 417        |   |       | $ | 419        |   |  | $ | 507 |   |  | $ | 3,526  |   |  | $ | 5,007  |   |  | $ | 5,007  |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 10   | % |      |   | 9    | % |      |   | 8          | % |       |   | 7          | % |  |   | 7   | % |  |   | 7      | % |  |   | 7      | % |  |   |        |  
|Interest Rate Swaps                                                                                |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable to Fixed(1)  |                            | $ |     |   |      | $ |     |   |      | $ |           |   |       | $ |           |   |  | $ |    |   |  | $ | 570    |   |  | $ | 570    |   |  | $ | (67    | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Pay Rate      |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 8      | % |  |   | 8      | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Receive Rate  |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 5      | % |  |   | 5      | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable to Variable  |                            | $ |     |   |      | $ |     |   |      | $ | 400        |   |       | $ |           |   |  | $ |    |   |  | $ |       |   |  | $ | 400    |   |  | $ | (11    | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Pay Rate      |                            |   |     |   |      |   |     |   |      |   | 6          | % |       |   |           |   |  |   |    |   |  |   |       |   |  |   | 6      | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Receive Rate  |                            |   |     |   |      |   |     |   |      |   | 4          | % |       |   |           |   |  |   |    |   |  |   |       |   |  |   | 4      | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|II. Foreign Exchange Rate
	Sensitivity                                                             |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       
|Long-Term Debt                                                                                     |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Fixed Rate            |                            | $ |     |   |      | $ | 1    |   |      | $ |           |   |       | $ |           |   |  | $ |    |   |  | $ | 2,331  |   |  | $ | 2,332  |   |  | $ | 569    |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   |     |   |      |   | 14   | % |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 13     | % |  |   | 13     | % |  |   |        |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable Rate         |                            | $ | 17   |   |      | $ | 74   |   |      | $ | 219        |   |       | $ | 94         |   |  | $ | 75  |   |  | $ | 28     |   |  | $ | 507    |   |  | $ | 507    |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 10   | % |      |   | 11   | % |      |   | 10         | % |       |   | 11         | % |  |   | 11  | % |  |   | 11     | % |  |   | 11     | % |  |   |        |  




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

27



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##### Table of Contents






PART II  OTHER INFORMATION.




Item 1.  Legal
Proceedings.

Nextel is involved in certain legal proceedings
that are described in our 2000 annual report on Form 10-K.
During the three months ended June 30, 2001, there were no
material changes in the status of or developments regarding
those legal proceedings that have not been previously disclosed
in our 2000 annual report on Form 10-K and our quarterly
report on Form 10-Q for the quarter ended March 31,
2001.

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




Item 2.  Changes in
Securities.

Convertible Notes Offering.In May 2001, we completed the
issuance and sale in a private placement of $1.0 billion in
principal amount of 6% convertible senior notes due 2011.
These notes are convertible at the option of the holders into
class A common stock at any time prior to redemption, repurchase
or maturity at a conversion price of about $23.84 per
share, subject to adjustment. Morgan Stanley Dean Witter acted
as placement agent and received about $20 million in fees
in connection with the sale of these notes. Because these notes
were issued in a private placement transaction, they may not be
offered or sold in the United States absent an effective
registration statement or an applicable exemption from the
registration requirements of the Securities Act. This
transaction was effected pursuant to the exemption of
Section 4(2) of the Securities Act and Rule 144A under
that act, in reliance upon the representations of the placement
agent.




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

On May 31, 2001, we held our 2001 annual
meeting of stockholders in Reston, Virginia. Only holders of
record of our class A common stock and class A convertible
redeemable preferred stock on the record date of April 6,
2001 were entitled to vote at the annual meeting. Each holder of
record of class A common stock at the close of business on
the record date was entitled to one vote per share on each
matter voted upon by the stockholders at the annual meeting. The
holder of record of the class A preferred stock was
entitled to the number of votes into which its shares of
class A preferred stock were convertible on the record
date. The holders of class A common stock and the
class A preferred stock were entitled to vote as single
class on all matters, except for the election of directors. Only
the holders of class A common stock were entitled to vote
on the election of Keith J. Bane and V. Janet Hill,
while only the holder of class A preferred stock was
entitled to vote on the election of Craig O. McCaw. As of
the record date, there were 728,843,745 shares of
class A common stock outstanding and 7,702,483 shares
of class A preferred stock outstanding, convertible into
46,214,898 shares of class A common stock.

The following matters were submitted for a vote
at our annual meeting:



|           |                                                                                                                                                                                                       
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Proposal 1 | To elect directors to hold office for a
	three-year term ending on the date of our annual meeting of
	stockholders in 2004 or until their respective successors have
	been duly elected and qualified.

28



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##### Table of Contents



Set forth below is information regarding the
628,454,593 shares of class A common stock voted in the
election of the following two directors and regarding all of the
shares of class A preferred stock voted in the election of the
class A preferred stock director.

|              |  |     |             |          |  |  |            | 
|------------- |  | --- | ----------- | -------- |  |  | ---------- | 
|Name          |  | For |             | Withheld
|              |  |     |             |         
|Keith J. Bane |  |     | 617,311,040 |          |  |  | 11,143,553 | 
|             
|             
|             
|             
|V. Janet Hill |  |     | 618,361,596 |          |  |  | 10,092,997 | 

Class A preferred stock director

|               |  |     |            |          |  |  |   | 
|-------------- |  | --- | ---------- | -------- |  |  | - | 
|Name           |  | For |            | Withheld
|               |  |     |            |         
|Craig O. McCaw |  |     | 46,214,898 |          |  |  | 0 | 

In addition to William E. Kennard, the following
are the names of each of our directors whose term of office
continued after the meeting:



| |                                      |                                                                                
| | ------------------------------------ | -------------------------------------------------------------------------------
| | Directors Holding Office Until 2002: | Daniel F. Akerson, Timothy M. Donahue,
	Frank M. Drendel and Dennis M. Weibling
|
| | Directors Holding Office Until 2003: | William E. Conway, Jr. and
	Morgan E. OBrien                                  



|           |                                                                                                                                                                           
|---------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Proposal 2 | To ratify the appointment of
	Deloitte & Touche LLP as our independent auditors
	to audit our consolidated financial statements for fiscal year
	ending December 31, 2001.

Set forth below is information regarding the
674,669,491 aggregate common stock equivalents, representing
shares of class A common stock and class A preferred stock,
voted on this matter.

|      |  |     |             |         |  |                |           |            |  |  |   |  |  |  |           | 
|----- |  | --- | ----------- | ------- |  | -------------- | --------- | ---------- |  |  | - |  |  |  | --------- | 
|      |  | For |             | Against |  | Broker Nonvote |           | Abstention
|      |  |     |             |         |  |                |           |           
|Total |  |     | 663,929,415 |         |  |                | 8,590,408 |            |  |  | 0 |  |  |  | 2,149,668 | 






Item 5.  Other
Information.


McCaw Transactions.In July 2001, various members of
the McCaw family (and entities affiliated with them) who
previously were members of Digital Radio, L.L.C., an
affiliate of Craig O. McCaw, exercised in full options to
purchase an aggregate of 10 million shares of our
class A common stock for an aggregate purchase price of
about $108 million.

On August 9, 2001, we entered into an
agreement with Digital Radio, L.L.C. and Mr. McCaw
that amends the securities purchase agreement originally entered
into in 1995. In 1995, the parties established certain
arrangements relating to our corporate governance including,
among other things, our agreement to create a five-member
operations committee of the board of directors with Digital
Radio entitled to have a majority of the members of this
committee selected from among its representatives on the board
of directors. The operations committee has the authority to
formulate key aspects of our business strategy, including
decisions relating to the technology we use, acquisitions,
operating and capital budgets, marketing and strategic plans,
approval of financing plans and endorsement of nominees to the
board of directors and its committees, as well as nomination and
oversight of certain officers. The board of directors, by a
majority vote, retained the right to override actions taken or
proposed by the operations committee, although doing so would
have resulted in a $25 million liquidated damages payment
to Digital Radio and the commencement of the accrual of a 12%
dividend payable on the stated value of all outstanding shares
of class A preferred stock. The shares of our class A
preferred stock outstanding at December 31, 2000 had an
aggregate stated value of about $283 million.

We also agreed that, subject to limited
exceptions, until one year after the termination of the
operations committee, neither Digital Radio nor its controlled
affiliates would participate in other two-way terrestrial-based
mobile wireless communications systems in any part of North
America or South America, unless those opportunities first have
been presented to and waived or rejected by us in accordance
with the provisions of the securities purchase agreement.

The securities purchase agreement and our
certificate of incorporation also described a number of
circumstances in which the operations committee could be
terminated but the liquidated damages payment

29



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and dividend accrual would not be required. One
of these circumstances was the failure of Digital Radio and its
affiliates to maintain ownership of a specified interest in our
equity securities for a specified time period, referred to as
the maintenance requirement. As a result of
distributions by Digital Radio and its affiliates in July 2001,
our board could have terminated the operations committee as
early as October 2001 without triggering the liquidated damages
payment or the dividend accrual.


However, on August 9, 2001, we entered into
an agreement with Digital Radio and Mr. McCaw pursuant to
which we eliminated the maintenance requirement referred to
above, although the original provisions that terminate a number
of the 1995 arrangements if ownership by Digital Radio and its
affiliates falls below 5% remain in effect. Under the new
agreement, if a majority of our board of directors who are
independent of Mr. McCaw vote to override actions taken or
proposed to be taken by the operations committee there are no
consequences to us. If our board of directors acts to revoke or
terminate the authority of the operations committee, the
$25 million in liquidated damages will continue to be
payable to Digital Radio but no dividends will accrue on the
outstanding shares of class A preferred stock. Further, the
board of directors continues to have the right under certain
circumstances by a majority vote of the full board of directors
or a majority vote of its disinterested directors, to change the
powers of or to terminate the operations committee without
triggering the liquidated damages payment. Mr. McCaw also
has agreed to continue to serve on our board of directors until
the operations committee is terminated or until his death or
incapacity.

Regulatory Developments.On June 22, 2001, the United
States Court of Appeals for the District of Columbia Circuit
issued a decision reversing the FCCs determination that
licenses held by NextWave Personal Communications, Inc. had
been forfeited when NextWave failed to make installment payments
for those licenses. If this decision is not reversed by a
subsequent appeal and if the FCC does not determine that
NextWave has forfeited the licenses on other grounds, many, but
not all, of the licenses awarded in the FCC auction completed in
January 2001, could be returned to NextWave rather than awarded
to the auction winners, many of whom are significant competitors
of Nextel.

On July 11, 2001, the FCC postponed
indefinitely the auction of 700 MHz spectrum that was
previously scheduled to begin on September 12, 2001, thus
delaying wireless carriers access to spectrum expected to be
used for 3G and other advanced services.

On May 25, 2001, the FCC extended the
five-year construction deadline applicable to all Major Trading
Area 900 MHz licenses from August 12, 2001, until
December 31, 2002, including those held by our subsidiaries.

We previously described in our annual report on
Form 10-K for the year ended December 31, 2000 certain
efforts to limit the use of wireless devices by drivers. Since
that disclosure, the State of New York has enacted a
statute that makes it unlawful to use a handheld mobile
telephone while driving. The use of a headset or other
hands-free device is not prohibited by this statute. This law
and similar laws, if enacted, could decrease the minutes of use
on wireless networks, including ours.

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##### Table of Contents






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

(a)  List of Exhibits.

|        |  |                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                               
|Number  |  | Exhibit Description                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                               
|4.1     |  | Indenture dated May 29, 2001 by and between
	Nextel Communications, Inc. and BNY Midwest Trust
	Company, as Trustee, relating to Nextels
	6% convertible senior notes due 2011 (filed as
	Exhibit 4.1 to our current report on Form 8-K dated
	and filed May 29, 2001 and incorporated herein by
	reference).                
|4.2     |  | Registration Rights Agreement dated May 29,
	2001 by and between Nextel Communications, Inc. and Morgan
	Stanley &  Co. Incorporated relating to
	Nextels 6% convertible senior notes due 2011 (filed
	as Exhibit 4.2 to our current report on Form 8-K dated
	and filed May 29, 2001 and incorporated herein by
	reference).
|10.1    |  | Amendment dated August 9, 2001 to the
	Securities Purchase Agreement dated April 4, 1995 between
	Nextel Communications, Inc., Digital Radio, L.L.C. and
	Mr.  Craig O. McCaw.                                                                                                                                                

(b)  Reports on Form 8-K filed with the
Securities and Exchange Commission.



| |    |                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Current report on Form 8-K dated and filed
	on May 1, 2001 reporting under Item 5 the announcement
	of our financial results and other data for the quarter ended
	March 31, 2001.                                       
|
| | 2. | Current report on Form 8-K dated and filed
	on May 24, 2001 reporting under Item 5 the
	announcement of a private placement of $1.0  billion of our
	6% convertible senior notes due 2011 and other recent
	developments.
|
| | 3. | Current report on Form 8-K dated and filed
	on May 29, 2001 reporting under Item 5 the completion
	of a private placement of $1.0  billion of our
	6% convertible senior notes due 2011.                                 
|
| | 4. | Current report on Form 8-K dated and filed
	on May 31, 2001 reporting under Item 5 the
	announcement of the highlights of our annual shareholders
	meeting.                                                              

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SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



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



| |     |                      
| | --- | ---------------------
| | By: | /s/ WILLIAM G. ARENDT

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

Date:  August 10, 2001


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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                               
|Number  |  | Exhibit Description                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                               
|4.1     |  | Indenture dated May 29, 2001 by and between
	Nextel Communications, Inc. and BNY Midwest Trust
	Company, as Trustee, relating to Nextels
	6% convertible senior notes due 2011 (filed as
	Exhibit 4.1 to our current report on Form 8-K dated
	and filed May 29, 2001 and incorporated herein by
	reference).                
|4.2     |  | Registration Rights Agreement dated May 29,
	2001 by and between Nextel Communications, Inc. and Morgan
	Stanley &  Co. Incorporated relating to
	Nextels 6% convertible senior notes due 2011 (filed
	as Exhibit 4.2 to our current report on Form 8-K dated
	and filed May 29, 2001 and incorporated herein by
	reference).
|10.1    |  | Amendment dated August 9, 2001 to the
	Securities Purchase Agreement dated April 4, 1995 between
	Nextel Communications, Inc., Digital Radio, L.L.C. and
	Mr.  Craig O. McCaw.                                                                                                                                                

33