##### 


















FORM 10-Q/A








(Amendment No. 1)





(Mark One)


|                                                |  |                                                                                             
|----------------------------------------------- |  | --------------------------------------------------------------------------------------------
|[X]                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934 
|                                               
|For the quarterly period ended March 31, 2004  
|                                               
|OR                                             
|                                               
|[  ]                                            |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                               
|For the transition period
    from           to
|                                               
|Commission file number 0-19656                 

NEXTEL COMMUNICATIONS, INC.




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







|                                                 |  |                              |               | 
|------------------------------------------------ |  | ---------------------------- | ------------- | 
|                                                 |  | Number of Shares Outstanding
|Title of Class                                   |  | on April 30, 2004           
|                                                 |  |                             
|Class A Common Stock, $0.001 par value           |  |                              | 1,074,142,865 | 
|Class B Nonvoting Common Stock, $0.001 par value |  |                              | 35,660,000    | 









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##### 






EXPLANATORY NOTE































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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


INDEX





| |          |  |  |                        |  |                                                                                                                                               |  |  |    | 
| | -------- |  |  | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
| |          |  |  |                        |  | Page                                                                                                                                          | 
| |          |  |  |                        |  |                                                                                                                                               | 
| | Part  I  |  |  | Financial Information.
| |          |  |  | Item 1.                |  | Financial Statements  Unaudited.                                                                                                             |  |  |    | 
| |          |  |  |                        |  | Condensed Consolidated Balance Sheets As of March 31, 2004 and
    December 31, 2003, Restated                                                |  |  | 3  | 
| |          |  |  |                        |  | Condensed Consolidated Statements of Operations and
    Comprehensive Income For the Three Months Ended March 31, 2004
    and 2003, Restated |  |  | 4  | 
| |          |  |  |                        |  | Condensed Consolidated Statement of Changes in
    Stockholders Equity For the Three Months Ended
    March 31, 2004, Restated               |  |  | 5  | 
| |          |  |  |                        |  | Condensed Consolidated Statements of Cash Flows For the Three
    Months Ended March 31, 2004 and 2003, Restated                              |  |  | 6  | 
| |          |  |  |                        |  | Notes to Condensed Consolidated Financial Statements                                                                                          |  |  | 7  | 
| |          |  |  |                        |  | Report of Independent Registered Public Accounting Firm                                                                                       |  |  | 18 | 
| |          |  |  | Item 2.                |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                                                     |  |  | 19 | 
| |          |  |  | Item 3.                |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                    |  |  | 40 | 
| |          |  |  | Item 4.                |  | Controls and Procedures                                                                                                                       |  |  | 41 | 
| | Part  II |  |  | Other Information.    
| |          |  |  | Item 1.                |  | Legal Proceedings                                                                                                                             |  |  | 42 | 
| |          |  |  | Item 5.                |  | Other Information                                                                                                                             |  |  | 42 | 
| |          |  |  | Item 6.                |  | Exhibits and Reports on Form 8-K                                                                                                              |  |  | 43 | 






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##### 



PART I  FINANCIAL INFORMATION.


Item 1.     Financial
Statements  Unaudited.


NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Balance Sheets


As of March 31, 2004 and December 31, 2003





Unaudited








|                                                                                                      |                                                                                            |                            |                           |                      |               |        |        |        |       |        |       | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------- | ------------------------- | -------------------- | ------------- | ------ | ------ | ------ | ----- | ------ | ----- | 
|                                                                                                      |                                                                                            | 2004                       |                           |                      | 2003          |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | (as restated)              |                           |                      | (as restated) |       
|                                                                                                      |                                                                                            | See note 1                 |                           |                      | See note 1    |       
|                                                                                                      |                                                                                            | (dollars in millions)      |                          
|ASSETS                                                                                               
|Current assets                                                                                        |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Cash and cash equivalents                                                                  |                            | $                         | 1,687                |               |        | $      | 806    |      
|                                                                                                      | Short-term investments                                                                     |                            |                           | 1,026                |               |        |        | 1,165  |      
|                                                                                                      | Accounts and notes receivable, less allowance for doubtful
    accounts of $78 and $86     |                            |                           | 1,243                |               |        |        | 1,276  |      
|                                                                                                      | Due from related parties                                                                   |                            |                           | 83                   |               |        |        | 70     |      
|                                                                                                      | Handset and accessory inventory                                                            |                            |                           | 306                  |               |        |        | 223    |      
|                                                                                                      | Prepaid expenses and other current assets                                                  |                            |                           | 271                  |               |        |        | 148    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            |                           | Total current assets |               |        | 4,616  |        |       |        | 3,688 | 
|Investments                                                                                           |                                                                                            |                            | 477                       |                      |               |        | 408    |       
|Property, plant and equipment,net of accumulated
    depreciation of $5,994 and $5,562                |                                                                                            |                            | 9,191                     |                      |               |        | 9,093  |       
|Intangible assets,net of accumulated amortization of
    $103 and $92                                 |                                                                                            |                            | 7,044                     |                      |               |        | 7,038  |       
|Other assets                                                                                          |                                                                                            |                            | 293                       |                      |               |        | 283    |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | $                          | 21,621                    |                      |               | $      | 20,510 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 
|Current liabilities                                                                                   |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Accounts payable                                                                           |                            | $                         | 725                  |               |        | $      | 663    |      
|                                                                                                      | Accrued expenses and other                                                                 |                            |                           | 1,267                |               |        |        | 1,382  |      
|                                                                                                      | Due to related parties                                                                     |                            |                           | 564                  |               |        |        | 285    |      
|                                                                                                      | Current portion of long-term debt and capital lease obligation                             |                            |                           | 364                  |               |        |        | 487    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            | Total current liabilities |                      |               | 2,920  |        |        |       | 2,817  |      
|Long-term debt                                                                                        |                                                                                            |                            | 9,953                     |                      |               |        | 9,725  |       
|Deferred income taxes                                                                                 |                                                                                            |                            | 1,923                     |                      |               |        | 1,873  |       
|Other liabilities                                                                                     |                                                                                            |                            | 234                       |                      |               |        | 258    |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            |                            | Total liabilities         |                      |               | 15,030 |        |        |       | 14,673 |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|Commitments and contingencies (note 7)                                                                |                                                                                            |                            |                           |                      |               |        |        |       
|Zero coupon mandatorily redeemable preferred stock,convertible, 245,245 shares issued and outstanding |                                                                                            |                            | 101                       |                      |               |        | 99     |       
|Stockholders equity                                                                                  |                                                                                            |                            |                           |                      |               |        |        |       
|                                                                                                      | Common stock, class A, 1.073 billion and 1.068 billion
    shares issued and outstanding   |                            |                           | 1                    |               |        |        | 1      |      
|                                                                                                      | Common stock, class B, nonvoting convertible, 36 million
    shares issued and outstanding |                            |                           |                     |               |        |        |       |      
|                                                                                                      | Paid-in capital                                                                            |                            |                           | 12,031               |               |        |        | 11,942 |      
|                                                                                                      | Accumulated deficit                                                                        |                            |                           | (5,768               | )             |        |        | (6,363 | )    
|                                                                                                      | Deferred compensation, net                                                                 |                            |                           | (15                  | )             |        |        | (16    | )    
|                                                                                                      | Accumulated other comprehensive income                                                     |                            |                           | 241                  |               |        |        | 174    |      
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | Total stockholders equity |                           |                      | 6,490         |        |        |        | 5,738 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       
|                                                                                                      |                                                                                            | $                          | 21,621                    |                      |               | $      | 20,510 |       
|                                                                                                      |                                                                                            |                            |                           |                      |               |       








3



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of Operations and
Comprehensive Income


For the Three Months Ended March 31, 2004 and 2003


(in millions, except per share amounts)


Unaudited





|                                                     |                                                                |                                                                      |       |       |               |   |       |       |   | 
|---------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------------- | ----- | ----- | ------------- | - | ----- | ----- | - | 
|                                                     |                                                                | 2004                                                                 |       |       | 2003          |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     |                                                                | (as restated)                                                        |       |       | (as restated) |  
|                                                     |                                                                | See note 1                                                           |       |       | See note 1    |  
|Operating revenues                                   |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Service revenues                                               |                                                                      | $     | 2,776 |               |   | $     | 2,210 |  
|                                                     | Handset and accessory revenues                                 |                                                                      |       | 327   |               |   |       | 161   |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     |                                                                |                                                                      | 3,103 |       |               |   | 2,371 |      
|                                                     |                                                                |                                                                      |       |       |               |  
|Operating expenses                                   |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Cost of service (exclusive of depreciation included below)     |                                                                      |       | 436   |               |   |       | 374   |  
|                                                     | Cost of handset and accessory revenues                         |                                                                      |       | 489   |               |   |       | 310   |  
|                                                     | Selling, general and administrative                            |                                                                      |       | 971   |               |   |       | 786   |  
|                                                     | Depreciation                                                   |                                                                      |       | 432   |               |   |       | 399   |  
|                                                     | Amortization                                                   |                                                                      |       | 11    |               |   |       | 14    |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     |                                                                |                                                                      | 2,339 |       |               |   | 1,883 |      
|                                                     |                                                                |                                                                      |       |       |               |  
|Operating income                                     |                                                                |                                                                      | 764   |       |               |   | 488   |      
|                                                     |                                                                |                                                                      |       |       |               |  
|Other (expense) income                               |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Interest expense                                               |                                                                      |       | (154  | )             |   |       | (225  | )
|                                                     | Interest income                                                |                                                                      |       | 8     |               |   |       | 12    |  
|                                                     | Loss on retirement of debt                                     |                                                                      |       | (17   | )             |   |       | (5    | )
|                                                     | Equity in losses of unconsolidated affiliates, net             |                                                                      |       |      |               |   |       | (13   | )
|                                                     | Realized gain on sale of investments                           |                                                                      |       | 26    |               |   |       |      |  
|                                                     | Other, net                                                     |                                                                      |       | 1     |               |   |       |      |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     |                                                                |                                                                      | (136  | )     |               |   | (231  | )    
|                                                     |                                                                |                                                                      |       |       |               |  
|Income before income tax provision                   |                                                                |                                                                      | 628   |       |               |   | 257   |      
|Income tax provision                                 |                                                                |                                                                      | (33   | )     |               |   | (22   | )    
|                                                     |                                                                |                                                                      |       |       |               |  
|Net income                                           |                                                                |                                                                      | 595   |       |               |   | 235   |      
|                                                     | Loss on retirement of mandatorily redeemable preferred stock   |                                                                      |       |      |               |   |       | (2    | )
|                                                     | Mandatorily redeemable preferred stock dividends and accretion |                                                                      |       | (2    | )             |   |       | (30   | )
|                                                     |                                                                |                                                                      |       |       |               |  
|Income available to common stockholders              |                                                                | $                                                                    | 593   |       |               | $ | 203   |      
|                                                     |                                                                |                                                                      |       |       |               |  
|Earnings per common share                            |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Basic                                                          |                                                                      | $     | 0.54  |               |   | $     | 0.20  |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     | Diluted                                                        |                                                                      | $     | 0.52  |               |   | $     | 0.19  |  
|                                                     |                                                                |                                                                      |       |       |               |  
|Weighted average number of common shares outstanding |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Basic                                                          |                                                                      |       | 1,106 |               |   |       | 1,010 |  
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     | Diluted                                                        |                                                                      |       | 1,172 |               |   |       | 1,047 |  
|                                                     |                                                                |                                                                      |       |       |               |  
|Comprehensive income, net of income tax              |                                                                |                                                                      |       |       |               |   |       |      
|                                                     | Unrealized gain on available-for-sale securities:              |                                                                      |       |       |               |   |       |       |  
|                                                     |                                                                | Net unrealized holding gains arising during the period               |       | $     | 77            |   |       | $     |  | 
|                                                     |                                                                | Reclassification adjustment for gain included in net income          |       |       | (12           | ) |       |       |  | 
|                                                     | Foreign currency translation adjustment                        |                                                                      |       | 2     |               |   |       | 1     |  
|                                                     | Cash flow hedge:                                               |                                                                      |       |       |               |   |       |       |  
|                                                     |                                                                | Reclassification of transition adjustment included in
    net income |       |       |              |   |       |       | 2 | 
|                                                     |                                                                | Unrealized gain on cash flow hedge                                   |       |       |              |   |       |       | 5 | 
|                                                     |                                                                |                                                                      |       |       |               |  
|                                                     | Other comprehensive income                                     |                                                                      |       | 67    |               |   |       | 8     |  
|                                                     | Net income                                                     |                                                                      |       | 595   |               |   |       | 235   |  
|                                                     |                                                                |                                                                      |       |       |               |  
|Comprehensive income, net of income tax              |                                                                | $                                                                    | 662   |       |               | $ | 243   |      
|                                                     |                                                                |                                                                      |       |       |               |  








4



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Statement of Changes in
Stockholders Equity


For the Three Months Ended March 31, 2004


(in millions)


Unaudited





|                         |                                                                     |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     |       |  |   |     |    |  |   |    |   |  |   |       |     |  
|------------------------ | ------------------------------------------------------------------- | ------------ | ----- | - | ------------ | - | ------- | ------ |  | ----------- | ------ | -------------------- | ---------- | - | - | ----------------- | ------------- | - | ------------ | -- | - | ------------- | ------ | --- | ---------- | - | --- | ----- |  | - | --- | -- |  | - | -- | - |  | - | ----- | --- | -
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        |                      |            |   |   | Accumulated Other |               |   |             
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        | Comprehensive Income |            |   |  
|                         |                                                                     | Class A      |       |   | Class B      |   |         |        |  |             |        |                      |            |   |   |                  
|                         |                                                                     | Common Stock |       |   | Common Stock |   |         |        |  |             |        |                      | Unrealized |   |   | Cumulative        |               |   |             
|                         |                                                                     |              |       |   |              |   | Paid-in |        |  | Accumulated |        |                      | Deferred   |   |   | Gain on           |               |   | Translation  |    |   |              
|                         |                                                                     | Shares       |       |   | Amount       |   |         | Shares |  |             | Amount |                      | Capital    |   |   | Deficit           |               |   | Compensation |    |   | Investments   |        |     | Adjustment |   |     | Total | 
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     |       | 
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        | (as restated)        |            |   |   |                   | (as restated) |   |              |    |   | (as restated) |       
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        | See note 1           |            |   |   |                   | See note 1    |   |              |    |   | See note 1    |       
|Balance, January 1, 2004 |                                                                     |              | 1,068 |   |              | $ | 1       |        |  |             | 36     |                      |            | $ |  |                   |               | $ | 11,942       |    |   | $             | (6,363 | )   |            | $ | (16 | )     |  | $ | 179 |    |  | $ | (5 | ) |  | $ | 5,738 |    
|                         | Net income                                                          |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        | 595 |            |   |     |       |  |   |     |    |  |   |    |   |  |   |       | 595 |  
|                         | Other comprehensive income                                          |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     |       |  |   |     | 65 |  |   |    | 2 |  |   |       | 67  |  
|                         | Common stock issued under equity plans                              |              |       | 5 |              |   |         |       |  |             |        |                      |            |   |   |                   |               |   |              | 91 |   |               |        |     |            |   |     |       |  |   |     |    |  |   |    |   |  |   |       | 91  |  
|                         | Deferred compensation                                               |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     | 1     |  |   |     |    |  |   |    |   |  |   |       | 1   |  
|                         | Accretion on zero coupon mandatorily redeemable
    preferred stock |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              | (2 | ) |               |        |     |            |   |     |       |  |   |     |    |  |   |    |   |  |   |       | (2  | )
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     |       |  |  
|Balance, March 31, 2004  |                                                                     |              | 1,073 |   |              | $ | 1       |        |  |             | 36     |                      |            | $ |  |                   |               | $ | 12,031       |    |   | $             | (5,768 | )   |            | $ | (15 | )     |  | $ | 244 |    |  | $ | (3 | ) |  | $ | 6,490 |    
|                         |                                                                     |              |       |   |              |   |         |        |  |             |        |                      |            |   |   |                   |               |   |              |    |   |               |        |     |            |   |     |       |  |  








5



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##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of Cash Flows


For the Three Months Ended March 31, 2004 and 2003


(in millions)


Unaudited





|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |      |       |      |     |    |      |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------- | ------------- | ---- | ----- | ---- | --- | -- | ---- | -
|                                                     |                                                                                           | 2004                                                                    |                                              |                                                     | 2003          |     
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|                                                     |                                                                                           | (as restated)                                                           |                                              |                                                     | (as restated) |     
|                                                     |                                                                                           | See note 1                                                              |                                              |                                                     | See note 1    |     
|Cash flows from operating activities                 |                                                                                           |                                                                         |                                              |                                                     |               |      |       |     
|                                                     | Net income                                                                                |                                                                         | $                                            | 595                                                 |               |      | $     | 235  |    
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities:     |                                                                         |                                              |                                                     |               |      |       |      |    
|                                                     |                                                                                           | Amortization of debt financing costs and accretion of senior
    notes  |                                              |                                                     | 5             |      |       |      | 23  |   
|                                                     |                                                                                           | Provision for losses on accounts receivable                             |                                              |                                                     | 34            |      |       |      | 56  |   
|                                                     |                                                                                           | Amortization of deferred gain from sale of towers                       |                                              |                                                     | (26           | )    |       |      | (26 | ) 
|                                                     |                                                                                           | Depreciation and amortization                                           |                                              |                                                     | 443           |      |       |      | 413 |   
|                                                     |                                                                                           | Loss on retirement of debt                                              |                                              |                                                     | 17            |      |       |      | 5   |   
|                                                     |                                                                                           | Equity in losses of unconsolidated affiliates, net                      |                                              |                                                     |              |      |       |      | 13  |   
|                                                     |                                                                                           | Realized gain on investments                                            |                                              |                                                     | (26           | )    |       |      |    |   
|                                                     |                                                                                           | Income tax provision                                                    |                                              |                                                     | 16            |      |       |      | 12  |   
|                                                     |                                                                                           | Other, net                                                              |                                              |                                                     | 4             |      |       |      | (2  | ) 
|                                                     |                                                                                           | Change in assets and liabilities, net of effects from
    acquisitions: |                                              |                                                     |               |      |       |      |     |   
|                                                     |                                                                                           |                                                                         | Accounts and notes receivable                |                                                     |               | (5   | )     |      |     | 18 |     
|                                                     |                                                                                           |                                                                         | Handset and accessory inventory              |                                                     |               | (87  | )     |      |     | 51 |     
|                                                     |                                                                                           |                                                                         | Prepaid expenses and other assets            |                                                     |               | (130 | )     |      |     | 16 |     
|                                                     |                                                                                           |                                                                         | Accounts payable, accrued expenses and other |                                                     |               | 404  |       |      |     | (1 | )   
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|                                                     |                                                                                           |                                                                         |                                              | Net cash provided by operating activities           |               |      | 1,244 |      |     |    | 813  |  
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|Cash flows from investing activities                 |                                                                                           |                                                                         |                                              |                                                     |               |      |       |     
|                                                     | Capital expenditures                                                                      |                                                                         |                                              | (684                                                | )             |      |       | (386 | )  
|                                                     | Purchases of short-term investments                                                       |                                                                         |                                              | (553                                                | )             |      |       | (728 | )  
|                                                     | Proceeds from maturities and sales of short-term investments                              |                                                                         |                                              | 695                                                 |               |      |       | 650  |    
|                                                     | Payments for purchases of licenses, investments and other, net
    of cash acquired       |                                                                         |                                              | (56                                                 | )             |      |       | (229 | )  
|                                                     | Proceeds from sale of investments and other                                               |                                                                         |                                              | 77                                                  |               |      |       | 15   |    
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|                                                     |                                                                                           |                                                                         |                                              | Net cash used in investing activities               |               |      | (521  | )    |     |    | (678 | )
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|Cash flows from financing activities                 |                                                                                           |                                                                         |                                              |                                                     |               |      |       |     
|                                                     | Proceeds from issuance of debt securities                                                 |                                                                         |                                              | 494                                                 |               |      |       |     |    
|                                                     | Purchase and retirement of debt securities and mandatorily
    redeemable preferred stock |                                                                         |                                              | (191                                                | )             |      |       | (570 | )  
|                                                     | Proceeds from issuance of stock                                                           |                                                                         |                                              | 68                                                  |               |      |       | 10   |    
|                                                     | Repayments under long-term credit facility                                                |                                                                         |                                              | (48                                                 | )             |      |       | (49  | )  
|                                                     | Borrowings under long-term credit facility                                                |                                                                         |                                              |                                                    |               |      |       | 69   |    
|                                                     | Payment for capital lease buy-out                                                         |                                                                         |                                              | (156                                                | )             |      |       | (54  | )  
|                                                     | Repayments under capital lease and finance obligations                                    |                                                                         |                                              | (9                                                  | )             |      |       | (16  | )  
|                                                     | Mandatorily redeemable preferred stock dividends paid                                     |                                                                         |                                              |                                                    |               |      |       | (15  | )  
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|                                                     |                                                                                           |                                                                         |                                              | Net cash provided by (used in) financing activities |               |      | 158   |      |     |    | (625 | )
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|Net increase (decrease) in cash and cash equivalents |                                                                                           |                                                                         | 881                                          |                                                     |               |      | (490  | )   
|Cash and cash equivalents, beginning of period       |                                                                                           |                                                                         | 806                                          |                                                     |               |      | 1,846 |     
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     
|Cash and cash equivalents, end of period             |                                                                                           | $                                                                       | 1,687                                        |                                                     |               | $    | 1,356 |     
|                                                     |                                                                                           |                                                                         |                                              |                                                     |               |     








6



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial Statements


Unaudited


Note 1.     Basis of Presentation




Earnings Per Common Share.





|                                                                   |                                                                                               |                                                                         |       |      |      |   |       |      |    | 
|------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----- | ---- | ---- | - | ----- | ---- | -- | 
|                                                                   |                                                                                               | Three Months Ended                                                      |      
|                                                                   |                                                                                               | March 31,                                                               |      
|                                                                   |                                                                                               |                                                                         |      
|                                                                   |                                                                                               | 2004                                                                    |       |      | 2003 |  
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|                                                                   |                                                                                               | (in millions, except                                                    |      
|                                                                   |                                                                                               | per share amounts)                                                      |      
|Income available to common stockholders  basic                    |                                                                                               | $                                                                       | 593   |      |      | $ | 203   |     
|                                                                   | Interest expense and preferred stock accretion eliminated upon
    the assumed conversion of: |                                                                         |       |      |      |   |       |      |   
|                                                                   |                                                                                               | 6% convertible senior notes due 2011.                                   |       |      | 10   |   |       |      |   | 
|                                                                   |                                                                                               | Zero coupon convertible preferred stock mandatorily
    redeemable 2013 |       |      | 2    |   |       |      |   | 
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|Income available to common stockholders 
    diluted              |                                                                                               | $                                                                       | 605   |      |      | $ | 203   |     
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|Weighted average number of common shares
    outstanding  basic   |                                                                                               |                                                                         | 1,106 |      |      |   | 1,010 |     
|                                                                   | Effect of dilutive securities:                                                                |                                                                         |       |      |      |   |       |      |   
|                                                                   |                                                                                               | Equity plans                                                            |       |      | 35   |   |       |      | 20 | 
|                                                                   |                                                                                               | 6% convertible senior notes due 2011                                    |       |      | 26   |   |       |      |   | 
|                                                                   |                                                                                               | Zero coupon convertible preferred stock mandatorily redeemable
    2013 |       |      | 5    |   |       |      |   | 
|                                                                   |                                                                                               | Class A convertible preferred stock                                     |       |      |     |   |       |      | 17 | 
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|Weighted average number of common shares
    outstanding  diluted |                                                                                               |                                                                         | 1,172 |      |      |   | 1,047 |     
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|Earnings per common share                                          |                                                                                               |                                                                         |       |      |      |   |       |     
|                                                                   | Basic                                                                                         |                                                                         | $     | 0.54 |      |   | $     | 0.20 |   
|                                                                   |                                                                                               |                                                                         |       |      |      |  
|                                                                   | Diluted                                                                                       |                                                                         | $     | 0.52 |      |   | $     | 0.19 |   
|                                                                   |                                                                                               |                                                                         |       |      |      |  






7



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




Stock-Based Compensation.







|                                                     |                                                                               |                      |     |     |      |   |     |     |      | 
|---------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------- | --- | --- | ---- | - | --- | --- | ---- | 
|                                                     |                                                                               | Three Months Ended   |    
|                                                     |                                                                               | March 31,            |    
|                                                     |                                                                               |                      |    
|                                                     |                                                                               | 2004                 |     |     | 2003 |  
|                                                     |                                                                               |                      |     |     |      |  
|                                                     |                                                                               | (in millions, except |    
|                                                     |                                                                               | per share amounts)   |    
|Income available to common stockholders, as reported |                                                                               | $                    | 593 |     |      | $ | 203 |    
|                                                     | Stock-based compensation expense included in reported net income              |                      |     | 1   |      |   |     | 2   |     
|                                                     | Stock-based compensation expense determined under fair value
    based method |                      |     | (55 | )    |   |     | (82 | )   
|                                                     |                                                                               |                      |     |     |      |  
|Income available to common stockholders, pro forma   |                                                                               | $                    | 539 |     |      | $ | 123 |    
|                                                     |                                                                               |                      |     |     |      |  
|Earnings per common share                            |                                                                               |                      |     |     |      |   |     |    
|                                                     | As reported                                                                   |                      |     |     |      |   |     |     |     
|                                                     |                                                                               | Basic                |     | $   | 0.54 |   |     | $   | 0.20 | 
|                                                     |                                                                               |                      |     |     |      |  
|                                                     |                                                                               | Diluted              |     | $   | 0.52 |   |     | $   | 0.19 | 
|                                                     |                                                                               |                      |     |     |      |  
|                                                     | Pro forma                                                                     |                      |     |     |      |   |     |     |     
|                                                     |                                                                               | Basic                |     | $   | 0.49 |   |     | $   | 0.12 | 
|                                                     |                                                                               |                      |     |     |      |  
|                                                     |                                                                               | Diluted              |     | $   | 0.47 |   |     | $   | 0.12 | 
|                                                     |                                                                               |                      |     |     |      |  




8



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


Supplemental Cash Flow
Information.


|                                                     |                                                             |                    |     |      |      |   |     |     |  
|---------------------------------------------------- | ----------------------------------------------------------- | ------------------ | --- | ---- | ---- | - | --- | --- | -
|                                                     |                                                             | Three Months Ended |    
|                                                     |                                                             | March 31,          |    
|                                                     |                                                             |                    |    
|                                                     |                                                             | 2004               |     |      | 2003 |  
|                                                     |                                                             |                    |     |      |      |  
|                                                     |                                                             | (in millions)      |    
|Capital expenditures, including capitalized interest |                                                             |                    |     |      |      |   |     |    
|                                                     | Cash paid for capital expenditures                          |                    | $   | 684  |      |   | $   | 386 |  
|                                                     | Changes in capital expenditures accrued, unpaid or financed |                    |     | (144 | )    |   |     | (70 | )
|                                                     |                                                             |                    |     |      |      |  
|                                                     |                                                             | $                  | 540 |      |      | $ | 316 |    
|                                                     |                                                             |                    |     |      |      |  
|Interest costs                                       |                                                             |                    |     |      |      |   |     |    
|                                                     | Interest expense                                            |                    | $   | 154  |      |   | $   | 225 |  
|                                                     | Interest capitalized                                        |                    |     | 3    |      |   |     | 11  |  
|                                                     |                                                             |                    |     |      |      |  
|                                                     |                                                             | $                  | 157 |      |      | $ | 236 |    
|                                                     |                                                             |                    |     |      |      |  
|Cash paid for interest, net of amounts capitalized   |                                                             | $                  | 169 |      |      | $ | 154 |    
|                                                     |                                                             |                    |     |      |      |  
|Cash received for interest                           |                                                             | $                  | 6   |      |      | $ | 9   |    
|                                                     |                                                             |                    |     |      |      |  
|Cash paid for income taxes                           |                                                             | $                  | 7   |      |      | $ | 7   |    
|                                                     |                                                             |                    |     |      |      |  




Restatement of Consolidated
Financial Statements.





















9



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





























Condensed Consolidated Balance Sheets








(in millions)








Unaudited








|                                       |  |               |        |   |             |   |        |  
|-------------------------------------- |  | ------------- | ------ | - | ----------- | - | ------ | -
|                                       |  | As previously |        |   |            
|As of March 31, 2004                   |  | reported      |        |   | As restated |  
|                                       |  |               |        |   |             |  
|Deferred income taxes                  |  | $             | 1,917  |   |             | $ | 1,923  |  
|Other liabilities                      |  |               | 144    |   |             |   | 234    |  
|Total liabilities                      |  |               | 14,934 |   |             |   | 15,030 |  
|Accumulated deficit                    |  |               | (5,663 | ) |             |   | (5,768 | )
|Accumulated other comprehensive income |  |               | 232    |   |             |   | 241    |  
|Total stockholders equity             |  |               | 6,586  |   |             |   | 6,490  |  







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




10



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





Condensed Consolidated Statements of Operations and
Comprehensive Income








(in millions, except per share data)








Unaudited








|                                            |         |               |     |      |             |   |     |      | 
|------------------------------------------- | ------- | ------------- | --- | ---- | ----------- | - | --- | ---- | 
|                                            |         | As previously |     |      |            
|Three months ended March 31, 2004           |         | reported      |     |      | As restated |  
|                                            |         |               |     |      |             |  
|Cost of service (exclusive of depreciation) |         | $             | 438 |      |             | $ | 436 |     
|Operating income                            |         |               | 762 |      |             |   | 764 |     
|Income before income tax provision          |         |               | 626 |      |             |   | 628 |     
|Net income                                  |         |               | 593 |      |             |   | 595 |     
|Income available to common stockholders     |         | $             | 591 |      |             | $ | 593 |     
|Earnings per common share                   |         |               |     |      |             |   |     |     
|                                            | Basic   |               | $   | 0.53 |             |   | $   | 0.54 | 
|                                            | Diluted |               | $   | 0.51 |             |   | $   | 0.52 | 
|Comprehensive income, net of income tax     |         | $             | 660 |      |             | $ | 662 |     







|                                            |         |               |     |      |             |   |     |      | 
|------------------------------------------- | ------- | ------------- | --- | ---- | ----------- | - | --- | ---- | 
|                                            |         | As previously |     |      |            
|Three months ended March 31, 2003           |         | reported      |     |      | As restated |  
|                                            |         |               |     |      |             |  
|Cost of service (exclusive of depreciation) |         | $             | 369 |      |             | $ | 374 |     
|Operating income                            |         |               | 493 |      |             |   | 488 |     
|Income before income tax provision          |         |               | 262 |      |             |   | 257 |     
|Net income                                  |         |               | 240 |      |             |   | 235 |     
|Income available to common stockholders     |         | $             | 208 |      |             | $ | 203 |     
|Earnings per common share                   |         |               |     |      |             |   |     |     
|                                            | Basic   |               | $   | 0.21 |             |   | $   | 0.20 | 
|                                            | Diluted |               | $   | 0.20 |             |   | $   | 0.19 | 
|Comprehensive income, net of income tax     |         | $             | 248 |      |             | $ | 243 |     







Condensed Consolidated Statement of Changes in
Stockholders Equity








(in millions)








Unaudited








|                               |  |               |        |   |             |   |        |  
|------------------------------ |  | ------------- | ------ | - | ----------- | - | ------ | -
|                               |  | As previously |        |   |            
|As of March 31, 2004           |  | reported      |        |   | As restated |  
|                               |  |               |        |   |             |  
|Accumulated deficit            |  | $             | (5,663 | ) |             | $ | (5,768 | )
|Unrealized gain on investments |  | $             | 235    |   |             | $ | 244    |  
|As of January 1, 2004          |  |               |        |   |             |   |        |  
|                               |  |               |        |   |             |  
|Accumulated deficit            |  | $             | (6,256 | ) |             | $ | (6,363 | )
|Unrealized gain on investments |  | $             | 170    |   |             | $ | 179    |  




11



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)





Condensed Consolidated Statements of Cash Flows








(in millions)








Unaudited








|                                                                                                                         |  |               |     |  |             |   |     | 
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- |  | ----------- | - | --- | 
|                                                                                                                         |  | As previously |     |  |            
|Three months ended March 31, 2004                                                                                        |  | reported      |     |  | As restated |  
|                                                                                                                         |  |               |     |  |             |  
|Net income                                                                                                               |  | $             | 593 |  |             | $ | 595 | 
|Changes in assets and liabilities, net of effects from
    acquisitions
    Accounts payable, accrued expenses and other |  |               | 406 |  |             |   | 404 | 







|                                                                                                                         |  |               |     |   |             |   |     |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- | - | ----------- | - | --- | -
|                                                                                                                         |  | As previously |     |   |            
|Three months ended March 31, 2003                                                                                        |  | reported      |     |   | As restated |  
|                                                                                                                         |  |               |     |   |             |  
|Net income                                                                                                               |  | $             | 240 |   |             | $ | 235 |  
|Changes in assets and liabilities, net of effects from
    acquisitions
    Accounts payable, accrued expenses and other |  |               | (6  | ) |             |   | (1  | )




New Accounting Pronouncements.




Reclassifications.


12



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


Note 2.     Intangible Assets


|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |   |    |    |  |   |       |       | 
|----------------------------- | ---------------------------------------------------- | ------ | -------------- | -------------- | ----- | ----- | ----------------- | - | --- | -------- |  | ----- | -------- | ----- |  | ------------ | ----- | ----- | -------- | - | -- | -- |  | - | ----- | ----- | 
|                              |                                                      |        |                | March 31, 2004 |       |       | December 31, 2003 |  
|                              |                                                      |        |                |                |       |       |                   |  
|                              |                                                      |        |                | Gross          |       |       |                   |   | Net |          |  | Gross |          |       |  |              | Net   |      
|                              |                                                      | Useful |                | Carrying       |       |       | Accumulated       |   |     | Carrying |  |       | Carrying |       |  | Accumulated  |       |       | Carrying |  
|                              |                                                      | Lives  |                | Value          |       |       | Amortization      |   |     | Value    |  |       | Value    |       |  | Amortization |       |       | Value    |  
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  
|                              |                                                      |        |                | (in millions)  |      
|Amortized intangible assets   |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |   |    |    |  |   |       |      
|                              | Customer lists                                       |        | 3 years        |                | $     | 98    |                   |   | $   | 83       |  |       | $        | 15    |  |              | $     | 98    |          |   | $  | 75 |  |   | $     | 23    | 
|                              | Spectrum sharing and noncompete agreements and other |        | Up to 20 years |                |       | 82    |                   |   |     | 20       |  |       |          | 62    |  |              |       | 82    |          |   |    | 17 |  |   |       | 65    | 
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  
|                              |                                                      |        |                |                | 180   |       |                   |   | 103 |          |  |       | 77       |       |  |              | 180   |       |          |   | 92 |    |  |   | 88    |      
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  
|Unamortized intangible assets |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |   |    |    |  |   |       |      
|                              | FCC licenses                                         |        | Indefinite     |                |       | 6,939 |                   |   |     |          |  |       |          | 6,939 |  |              |       | 6,922 |          |   |    |    |  |   |       | 6,922 | 
|                              | Goodwill                                             |        | Indefinite     |                |       | 28    |                   |   |     |          |  |       |          | 28    |  |              |       | 28    |          |   |    |    |  |   |       | 28    | 
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  
|                              |                                                      |        |                |                | 6,967 |       |                   |   |     |          |  |       | 6,967    |       |  |              | 6,950 |       |          |   |    |    |  |   | 6,950 |      
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  
|Total intangible assets       |                                                      |        |                | $              | 7,147 |       |                   | $ | 103 |          |  | $     | 7,044    |       |  | $            | 7,130 |       |          | $ | 92 |    |  | $ | 7,038 |      
|                              |                                                      |        |                |                |       |       |                   |   |     |          |  |       |          |       |  |              |       |       |          |  









13



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




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

Long-Term Debt and
Mandatorily Redeemable Preferred Stock.


|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |     |  |   |       |        |      |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------------------- | ----- | -------- | ----------- | - | --- | --------- |  | - | --------- | --- |  | - | ----- | ------ | ---- | -
|                                                                                                                                                                        |                      |                       |       | Book and |             |   | New |           |  |  
|                                                                                                                                                                        |                      | December 31,          |       |          | Principal   |   |     | Debt      |  |   | March 31, |    
|                                                                                                                                                                        |                      | 2003                  |       |          | Value of    |   |     | Issuance  |  |   | 2004      |    
|                                                                                                                                                                        |                      | Balance               |       |          | Retirements |   |     | and Other |  |   | Balance   |    
|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |    
|                                                                                                                                                                        |                      | (dollars in millions) |      
|9.375% senior serial redeemable notes due 2009                                                                                                                          |                      | $                     | 1,599 |          |             | $ |    |           |  | $ |          |     |  | $ | 1,599 |       
|5.25% convertible senior notes due 2010                                                                                                                                 |                      |                       | 607   |          |             |   |    |           |  |   |          |     |  |   | 607   |       
|9.5% senior serial redeemable notes due 2011, including a
    deferred premium of $36 and $28                                                                           |                      |                       | 895   |          |             |   | 167 |           |  |   | (8        | )   |  |   | 720   |       
|6% convertible senior notes due 2011                                                                                                                                    |                      |                       | 608   |          |             |   |    |           |  |   |          |     |  |   | 608   |       
|6.875% senior serial redeemable notes due 2013                                                                                                                          |                      |                       | 500   |          |             |   |    |           |  |   |          |     |  |   | 500   |       
|5.95% senior serial redeemable notes due 2014, net of
    unamortized discount of $0 and $6                                                                             |                      |                       |      |          |             |   |    |           |  |   | 494       |     |  |   | 494   |       
|7.375% senior serial redeemable notes due 2015, including
    unamortized premium of $8 and $8                                                                          |                      |                       | 2,008 |          |             |   |    |           |  |   |          |     |  |   | 2,008 |       
|Bank credit facility                                                                                                                                                    |                      |                       | 3,804 |          |             |   |    |           |  |   | (48       | )   |  |   | 3,756 |       
|Other                                                                                                                                                                   |                      |                       | 25    |          |             |   |    |           |  |   |          |     |  |   | 25    |       
|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |    
|                                                                                                                                                                        | Total long-term debt |                       |       | 10,046   |             |   | $   | 167       |  |   | $         | 438 |  |   |       | 10,317 |     
|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |    
|                                                                                                                                                                        |                      | Less current portion  |       |          | (321        | ) |     |           |  |   |           |     |  |   |       |        | (364 | )
|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |    
|                                                                                                                                                                        |                      | $                     | 9,725 |          |             |   |     |           |  |   |           |     |  | $ | 9,953 |       
|                                                                                                                                                                        |                      |                       |       |          |             |   |     |           |  |   |           |    
|Zero coupon convertible preferred stock mandatorily
    redeemable 2013, no dividend; stated at accreted liquidation
    preference value at 9.25% compounded quarterly |                      | $                     | 99    |          |             | $ |    |           |  | $ | 2         |     |  | $ | 101   |       

5.95% Senior Notes.


Debt and Preferred Stock Retirements.


14



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Capital Lease Obligation.


Note 4.     2004 Developments




Note 5.     Related Party
Transactions






15



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Note 6.     Derivative Instruments
and Hedging Activities










Note 7.     Commitments and
Contingencies




16



---



##### 



NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






Note 8.     Subsequent Event




17



---



##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





























































































18



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##### 





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

A. Overview


























Company Overview.






19



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##### 






SM









Managements Summary.






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





20



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##### 







| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | further extend the reach of Direct Connect service in North
    America and into selected markets in Latin America;                                                                                                                                             
|
| |  | begin the deployment of an enhancement to our existing iDEN
    technology, known as
    WiDENSM,
    designed to increase the data speeds of our network by up to
    four times the current speeds;                                                           
|
| |  | build an additional 2,200 transmitter and receiver sites to
    improve both our geographic coverage and to meet the capacity
    needs of our growing customer base;                                                                                           
|
| |  | introduce handsets that, together with software that we recently
    installed in our network infrastructure, are designed to more
    efficiently utilize radio spectrum to significantly increase our
    network capacity once these handsets are in use; and
|
| |  | complete a field trial of Nextel Wireless
    BroadbandSM,
    an easy-to-use and secure service that connects customers to the
    Internet at broadband speeds, with the full mobility of wireless
    service.                                               









21



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##### 









Critical Accounting Policies and Estimates.




Revenue Recognition.


22



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##### 





Cost of Handsets.


Allowance for Doubtful Accounts.


Valuation and Recoverability of Long-Lived Assets.


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





23



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##### 







Valuation and Recoverability of Intangible Assets.




Recoverability of Capitalized Software.





Net Operating Loss Valuation Allowance.







24



---



##### 





B. Results of Operations










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





25



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##### 







Selected Financial and Operating Data.


|                                                         |  |                    |        |  |      |  |        | 
|-------------------------------------------------------- |  | ------------------ | ------ |  | ---- |  | ------ | 
|                                                         |  | Three Months Ended |       
|                                                         |  | March 31,          |       
|                                                         |  |                    |       
|                                                         |  | 2004               |        |  | 2003 | 
|                                                         |  |                    |        |  |      | 
|Handsets in service, end of period (in thousands)(1)     |  |                    | 13,356 |  |      |  | 11,092 | 
|Net handset additions (in thousands)(1)                  |  |                    | 474    |  |      |  | 480    | 
|Average monthly minutes of use per handset(1)            |  |                    | 750    |  |      |  | 650    | 
|System minutes of use (in billions)(1)                   |  |                    | 29.6   |  |      |  | 21.2   | 
|Net transmitter and receiver sites placed in service     |  |                    | 400    |  |      |  | 100    | 
|Transmitter and receiver sites in service, end of period |  |                    | 17,900 |  |      |  | 16,400 | 
|Switches in service, end of period                       |  |                    | 82     |  |      |  | 84     | 
|Nextel stores in service, end of period                  |  |                    | 649    |  |      |  | 470    | 






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







26



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##### 



Service Revenues and Cost of Service.





|                                            |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |   |     |     |  |  |    |    |  
|------------------------------------------- | ------------------------------- | --------------------- | ----- | ----- | --------- |  | -- | --------- | ---- | ----------- | --------- | ------------- | - | ------- | -- | - | ------- | - | --- | --- |  |  | -- | -- | -
|                                            |                                 |                       |       |       |           |  |    |           |      | Change from |          
|                                            |                                 |                       |       | % of  |           |  |    |           | % of |             |           | Previous Year |  
|                                            |                                 | March 31,             |       |       | Operating |  |    | March 31, |      |             | Operating |               |   |         |   
|                                            |                                 | 2004                  |       |       | Revenues  |  |    | 2003      |      |             | Revenues  |               |   | Dollars |    |   | Percent |  
|                                            |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |  
|                                            |                                 | (dollars in millions) |      
|Three Months Ended                          |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |   |     |     |  |  |    |   
|Service revenues                            |                                 | $                     | 2,776 |       |           |  | 89 | %         |      | $           | 2,210     |               |   |         | 93 | % |         | $ | 566 |     |  |  | 26 | % 
|Cost of service (exclusive of depreciation) |                                 |                       | 436   |       |           |  | 14 | %         |      |             | 374       |               |   |         | 16 | % |         |   | 62  |     |  |  | 17 | % 
|                                            |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin            |                       | $     | 2,340 |           |  |    |           |      |             | $         | 1,836         |   |         |    |   |         |   | $   | 504 |  |  |    | 27 | %
|                                            |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |  
|                                            | Service gross margin percentage |                       |       | 84    | %         |  |    |           |      |             |           | 83            | % |         |    |   |         |   |     |     |  |  |    |    |  
|                                            |                                 |                       |       |       |           |  |    |           |      |             |           |               |   |         |    |   |         |  




Service Revenues.






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





| |   |                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in our service price plans in effect in the first
    quarter 2004 as compared to those in effect during the first
    quarter 2003, which generally included lower access charges and
    a higher level of bundled minutes;
|
| |  | the revenues associated with our Nationwide Direct Connect
    service implemented in July 2003; and                                                                                                                                 
|
| |  | the increase in fees charged to customers for non-recurring
    services.                                                                                                                                                            




Cost of Service.







| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
|
| |  | a 19% net increase in costs incurred in the operation and
    maintenance of our network and fixed interconnection costs; and
|
|
| |  | a 33% increase in costs incurred to operate our handset service
    and repair program; partially offset by                  
|
| |  | a 4% decrease in variable interconnection fees.                                                                              

27



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##### 













| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in roaming fees paid to Nextel Partners due to the
    increase in our customer base and the launch of Nationwide
    Direct Connect service in July 2003;                                                                                                                                        
|
| |  | an increase in transmitter and receiver and switch related
    operational costs due to a 9% increase in transmitter and
    receiver sites placed into service from March 31, 2003 to
    March 31, 2004; and                                                                                                
|
| |  | an increase in headcount and related employee costs to support
    our expanding network; partially offset by                                                                                                                                                                                                 
|
| |  | a decrease in fixed interconnection costs as a result of
    initiatives implemented to gain efficiencies in our network by
    taking advantage of lower facility fees and more technologically
    advanced network equipment that provides for additional capacity
    but requires less leased facilities.







Service Gross Margin.


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




28



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##### 





|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |     |     |  |  |     |     |  
|-------------------------------------------------- | -------------------------------------- | --------------------- | ---- | ---- | --------- |  | -- | --------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | --- | --- |  |  | --- | --- | -
|                                                   |                                        |                       |      |      |           |  |    |           |      | Change from |          
|                                                   |                                        |                       |      | % of |           |  |    |           | % of |             |           | Previous Year | 
|                                                   |                                        | March 31,             |      |      | Operating |  |    | March 31, |      |             | Operating |               |  |         |   
|                                                   |                                        | 2004                  |      |      | Revenues  |  |    | 2003      |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                                                   |                                        | (dollars in millions) |     
|Three Months Ended                                 |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |     |     |  |  |     |    
|Current period handset and accessory sales         |                                        | $                     | 327  |      |           |  | 11 | %         |      | $           | 250       |               |  |         | 11 | %  |         | $ | 77  |     |  |  | 31  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %         |      |             | (89       | )             |  |         | (4 | )% |         |   | 89  |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                                                   | Handset and accessory revenues         |                       |      | 327  |           |  |    | 11        | %    |             |           | 161           |  |         |    | 7  | %       |   |     | 166 |  |  |     | 103 | %
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|Current period cost of handset and accessory sales |                                        |                       | 489  |      |           |  | 16 | %         |      |             | 399       |               |  |         | 17 | %  |         |   | 90  |     |  |  | 23  | %  
|SAB No. 101                                        |                                        |                       |     |      |           |  |   | %         |      |             | (89       | )             |  |         | (4 | )% |         |   | 89  |     |  |  | 100 | %  
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                                                   | Cost of handset and accessory revenues |                       |      | 489  |           |  |    | 16        | %    |             |           | 310           |  |         |    | 13 | %       |   |     | 179 |  |  |     | 58  | %
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|Handset and accessory net subsidy                  |                                        | $                     | (162 | )    |           |  |    |           |      | $           | (149      | )             |  |         |    |    |         | $ | (13 | )   |  |  | 9   | %  
|                                                   |                                        |                       |      |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  

Handset and Accessory Revenues.


Cost of Handset and Accessory Revenues.


Handset and Accessory Net Subsidy.






| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | an increase in the number of handsets sold of about 45%;
    partially offset by
|
| |  | a decrease in the average subsidy per handset of about 20%; and                 
|
| |  | an increase in the gross margin from accessory sales.                           



29



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##### 



Selling, General and Administrative Expenses.


|                           |                                     |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |    |  
|-------------------------- | ----------------------------------- | --------------------- | --- | ---- | --------- |  | -- | --------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | --- | --- |  |  | -- | -- | -
|                           |                                     |                       |     |      |           |  |    |           |      | Change from |          
|                           |                                     |                       |     | % of |           |  |    |           | % of |             |           | Previous Year | 
|                           |                                     | March 31,             |     |      | Operating |  |    | March 31, |      |             | Operating |               |  |         |   
|                           |                                     | 2004                  |     |      | Revenues  |  |    | 2003      |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                           |                                     |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                           |                                     | (dollars in millions) |    
|Three Months Ended         |                                     |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |     |     |  |  |    |   
|Selling and marketing      |                                     | $                     | 495 |      |           |  | 16 | %         |      | $           | 411       |               |  |         | 17 | %  |         | $ | 84  |     |  |  | 20 | % 
|General and administrative |                                     |                       | 476 |      |           |  | 15 | %         |      |             | 375       |               |  |         | 16 | %  |         |   | 101 |     |  |  | 27 | % 
|                           |                                     |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                           | Selling, general and administrative |                       | $   | 971  |           |  |    | 31        | %    |             | $         | 786           |  |         |    | 33 | %       |   | $   | 185 |  |  |    | 24 | %
|                           |                                     |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  

Selling and Marketing.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $36 million increase in advertising expenses as a result
    of general marketing campaigns directed at increasing brand
    awareness and promoting our differentiated services, such as our
    new branding campaign launched in the third quarter 2003, our
    affiliation with NASCAR beginning in the first quarter 2004, the
    promotion of Nationwide Direct Connect services and advertising
    and promotional costs related to our planned expansion of the
    areas in which we offer Boost Mobile pre-paid services beginning
    in the first quarter 2004;
|
| |  | a $35 million increase in marketing payroll and related
    expenses primarily associated with our opening an additional 180
    Nextel stores between March 31, 2003 and March 31,
    2004, and increased employee commissions; and                                                                                                                                                                                                                                                                                                                                           
|
| |  | a $13 million increase primarily reflecting an increase in
    the rate of commissions and residuals earned by indirect dealers
    and distributors in the first quarter 2004 as compared to the
    same period in 2003, partially offset by the decrease in
    commissions paid with respect to handset sales as more handsets
    were delivered through our direct handset fulfillment system.                                                                                                                                                                            

General and Administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $73 million increase in personnel, facilities and general
    corporate expenses due to increases in information technology
    initiatives, headcount and related facility costs, legal and
    professional fees, and our enterprise resource planning, or ERP,
    system implementation; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | a $50 million increase in expenses related to billing,
    collection, customer retention and customer care activities
    primarily due to the costs to support a larger customer base in
    addition to increased costs associated with the implementation
    of wireless number portability in the fourth quarter 2003;
    partially offset by                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | a $22 million decrease in bad debt expense. Bad debt
    expense decreased from $56 million, or 2.4% of operating
    revenues, for the first quarter 2003 to $34 million, or
    1.1% of operating revenues, for the first quarter 2004. The
    decrease in both the aggregate amount of the bad debt expense
    and bad debt expense as a percentage of operating revenues
    reflects the results of our policies implemented over the past
    two years that were focused on strengthening our credit policies
    and procedures, limiting the account sizes for high-risk
    accounts and strengthening identity verification processes at
    the point of credit applications. The credit and collection
    software tools that we have implemented now enable us to better
    screen and monitor the credit quality and delinquency levels of
    our customers. We have also benefited from improvements in
    recoveries of past due accounts handled by third party
    collection agencies. These factors and others have resulted in
    increased collections, an improvement in the accounts receivable
    agings and a reduction in the write-offs for fraud-related
    accounts. Therefore, our allowance for doubtful accounts as a
    percentage of accounts receivable has also improved from
    March 31, 2003 to March 31, 2004. Bad debt expense in
    the future could be adversely affected by general economic
    conditions and competitive conditions within the wireless
    industry, including those

30



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##### 



| |  |                                                                                                                                                           
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | related to wireless number portability or to the extent we
    adjust our credit standards to be more competitive. See
     Forward-Looking Statements.







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

Depreciation and Amortization.


|                   |                               |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |    |    |  |  |     |    |  
|------------------ | ----------------------------- | --------------------- | --- | ---- | --------- |  | -- | --------- | ---- | ----------- | --------- | ------------- |  | ------- | -- | -- | ------- | - | -- | -- |  |  | --- | -- | -
|                   |                               |                       |     |      |           |  |    |           |      | Change from |          
|                   |                               |                       |     | % of |           |  |    |           | % of |             |           | Previous Year | 
|                   |                               | March 31,             |     |      | Operating |  |    | March 31, |      |             | Operating |               |  |         |   
|                   |                               | 2004                  |     |      | Revenues  |  |    | 2003      |      |             | Revenues  |               |  | Dollars |    |    | Percent |  
|                   |                               |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                   |                               | (dollars in millions) |    
|Three Months Ended |                               |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |   |    |    |  |  |     |   
|Depreciation       |                               | $                     | 432 |      |           |  | 14 | %         |      | $           | 399       |               |  |         | 17 | %  |         | $ | 33 |    |  |  | 8   | % 
|Amortization       |                               |                       | 11  |      |           |  |   | %         |      |             | 14        |               |  |         | 1  | %  |         |   | (3 | )  |  |  | (21 | )%
|                   |                               |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  
|                   | Depreciation and amortization |                       | $   | 443  |           |  |    | 14        | %    |             | $         | 413           |  |         |    | 18 | %       |   | $  | 30 |  |  |     | 7  | %
|                   |                               |                       |     |      |           |  |    |           |      |             |           |               |  |         |    |    |         |  



31



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##### 



Interest and Other.





|                                                   |  |                       |      |             |               |   |      |         |  |   |         |   |  |  |     |   
|-------------------------------------------------- |  | --------------------- | ---- | ----------- | ------------- | - | ---- | ------- |  | - | ------- | - |  |  | --- | --
|                                                   |  |                       |      | Change from |              
|                                                   |  | March 31,             |      |             | Previous Year |  
|                                                   |  |                       |      |             |               |  
|                                                   |  | 2004                  |      |             | 2003          |   |      | Dollars |  |   | Percent |  
|                                                   |  |                       |      |             |               |   |      |         |  |   |         |  
|                                                   |  | (dollars in millions) |     
|Three Months Ended                                 |  |                       |      |             |               |   |      |         |  |   |         |   |  |  |     |   
|Interest expense                                   |  | $                     | (154 | )           |               | $ | (225 | )       |  | $ | 71      |   |  |  | 32  | % 
|Interest income                                    |  |                       | 8    |             |               |   | 12   |         |  |   | (4      | ) |  |  | (33 | )%
|Loss on retirement of debt, net                    |  |                       | (17  | )           |               |   | (5   | )       |  |   | (12     | ) |  |  | NM  |   
|Equity in losses of unconsolidated affiliates, net |  |                       |     |             |               |   | (13  | )       |  |   | 13      |   |  |  | 100 | % 
|Realized gain on sale of investment                |  |                       | 26   |             |               |   |     |         |  |   | 26      |   |  |  | 100 | % 
|Other, net                                         |  |                       | 1    |             |               |   |     |         |  |   | 1       |   |  |  | 100 | % 
|Income tax provision                               |  |                       | (33  | )           |               |   | (22  | )       |  |   | (11     | ) |  |  | (50 | )%
|Income available to common stockholders            |  |                       | 593  |             |               |   | 203  |         |  |   | 390     |   |  |  | 192 | % 







NM  Not Meaningful


Interest Expense.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $95 million decrease in interest expense attributable to
    the reductions in the aggregate outstanding principal amount of
    our senior notes, as discussed below; and                                                                                                                                                                                                                                                       
|
| |  | a $17 million decrease in interest expense resulting
    primarily from the combined effect of the reduction in the
    weighted average interest rates related to our bank credit
    facility from 3.9% during the three months ended March 31,
    2003 to 3.0% during the three months ended March 31, 2004
    and the lower average principal amount of the bank credit
    facility outstanding in 2004; partially offset by
|
| |  | a $47 million increase in interest expense attributable to
    our new senior notes issued since the third quarter 2003.                                                                                                                                                                                                                                                                                                           



Interest Income.


Loss on Retirement of Debt.


32



---



##### 



Equity in Losses of Unconsolidated Affiliates.


Realized Gain on Investments.


Income Tax Provision.


C. Liquidity and Capital Resources






Cash Flows.


|                                                |  |                       |       |   |               |   |      |         |  |   |         |  |  |  |     |  
|----------------------------------------------- |  | --------------------- | ----- | - | ------------- | - | ---- | ------- |  | - | ------- |  |  |  | --- | -
|                                                |  | Three Months Ended    |       |   | Change from   |  
|                                                |  | March 31,             |       |   | Previous Year |  
|                                                |  |                       |       |   |               |  
|                                                |  | 2004                  |       |   | 2003          |   |      | Dollars |  |   | Percent | 
|                                                |  |                       |       |   |               |   |      |         |  |   |         | 
|                                                |  | (dollars in millions) |      
|Cash provided by operating activities           |  | $                     | 1,244 |   |               | $ | 813  |         |  | $ | 431     |  |  |  | 53  | %
|Cash used in investing activities               |  |                       | (521  | ) |               |   | (678 | )       |  |   | 157     |  |  |  | 23  | %
|Cash provided by (used in) financing activities |  |                       | 158   |   |               |   | (625 | )       |  |   | 783     |  |  |  | 125 | %







| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | a $220 million decrease in net cash purchases of short-term
    investments;                                
|
| |  | a $173 million decrease in cash paid for purchases of
    licenses, acquisitions, investments and other; and

33



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##### 





| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | a $62 million increase in proceeds from sales of
    investments and other assets; offset by
|
| |  | a $298 million increase in cash paid for capital
    expenditures.                          





| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in amounts expended to construct new cell sites and
    network improvements in 2004 as compared to 2003 reflecting our
    2004 plans to improve the coverage and capacity of our network;
    and
|
| |  | costs incurred in connection with WiDEN.                                                                                                                                                                       









| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $494 million of net proceeds from the sale of newly issued
    5.95% senior notes; and                                                                                                                     
|
| |  | $68 million of net proceeds from the issuance of shares of
    our class A common stock primarily under our equity plans;
    partially offset by                                                          
|
| |  | $191 million paid for the purchase and retirement of our
    9.5% senior notes;                                                                                                                            
|
| |  | $165 million in repayments related to our remaining capital
    lease obligation, including a payment of $156 million
    associated with the early buy-out option of this capital lease
    agreement; and
|
| |  | $48 million in repayments under our bank credit facility.                                                                                                                                                  





D. Future Capital Needs and Resources


Capital Resources.




34



---



##### 







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









35



---



##### 





Capital Needs.






| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | operating expenses relating to our network;                                                                                                                                                                                                             
|
| |  | capital expenditures, as discussed immediately below under
     Capital Expenditures;                                                                                                                                                                
|
| |  | future investments, including the purchase of certain
    multichannel multipoint distribution service, or MMDS, FCC
    licenses and related assets, other potential spectrum purchases
    and investments in new business opportunities;             
|
| |  | potential payments to the FCC or other third parties and
    potential costs to reconfigure our spectrum in connection with
    the FCCs action on the Consensus Plan or other similar FCC
    actions relating to the realignment of the 800 MHz band;
|
| |  | scheduled principal and interest payments related to our
    long-term debt, redemption of our 6% convertible senior notes
    due 2011 and any additional amounts that we choose to redeem;                                                            
|
| |  | potential material increases in the cost of compliance with
    regulatory mandates; and                                                                                                                                                                
|
| |  | other general corporate expenditures including the potential of
    becoming a full taxpayer in the next few years.                                                                                                                                     

Capital Expenditures.




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



36



---



##### 





Future Contractual Obligations.





|                               |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            |  |   |       |  |  |   |        | 
|------------------------------ |  | ------------- | ------ | --------- | ------- | - | ----- | ---- |  | - | ----- |  |  | ---- | -------- |  | ---- | - | ----- | ---------- |  | - | ----- |  |  | - | ------ | 
|Future                         |  |               |        | Remainder |         |   |       |      |  |   |       |  |  |      | 2009 and | 
|Contractual Obligations        |  | Total         |        |           | of 2004 |   |       | 2005 |  |   | 2006  |  |  | 2007 |          |  | 2008 |   |       | Thereafter | 
|                               |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 
|                               |  | (in millions) |       
|Public senior notes(1)         |  | $             | 10,608 |           |         | $ | 359   |      |  | $ | 496   |  |  | $    | 496      |  |      | $ | 496   |            |  | $ | 496   |  |  | $ | 8,265  | 
|Bank credit facility(2)        |  |               | 4,621  |           |         |   | 368   |      |  |   | 575   |  |  |      | 598      |  |      |   | 635   |            |  |   | 134   |  |  |   | 2,311  | 
|Preferred stock cash payments  |  |               | 245    |           |         |   |      |      |  |   |      |  |  |      |         |  |      |   |      |            |  |   |      |  |  |   | 245    | 
|Operating leases               |  |               | 2,866  |           |         |   | 325   |      |  |   | 433   |  |  |      | 414      |  |      |   | 393   |            |  |   | 362   |  |  |   | 939    | 
|Purchase obligations and other |  |               | 2,368  |           |         |   | 525   |      |  |   | 498   |  |  |      | 436      |  |      |   | 267   |            |  |   | 221   |  |  |   | 421    | 
|                               |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 
|Total                          |  | $             | 20,708 |           |         | $ | 1,577 |      |  | $ | 2,002 |  |  | $    | 1,944    |  |      | $ | 1,791 |            |  | $ | 1,213 |  |  | $ | 12,181 | 
|                               |  |               |        |           |         |   |       |      |  |   |       |  |  |      |          |  |      |   |       |            | 









|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts do not include the effect of our May 2004
    announcement of the redemption of the entire $608 million
    in outstanding principal amount of our 6% convertible senior
    notes due 2011.                                                              
|   
|(2) | These amounts include principal amortization and estimated
    interest payments based on managements expectation as to
    future interest rates, assume the current payment schedule and
    exclude any additional drawdown under the revolving loan
    commitment.





37



---



##### 





Future Outlook.






| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | the anticipated level of capital expenditures;                                                                
|
| |  | our scheduled debt service requirements;                                                                      
|
| |  | the announced redemption of our 6% convertible senior notes due
    2011;                                     
|
| |  | consummation of existing agreements to purchase spectrum,
    including those with WorldCom and Nucentrix; and
|
| |  | other future contractual obligations.                                                                         









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

38



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##### 







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



Forward-Looking Statements


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




| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the success of efforts to improve, and satisfactorily address
    any issues relating to, our network performance;                                                                                                                                                                                                                                                      
|
| |  | the timely development and availability of new handsets with
    expanded applications and features, including those that operate
    using the 6:1 voice coder;                                                                                                                                                                                                        
|
| |  | the timely development and deployment of higher speed data
    infrastructure and software designed to significantly increase
    the data speeds of our network;                                                                                                                                                                                                       
|
| |  | market acceptance of our data service offerings, including our
    Nextel Online services;                                                                                                                                                                                                                                                                              
|
| |  | the timely delivery and successful implementation of new
    technologies deployed in connection with any future enhanced
    iDEN or next generation or other advanced services we may offer;                                                                                                                                                                          
|
| |  | no significant adverse change in Motorolas ability or
    willingness to provide handsets and related equipment and
    software applications or to develop new technologies or features
    for us, or in our relationship with it, as a result of the
    proposed spin-off of its semiconductor unit, recent changes in
    its senior management team or otherwise;
|
| |  | the ability to achieve market penetration and average subscriber
    revenue levels sufficient to provide financial viability to our
    network business;                                                                                                                                                                                                              
|
| |  | the impact on our cost structure or service levels of the
    general downturn in the telecommunications sector, including the
    adverse effect of any bankruptcy of any of our tower providers
    or telecommunications suppliers;                                                                                                                                  

39



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to successfully scale, in some circumstances in
    conjunction with third parties under our outsourcing
    arrangements, our billing, collection, customer care and similar
    back-office operations to keep pace with customer growth,
    increased system usage rates and growth in levels of accounts
    receivables being generated by our customers;
|
| |  | access to sufficient debt or equity capital to meet any
    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 including, for example, two-way
    walkie-talkie services first introduced by several of our
    competitors in 2003;                                        
|
| |  | future legislation or regulatory actions relating to specialized
    mobile radio services, other wireless communications services or
    telecommunications generally;                                                                                                                                                                                                    
|
| |  | the costs of compliance with regulatory mandates, particularly
    the requirement to deploy location-based E911 capabilities; and                                                                                                                                                                                                                                         
|
| |  | other risks and uncertainties described from time to time in our
    reports filed with the Securities and Exchange Commission,
    including our annual report on Form 10-K for the year ended
    December 31, 2003.                                                                                                                                                     



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









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



40



---



##### 





|                                                                                   |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |       | 
|---------------------------------------------------------------------------------- | --------------------- | --------------------- | - | --- | ---- |  | - | ---- | ---- |  | ---- | --- | - | ---- | - | --- | ---------- |  | - | ----- | - |  | ----- | ----- | - |  | - | ----- | - |  | - | ----- | 
|                                                                                   |                       | Year of Maturity      |   |     |      |  |   |      |     
|                                                                                   |                       |                       |   |     |      |  |   |      | Fair | 
|                                                                                   |                       | 2004                  |   |     | 2005 |  |   | 2006 |      |  | 2007 |     |   | 2008 |   |     | Thereafter |  |   | Total |   |  | Value |      
|                                                                                   |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |      
|                                                                                   |                       | (dollars in millions) |  
|I. Interest Rate Sensitivity                                                       |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |      
|Mandatorily Redeemable Preferred Stock, Long-term Debt and
    Finance Obligations |                       |                       |   |     |      |  |   |      |      |  |      |     |   |      |   |     |            |  |   |       |   |  |       |       |   |  |   |       |   |  |   |      
|                                                                                   | Fixed Rate            |                       | $ | 1   |      |  | $ | 1    |      |  | $    | 1   |   |      | $ | 7   |            |  | $ |      |   |  | $     | 6,751 |   |  | $ | 6,761 |   |  | $ | 7,163 | 
|                                                                                   | Average Interest Rate |                       |   | 8   | %    |  |   | 8    | %    |  |      | 8   | % |      |   | 8   | %          |  |   |      |   |  |       | 8     | % |  |   | 8     | % |  |   |       | 
|                                                                                   | Variable Rate         |                       | $ | 273 |      |  | $ | 427  |      |  | $    | 460 |   |      | $ | 499 |            |  | $ | 22    |   |  | $     | 2,090 |   |  | $ | 3,771 |   |  | $ | 3,794 | 
|                                                                                   | Average Interest Rate |                       |   | 2   | %    |  |   | 2    | %    |  |      | 2   | % |      |   | 2   | %          |  |   | 3     | % |  |       | 3     | % |  |   | 3     | % |  |   |       | 

Item 4.     Controls and
Procedures.










































41



---



##### 



PART II  OTHER INFORMATION.


Item 1.     Legal
Proceedings.








Item 5.     Other
Information.


Proposed Public Safety Spectrum Realignment.


Local Number Portability.


42



---



##### 



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







|        |    |                     |  |                                                                                                                                                                                                                  
|------- | -- | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 4  | .1                 |  | Form of Series C 5.95% senior serial redeemable note due
    2014                                                                                                                                                
|        | 10 | .1.1*              |  | Extension Amendment to the iDEN Infrastructure 5 Year Supply
    Agreement and Term Sheet for Subscriber Units and Services,
    dated March 16, 2004, between Motorola, Inc. and Nextel
    Communications, Inc.
|        | 10 | .1.2*              |  | Term Sheet Subscriber Units and Services, dated
    December 31, 2003, between Nextel Communications, Inc. and
    Motorola, Inc.                                                                                
|        | 10 | .1.3*              |  | Amendment One to the Term Sheet for Subscriber Units and
    Services Agreement, dated March 31, 2004, between Motorola
    Inc. and Nextel Communications, Inc.                                                 
|        | 10 | .2.1**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Thomas N. Kelly, Jr.                                                                                                      
|        | 10 | .2.2**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Paul N. Saleh                                                                                                             
|        | 10 | .2.3**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Barry J. West                                                                                                             
|        | 10 | .2.4**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Leonard J. Kennedy                                                                                                        
|        | 15 |                     |  | Letter in Lieu of Consent for Review Report                                                                                                                                                                      
|        | 31 |                     |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                          
|        | 32 |                     |  | Section 1350 Certifications                                                                                                                                                                                      









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



|   |                                                         
|-- | --------------------------------------------------------
|** | Management contract or compensatory plan or arrangement.
|  
|  
|  | Previously filed with Original Form 10-Q.               
|  





| |    |                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Current report on Form 8-K dated and filed January 5,
    2004, furnishing a press release announcing that financial
    guidance would be reaffirmed at a conference under Item 9.                                                                   
|
| | 2. | Current report on Form 8-K dated and filed
    February 19, 2004, reporting certain financial and
    operating results under Item 5 and furnishing a press
    release announcing certain financial and operating results for
    2003 under Item 9. 
|
| | 3. | Current report on Form 8-K dated and filed March 18,
    2004, reporting under Item 5 the filing of the Underwriting
    Agreement, dated March 16, 2004, and an opinion of counsel
    relating to our 5.95% senior serial redeemable notes due 2014.

43



---



##### 



SIGNATURE






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



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

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









44



---



##### 



EXHIBIT INDEX





|        |    |                     |  |                                                                                                                                                                                                                  
|------- | -- | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 4  | .1                 |  | Form of Series C 5.95% senior serial redeemable note due
    2014                                                                                                                                                
|        | 10 | .1.1*              |  | Extension Amendment to the iDEN Infrastructure 5 Year Supply
    Agreement and Term Sheet for Subscriber Units and Services,
    dated March 16, 2004, between Motorola, Inc. and Nextel
    Communications, Inc.
|        | 10 | .1.2*              |  | Term Sheet Subscriber Units and Services, dated
    December 31, 2003, between Nextel Communications, Inc. and
    Motorola, Inc.                                                                                
|        | 10 | .1.3*              |  | Amendment One to the Term Sheet for Subscriber Units and
    Services Agreement, dated March 31, 2004, between Motorola
    Inc. and Nextel Communications, Inc.                                                 
|        | 10 | .2.1**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Thomas N. Kelly, Jr.                                                                                                      
|        | 10 | .2.2**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Paul N. Saleh                                                                                                             
|        | 10 | .2.3**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Barry J. West                                                                                                             
|        | 10 | .2.4**             |  | Employment Agreement, dated April 1, 2004, between Nextel
    Communications, Inc. and Leonard J. Kennedy                                                                                                        
|        | 15 |                     |  | Letter in Lieu of Consent for Review Report                                                                                                                                                                      
|        | 31 |                     |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                          
|        | 32 |                     |  | Section 1350 Certifications                                                                                                                                                                                      









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



|   |                                                         
|-- | --------------------------------------------------------
|** | Management contract or compensatory plan or arrangement.
|  
|  
|  | Previously filed with Original Form 10-Q.               
|