##### Table of Contents









UNITED STATES



Washington, D.C. 20549


FORM 10-Q

(Mark One)

|                                                   |  |                                                                                           
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------------
|                                                  
|                                                  
|                                                  
|                                                  
|[X]                                                |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
	15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended
	September 30, 2001
|OR                                                
|[   ]                                              |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
	15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934
|                                                   |  | For the transition period
	from                      to                                   
|Commission file number 0-19656                    

NEXTEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its
charter)


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

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

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

|                                                  |  |                              |             | 
|------------------------------------------------- |  | ---------------------------- | ----------- | 
|                                                  |  | Number of Shares Outstanding
|Title of Class                                    |  | on October 31, 2001         
|                                                  |  |                             
|Class A Common Stock, $0.001 par value            |  |                              | 762,647,372 | 
|Class B Nonvoting Common Stock, $0.001 par
	value |  |                              | 35,660,000  | 



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TABLE OF CONTENTS



|                                 |                                                                                                |                                                                                 |  |  |  |  |  | 
|-------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION.
|                                 | Item 1. Financial Statements -- Unaudited.                                                    
|                                 |                                                                                                | Condensed Consolidated Balance Sheets                                          
|                                 |                                                                                                | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
|                                 |                                                                                                | Condensed Consolidated Statement of Changes in Stockholders Equity            
|                                 |                                                                                                | Condensed Consolidated Statements of Cash Flows                                
|                                 |                                                                                                | Notes to Condensed Consolidated Financial Statements                           
|                                 | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                 | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                           
|PART II -- OTHER INFORMATION.   
|                                 | Item 1. Legal Proceedings.                                                                    
|                                 | Item 2. Changes in Securities and Use of Proceeds.                                            
|                                 | Item 5. Other Information.                                                                    
|                                 | Item 6. Exhibits and Reports on Form 8-K.                                                     
|                                 | SIGNATURE                                                                                     



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES

INDEX

| |          |  |  |                        |  |                                                                                                                                                   |  |  |    | 
| | -------- |  |  | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
| |          |  |  |                        |  | Page                                                                                                                                             
| |          |  |  |                        |  |                                                                                                                                                  
| | Part I   |  |  | Financial Information.
| |          |  |  | Item 1.                |  | Financial Statements  Unaudited.                                                                                                                 |  |  |    | 
| |          |  |  |                        |  | Condensed Consolidated Balance Sheets                                                                                                             |  |  |    | 
|
|
|
|
| |          |  |  |                        |  | As of September 30, 2001 and December
	31, 2000                                                                                                   |  |  | 3  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statements of Operations
	and Comprehensive (Loss) Income For the Nine and Three Months
	Ended September 30, 2001 and 2000 |  |  | 4  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statement of Changes in
	Stockholders Equity For the Nine Months Ended September
	30, 2001                                |  |  | 5  | 
|
|
|
|
| |          |  |  |                        |  | Condensed Consolidated Statements of Cash Flows
	For the Nine Months Ended September 30, 2001 and 2000                                            |  |  | 6  | 
|
|
|
|
| |          |  |  |                        |  | Notes to Condensed Consolidated Financial
	Statements                                                                                             |  |  | 7  | 
|
|
|
|
| |          |  |  | Item 2.                |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations                                                            |  |  | 14 | 
|
|
|
|
| |          |  |  | Item 3.                |  | Quantitative and Qualitative Disclosures about
	Market Risk                                                                                       |  |  | 28 | 
|
|
|
|
| | Part  II |  |  | Other Information.    
|
|
|
|
| |          |  |  | Item 1.                |  | Legal Proceedings                                                                                                                                 |  |  | 30 | 
|
|
|
|
| |          |  |  | Item 2.                |  | Changes in Securities and Use of Proceeds                                                                                                         |  |  | 30 | 
|
|
|
|
| |          |  |  | Item 5.                |  | Other Information                                                                                                                                 |  |  | 30 | 
|
|
|
|
| |          |  |  | Item 6.                |  | Exhibits and Reports on Form 8-K                                                                                                                  |  |  | 30 | 



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##### Table of Contents






PART I  FINANCIAL INFORMATION.




Item 1.  Financial
Statements  Unaudited.

NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






Condensed Consolidated Balance
Sheets


As of September 30, 2001 and
December 31, 2000


(in millions)


Unaudited


|                                                                                    |                                                                                       |                            |        |        |        |   |        |        |        | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                                    |                                                                                       | 2001                       |        | 2000  
|                                                                                    |                                                                                       |                            |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|ASSETS                                                                             
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Current assets                                                                      |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Cash and cash equivalents, of which $271 and $474
	is restricted                      |                            | $      | 3,040  |        |   | $      | 2,609  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Short-term investments                                                                |                            |        | 1,187  |        |   |        | 2,065  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accounts and notes receivable, less allowance for
	doubtful accounts of $161 and $104 |                            |        | 1,052  |        |   |        | 864    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Handset and accessory inventory                                                       |                            |        | 246    |        |   |        | 183    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Prepaid expenses and other current assets                                             |                            |        | 541    |        |   |        | 737    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total current assets       |        |        | 6,066  |   |        |        | 6,458  | 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Investments                                                                         |                                                                                       |                            | 344    |        |        |   | 756    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Property, plant and equipment,net of accumulated depreciation of
	$3,548 and $2,482 |                                                                                       |                            | 9,974  |        |        |   | 8,791  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Intangible assets,net of accumulated amortization of
	$1,218 and $1,101             |                                                                                       |                            | 6,497  |        |        |   | 5,982  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Other assets                                                                        |                                                                                       |                            | 779    |        |        |   | 699    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | $                          | 23,660 |        |        | $ | 22,686 |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                              
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Current liabilities                                                                 |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accounts payable                                                                      |                            | $      | 669    |        |   | $      | 953    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accrued expenses and other                                                            |                            |        | 1,429  |        |   |        | 1,244  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Due to related parties                                                                |                            |        | 347    |        |   |        | 423    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Current portion of long-term debt, capital lease
	and finance obligations             |                            |        | 133    |        |   |        | 102    |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total current liabilities  |        |        | 2,578  |   |        |        | 2,722  | 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Long-term debt                                                                      |                                                                                       |                            | 15,616 |        |        |   | 13,763 |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Capital lease and finance
	obligations                                              |                                                                                       |                            | 906    |        |        |   | 866    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Deferred income taxes and other                                                     |                                                                                       |                            | 1,325  |        |        |   | 1,426  |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total liabilities          |        |        | 20,425 |   |        |        | 18,777 | 
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|Contingencies (note 4)                                                              |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Mandatorily redeemable preferred
	stock                                             |                                                                                       |                            | 2,053  |        |        |   | 1,881  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Stockholders equity                                                                |                                                                                       |                            |        |        |        |   |        |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Convertible preferred stock, 8 shares issued and
	outstanding                         |                            |        | 283    |        |   |        | 283    |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Common stock, class A, 762 and 727 shares issued
	and outstanding                     |                            |        | 1      |        |   |        | 1      |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Common stock, class B, nonvoting convertible, 36
	shares issued and outstanding       |                            |        |       |        |   |        |       |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Paid-in capital                                                                       |                            |        | 8,633  |        |   |        | 8,370  |       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accumulated deficit                                                                   |                            |        | (7,445 | )      |   |        | (6,554 | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Treasury stock, at cost                                                               |                            |        |       |        |   |        | (2     | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Deferred compensation, net                                                            |                            |        | (20    | )      |   |        | (28    | )     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accumulated other comprehensive loss                                                  |                            |        | (270   | )      |   |        | (42    | )     
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | Total stockholders equity |        |        | 1,182  |   |        |        | 2,028  | 
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       
|                                                                                    |                                                                                       | $                          | 23,660 |        |        | $ | 22,686 |       
|                                                                                    |                                                                                       |                            |        |        |        |   |        |       

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

3



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statements of
Operations and Comprehensive (Loss) Income

For the Nine and Three Months Ended
September 30, 2001 and 2000


(in millions, except per share
amounts)


Unaudited


|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |       |     | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------------------- | ------ | ------------------ | ---- | ---- | ----- | ----- | --- | - | ----- | ----- | ---- | - | ----- | ----- | --- | 
|                                                                                        |                                                                     |                                                                 |        |                   
|                                                                                        |                                                                     | Nine Months Ended                                               |        | Three Months Ended
|                                                                                        |                                                                     | September 30,                                                   |        | September 30,     
|                                                                                        |                                                                     |                                                                 |        |                   
|                                                                                        |                                                                     | 2001                                                            |        | 2000               |      | 2001 |       | 2000 
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |      
|Operating revenues                                                                      |                                                                     | $                                                               | 5,615  |                    |      | $    | 4,068 |       |     | $ | 1,992 |       |      | $ | 1,528 |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Operating expenses                                                                      |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Cost of revenues                                                    |                                                                 |        | 2,114              |      |      |       | 1,549 |     |   |       | 732   |      |   |       | 587   |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Selling, general and administrative                                 |                                                                 |        | 2,236              |      |      |       | 1,642 |     |   |       | 763   |      |   |       | 582   |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Restructuring and impairment charges                                |                                                                 |        | 169                |      |      |       |      |     |   |       | 147   |      |   |       |      |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Depreciation and amortization                                       |                                                                 |        | 1,270              |      |      |       | 898   |     |   |       | 449   |      |   |       | 315   |    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                        |                                                                     |                                                                 | 5,789  |                    |      |      | 4,089 |       |     |   | 2,091 |       |      |   | 1,484 |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Operating (loss) income                                                                 |                                                                     |                                                                 | (174   | )                  |      |      | (21   | )     |     |   | (99   | )     |      |   | 44    |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Other income (expense)                                                                  |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Interest expense                                                    |                                                                 |        | (1,071             | )    |      |       | (912  | )   |   |       | (354  | )    |   |       | (333  | )  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Interest income                                                     |                                                                 |        | 178                |      |      |       | 298   |     |   |       | 43    |      |   |       | 111   |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Equity in losses of unconsolidated affiliates                       |                                                                 |        | (69                | )    |      |       | (106  | )   |   |       | (24   | )    |   |       | (35   | )  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Foreign currency transaction (losses) gains,
	net                   |                                                                 |        | (71                | )    |      |       | 9     |     |   |       | (16   | )    |   |       | 3     |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Reduction in fair value of available-for-sale
	securities           |                                                                 |        | (188               | )    |      |       |      |     |   |       | (188  | )    |   |       |      |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Other, net                                                          |                                                                 |        | (12                | )    |      |       | 4     |     |   |       | (1    | )    |   |       | 18    |    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                        |                                                                     |                                                                 | (1,233 | )                  |      |      | (707  | )     |     |   | (540  | )     |      |   | (236  | )    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Loss before income tax benefit and
	extraordinary item                                  |                                                                     |                                                                 | (1,407 | )                  |      |      | (728  | )     |     |   | (639  | )     |      |   | (192  | )    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Income tax benefit                                                                      |                                                                     |                                                                 | 47     |                    |      |      | 24    |       |     |   | 20    |       |      |   | 8     |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Loss before extraordinary item                                                          |                                                                     |                                                                 | (1,360 | )                  |      |      | (704  | )     |     |   | (619  | )     |      |   | (184  | )    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Extraordinary item  gain
	(loss) on early retirement of debt, net of income tax of
	$0 |                                                                     |                                                                 | 469    |                    |      |      | (104  | )     |     |   | 469   |       |      |   |      |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Net loss                                                                                |                                                                     |                                                                 | (891   | )                  |      |      | (808  | )     |     |   | (150  | )     |      |   | (184  | )    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Mandatorily redeemable preferred stock
	dividends                                       |                                                                     |                                                                 | (172   | )                  |      |      | (155  | )     |     |   | (59   | )     |      |   | (52   | )    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Loss attributable to common
	stockholders                                               |                                                                     | $                                                               | (1,063 | )                  |      | $    | (963  | )     |     | $ | (209  | )     |      | $ | (236  | )    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Loss per share attributable to common
	stockholders, basic and diluted                  |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Loss before extraordinary item attributable to
	common stockholders |                                                                 | $      | (1.99              | )    |      | $     | (1.14 | )   |   | $     | (0.87 | )    |   | $     | (0.31 | )  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Extraordinary item                                                  |                                                                 |        | 0.61               |      |      |       | (0.14 | )   |   |       | 0.60  |      |   |       |      |    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                        |                                                                     | $                                                               | (1.38  | )                  |      | $    | (1.28 | )     |     | $ | (0.27 | )     |      | $ | (0.31 | )    
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Weighted average number of common shares
	outstanding                                   |                                                                     |                                                                 | 771    |                    |      |      | 754   |       |     |   | 783   |       |      |   | 761   |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|Comprehensive (loss) income, net of
	income tax                                         |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Net unrealized (loss) gain on
	available-for-sale securities:       |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |       |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                     | Unrealized holding (losses) gains arising
	during the period    |        | $                  | (282 | )    |       | $     | 291 |   |       | $     | (172 | ) |       | $     | 326 | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                     | Reclassification adjustment for loss included in
	net loss      |        |                    | 188  |      |       |       |    |   |       |       | 188  |   |       |       |    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Foreign currency translation adjustment                             |                                                                 |        | (91                | )    |      |       | 26    |     |   |       | (32   | )    |   |       | 18    |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Cash flow hedge:                                                    |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |       |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                     | Cumulative effect of accounting change                          |        |                    | (20  | )    |       |       |    |   |       |       |     |   |       |       |    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                     | Reclassification of transition adjustment
	included in net loss |        |                    | 6    |      |       |       |    |   |       |       | 2    |   |       |       |    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                     | Unrealized loss on cash flow hedge                              |        |                    | (29  | )    |       |       |    |   |       |       | (26  | ) |       |       |    | 
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                        | Other comprehensive (loss) income                                   |                                                                 |        | (228               | )    |      |       | 317   |     |   |       | (40   | )    |   |       | 344   |    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Net loss                                                            |                                                                 |        | (891               | )    |      |       | (808  | )   |   |       | (150  | )    |   |       | (184  | )  
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      
|                                                                                        |                                                                     | $                                                               | (1,119 | )                  |      | $    | (491  | )     |     | $ | (190  | )     |      | $ | 160   |      
|                                                                                        |                                                                     |                                                                 |        |                    |      |      |       |       |     |   |       |       |      |   |       |      

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

4



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statement of Changes in
Stockholders Equity

For the Nine Months Ended September 30,
2001


(in millions)


Unaudited


|                             |                                                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      |     | 
|---------------------------- | ------------------------------------------------ | ---------------------------- | - | ------------ |  | ------------ | --- | ------- |  | ----------- | --- | -------------- | -- | -------- | - | ------------- | - | ------ | -- | ------ |  | ------------ | - | ---- |  | ----- | ----- | ---- | --- | - | ------ | ---- | - |  | - |  | - | - | -- | - | - | - | --- | - |  | - | ---- | ---- | - | - | ----- | ---- | --- | 
|                             |                                                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |       
|                             |                                                  | Convertible                  |   | Class A      |  | Class B      |     |         |  |             |     |                |    |          |   | Accumulated   |   |       
|                             |                                                  | Preferred Stock              |   | Common Stock |  | Common Stock |     |         |  |             |     | Treasury Stock |    |          |   | Other         |   |       
|                             |                                                  |                              |   |              |  |              |     | Paid-in |  | Accumulated |     |                |    | Deferred |   | Comprehensive |   |       
|                             |                                                  | Shares                       |   | Amount       |  | Shares       |     | Amount  |  | Shares      |     | Amount         |    | Capital  |   | Deficit       |   | Shares |    | Amount |  | Compensation |   | Loss |  | Total
|                             |                                                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |      
|Balance, January  1, 2001    |                                                  |                              | 8 |              |  | $            | 283 |         |  |             | 727 |                |    | $        | 1 |               |   |        | 36 |        |  | $            |  |      |  | $     | 8,370 |      |     | $ | (6,554 | )    |   |  |  |  |   | $ | (2 | ) |   | $ | (28 | ) |  | $ | (42  | )    |   | $ | 2,028 |     
|                            
|                            
|                            
|                            
|                             | Net loss                                         |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        | (891 | ) |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       | (891 | )  
|                            
|                            
|                            
|                            
|                             | Other comprehensive loss                         |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      | (228 | ) |   |       | (228 | )  
|                            
|                            
|                            
|                            
|                             | Issuance of common stock:                        |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      |    
|                            
|                            
|                            
|                            
|                             |                                                  | Exercise of options          |   |              |  |              |     |         |  |             |     |                | 12 |          |   |               |  |        |    |        |  |              |   |      |  |       |       |      | 124 |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      | 124 | 
|                            
|                            
|                            
|                            
|                             |                                                  | Employee stock purchase plan |   |              |  |              |     |         |  |             |     |                | 1  |          |   |               |  |        |    |        |  |              |   |      |  |       |       |      | 13  |   |        |      |   |  |   |  |  |   |    |   | 2 |   |     |   |  |   |      |      |   |   |       |      | 15  | 
|                            
|                            
|                            
|                            
|                             |                                                  | Retirement of debt           |   |              |  |              |     |         |  |             |     |                | 22 |          |   |               |  |        |    |        |  |              |   |      |  |       |       |      | 292 |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |      | 292 | 
|                            
|                            
|                            
|                            
|                             | Deferred compensation and other                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       | 6    |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     | 8 |  |   |      |      |   |   |       | 14   |    
|                            
|                            
|                            
|                            
|                             | Mandatorily redeemable preferred stock dividends |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       | (172 | )   |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       | (172 | )  
|                             |                                                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |     
|Balance, September  30, 2001 |                                                  |                              | 8 |              |  | $            | 283 |         |  |             | 762 |                |    | $        | 1 |               |   |        | 36 |        |  | $            |  |      |  | $     | 8,633 |      |     | $ | (7,445 | )    |   |  |  |  |   | $ |   |   |   | $ | (20 | ) |  | $ | (270 | )    |   | $ | 1,182 |     
|                             |                                                  |                              |   |              |  |              |     |         |  |             |     |                |    |          |   |               |   |        |    |        |  |              |   |      |  |       |       |      |     |   |        |      |   |  |   |  |   |   |    |   |   |   |     |   |  |   |      |      |   |   |       |     

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

5



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statements of Cash
Flows

For the Nine Months Ended September 30,
2001 and 2000


(in millions)


Unaudited


|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |        |     |      |        |  
|------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ----------------------------------------- | ----- | ---- | ------ | ------ | --- | ---- | ------ | -
|                                                              |                                                                                  | 2001                                                                                                                           |                                              | 2000                                     
|                                                              |                                                                                  |                                                                                                                                |                                              |                                          
|Cash flows from operating activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Net loss                                                                         |                                                                                                                                | $                                            | (891                                      | )     |      | $      | (808   | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Adjustments to reconcile net loss to net cash
	provided by operating activities: |                                                                                                                                |                                              |                                           |       |      |        |        |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Amortization of debt financing costs and
	accretion of senior redeemable discount notes, net of accreted
	interest capitalized |                                              |                                           | 384   |      |        |        | 301 |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Provision for losses on accounts receivable                                                                                    |                                              |                                           | 268   |      |        |        | 111 |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Stock-based compensation                                                                                                       |                                              |                                           | 16    |      |        |        | 7   |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Impairment charge                                                                                                              |                                              |                                           | 147   |      |        |        |    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Depreciation and amortization                                                                                                  |                                              |                                           | 1,270 |      |        |        | 898 |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Equity in losses of unconsolidated affiliates                                                                                  |                                              |                                           | 69    |      |        |        | 106 |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Foreign currency transaction losses (gains), net                                                                               |                                              |                                           | 71    |      |        |        | (9  | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Reduction in fair value of available-for-sale
	securities                                                                      |                                              |                                           | 188   |      |        |        |    |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Income tax benefit                                                                                                             |                                              |                                           | (47   | )    |        |        | (24 | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Extraordinary (gain) loss on early
	retirement of debt                                                                         |                                              |                                           | (469  | )    |        |        | 104 |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Other                                                                                                                          |                                              |                                           | 7     |      |        |        | (9  | )   
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  | Change in assets and liabilities, net of effects
	from acquisitions:                                                           |                                              |                                           |       |      |        |        |     |     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  |                                                                                                                                | Accounts and notes receivable                |                                           |       | (460 | )      |        |     | (284 | )     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  |                                                                                                                                | Handset and accessory inventory              |                                           |       | (69  | )      |        |     | (75  | )     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  |                                                                                                                                | Prepaid expenses and other assets            |                                           |       | 211  |        |        |     | (54  | )     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                                                                  |                                                                                                                                | Accounts payable, accrued expenses and other |                                           |       | 77   |        |        |     | 341  |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash provided by operating activities |       |      | 772    |        |     |      | 605    |  
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|Cash flows from investing activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Capital expenditures                                                             |                                                                                                                                |                                              | (2,671                                    | )     |      |        | (2,297 | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from maturities and sales of short-term
	investments                    |                                                                                                                                |                                              | 4,121                                     |       |      |        | 3,068  |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Purchases of short-term investments                                              |                                                                                                                                |                                              | (3,190                                    | )     |      |        | (4,644 | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Payments for licenses, acquisitions and other
	investments, net of cash acquired |                                                                                                                                |                                              | (912                                      | )     |      |        | (624   | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from sale of assets                                                     |                                                                                                                                |                                              | 10                                        |       |      |        | 297    |    
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash used in investing activities     |       |      | (2,642 | )      |     |      | (4,200 | )
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|Cash flows from financing activities                          |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Issuance of debt securities                                                      |                                                                                                                                |                                              | 2,250                                     |       |      |        | 1,791  |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Retirement of debt securities                                                    |                                                                                                                                |                                              |                                          |       |      |        | (1,208 | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Borrowings under long-term credit facilities                                     |                                                                                                                                |                                              | 19                                        |       |      |        | 1,925  |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Repayments under long-term credit facilities                                     |                                                                                                                                |                                              | (26                                       | )     |      |        | (15    | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from exercise of stock options                                          |                                                                                                                                |                                              | 124                                       |       |      |        | 70     |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Repayments under capital lease and finance
	obligations                          |                                                                                                                                |                                              | (66                                       | )     |      |        | (25    | )  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from finance obligation                                                 |                                                                                                                                |                                              | 39                                        |       |      |        | 74     |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Debt financing costs and other                                                   |                                                                                                                                |                                              | (36                                       | )     |      |        | (61    | )  
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|                                                              |                                                                                  |                                                                                                                                |                                              | Net cash provided by financing activities |       |      | 2,304  |        |     |      | 2,551  |  
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|Effect of exchange rate changes on cash and
	cash equivalents |                                                                                  |                                                                                                                                | (3                                           | )                                         |       |      |       |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|Net increase (decrease) in cash and cash
	equivalents         |                                                                                  |                                                                                                                                | 431                                          |                                           |       |      | (1,044 | )     
|                                                             
|                                                             
|                                                             
|                                                             
|Cash and cash equivalents, beginning of
	period               |                                                                                  |                                                                                                                                | 2,609                                        |                                           |       |      | 4,701  |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       
|Cash and cash equivalents, end of
	period                     |                                                                                  | $                                                                                                                              | 3,040                                        |                                           |       | $    | 3,657  |       
|                                                              |                                                                                  |                                                                                                                                |                                              |                                           |       |      |        |       

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

6



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






Notes to Condensed Consolidated Financial
Statements


Unaudited


Note 1.  Basis of
Presentation

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

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

Restricted Cash and Cash
Equivalents.Nextel International
and its subsidiaries held cash and cash equivalents of
$271 million at September 30, 2001 and
$474 million at December 31, 2000 that were not
available to fund any of the cash needs of our domestic
operations due to restrictions contained in their financing
agreements.

Foreign
Currency.The effects of changes
in exchange rates associated with Nextel Internationals
U.S. dollar based loans to its foreign subsidiaries that
are of a long-term investment nature are reported as part of the
cumulative foreign currency translation adjustment in our
consolidated financial statements.

Accumulated
Other Comprehensive Loss.

|                                                              |  |               |      |              |  |   |      |  
|------------------------------------------------------------- |  | ------------- | ---- | ------------ |  | - | ---- | -
|                                                              |  | September 30, |      | December 31,
|                                                              |  | 2001          |      | 2000        
|                                                              |  |               |      |             
|                                                              |  |              
|                                                              |  | (in millions)
|                                                             
|                                                             
|                                                             
|                                                             
|Unrealized (loss) gain on available-for-sale
	securities, net |  | $             | (2   | )            |  | $ | 92   |  
|                                                             
|                                                             
|                                                             
|                                                             
|Cumulative foreign currency translation adjustment            |  |               | (225 | )            |  |   | (134 | )
|                                                             
|                                                             
|                                                             
|                                                             
|Cumulative effect of accounting change                        |  |               | (14  | )            |  |   |     |  
|                                                             
|                                                             
|                                                             
|                                                             
|Unrealized loss on cash flow hedge                            |  |               | (29  | )            |  |   |     |  
|                                                              |  |               |      |              |  |   |      |  
|                                                              |  | $             | (270 | )            |  | $ | (42  | )
|                                                              |  |               |      |              |  |   |      |  

Supplemental
Cash Flow Information.

|                                                    |                                                                                   |                   |       |       |   |   |       |       | 
|--------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------- | ----- | ----- | - | - | ----- | ----- | 
|                                                    |                                                                                   |                  
|                                                    |                                                                                   | Nine Months Ended
|                                                    |                                                                                   | September 30,    
|                                                    |                                                                                   |                  
|                                                    |                                                                                   | 2001              |       | 2000 
|                                                    |                                                                                   |                   |       |      
|                                                    |                                                                                   |                  
|                                                    |                                                                                   | (in millions)    
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |                                                                                   |                   |       |       |   |   |       |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash paid for capital expenditures, including
	interest capitalized               |                   | $     | 2,671 |   |   | $     | 2,297 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Changes in noncash capital expenditures,
	including accreted interest capitalized |                   |       | (293  | ) |   |       | 161   | 
|                                                    |                                                                                   |                   |       |       |   |   |       |      
|                                                    |                                                                                   | $                 | 2,378 |       |   | $ | 2,458 |      
|                                                    |                                                                                   |                   |       |       |   |   |       |      
|Cash paid for
	interest, net of amounts capitalized |                                                                                   | $                 | 629   |       |   | $ | 553   |      
|                                                    |                                                                                   |                   |       |       |   |   |       |      

Accounting Change and New Accounting
Pronouncements.Effective
January 1, 2001, we adopted Statement of Financial
Accounting Standards, or SFAS, No. 133, Accounting
for Derivative Instruments and Hedging Activities, which,
as amended by SFAS No. 138, establishes accounting and
reporting

7



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

standards for derivative instruments, including
some derivative instruments embedded in other contracts, and for
hedging activities. Upon adoption of SFAS No. 133, we
recorded a $20 million transition adjustment in other
comprehensive loss as a cumulative effect of a change in
accounting principle. We will reclassify this amount into
interest expense over the lives of the respective interest rate
swaps, including $8 million during the twelve months ending
December 31, 2001.

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

As of September 30, 2001, we have recognized
all of our cash flow hedges at their fair values of
$111 million in other current and other noncurrent
liabilities on our balance sheet. For our interest rate swap
that qualifies for cash flow hedge accounting, an unrealized
loss of $29 million, representing the effective portion of
the change in its fair value, is reported in other comprehensive
loss and will be reclassified into interest expense in the same
period during which our hedged debt affects interest expense.
The ineffective portion of the change in fair value of our swap
qualifying for cash flow hedge accounting and changes in the
fair values of our swaps not qualifying for hedge accounting are
recognized in our statement of operations in the period of the
change. For the nine months ended September 30, 2001,
interest expense includes a loss of $8 million representing
changes in the fair values of our swaps not qualifying for hedge
accounting and $3 million relating to the ineffective
portion of the change in fair value of our swap qualifying for
hedge accounting.

In July 2001, we entered into three interest
rate swap agreements to hedge the risk of changes in fair value
of a portion of our long-term fixed rate debt. These fair value
hedges qualify for hedge accounting using the short-cut method
as the terms of the interest rate swaps match the critical terms
of the hedged debt. Accordingly, there was no net effect on our
results of operations for the three months ended
September 30, 2001 relating to these fair value hedges. As
of September 30, 2001, we have recognized the interest rate
swaps at their fair values of $33 million in other assets,
with an offsetting $33 million adjustment to the carrying value
of our hedged debt.

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

In April 2001, the EITF reached a consensus
on EITF Issue No. 00-25, Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the
Vendors Product, which clarifies the income
statement classification of costs incurred by a vendor in
connection with the resellers purchase or promotion of the
vendors products, and will result in certain cooperative
advertising and product placement costs currently classified as
selling expenses being reflected as a reduction of revenues
earned from that activity. EITF Issue No. 00-25 is
effective January 1, 2002. Based on our analysis to date,
we do not believe that the implementation of these provisions
will have a material impact on our financial position or results
of operations.

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

8



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

In June 2001, the FASB issued SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 requires goodwill and intangible assets with
indefinite useful lives to no longer be amortized but to be
tested for impairment at least annually. Intangible assets that
have finite lives will continue to be amortized over their
useful lives. The amortization and nonamortization provisions of
SFAS No. 142 are applicable to all goodwill and intangible
assets acquired after June 30, 2001. Effective
January 1, 2002, we are required to and will apply all
other provisions of SFAS No. 142 to all goodwill and
intangible assets recognized on our financial statements at that
date. Goodwill amortization was $29 million and
$10 million for the nine and three months ended
September 30, 2001. We are evaluating the impact of
applying the remaining provisions of SFAS No. 142 on our
financial position and results of operations.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which is effective January 1,
2002. This statement replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and some provisions
of Accounting Principles Board Opinion No. 30,
Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. SFAS No. 144 requires that
one accounting model be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly
acquired. It also broadens the presentation of discontinued
operations to include more disposal transactions. We are
evaluating the impact of applying the provisions of SFAS
No. 144 on our financial position and results of operations.

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

As a result of our adoption of Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial
Statements, we recognized revenues from digital handset
sales and equal amounts of cost of revenues during the following
periods that are attributable to handset sales previously
reported in periods prior to 2000 as follows:

|                                |  |               |     |      |  |   |     | 
|------------------------------- |  | ------------- | --- | ---- |  | - | --- | 
|                                |  | 2001          |     | 2000
|                                |  |               |     |     
|                                |  |              
|                                |  | (in millions)
|                               
|                               
|                               
|                               
|Nine months ended September 30  |  | $             | 196 |      |  | $ | 238 | 
|                               
|                               
|                               
|                               
|Three months ended September 30 |  |               | 61  |      |  |   | 78  | 

Note 2. Significant Transactions

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

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

9



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

In connection with Nextel Internationals
continuing efforts to tailor its operations to more closely
align with anticipated sources of financing, and following its
most recent review of economic conditions, operating performance
and other relevant factors relating to its Philippine operating
company, Nextel International decided to discontinue incremental
funding to its Philippine operating company during the third
quarter of 2001. Accordingly, Nextel International performed an
assessment of the carrying values of the long-lived assets to be
held and used in the Philippines, including property, plant and
equipment, licenses, goodwill and other intangible assets. As a
result, during the third quarter of 2001, Nextel International
recorded a $147 million pretax impairment charge based on
the amount by which the carrying values of these long-lived
assets exceeded their estimated fair market values. The fair
market values were determined using a market-value based
approach as reviewed and determined to be reasonable by an
independent appraiser.

Reduction in Fair Value of
Available-For-Sale Securities.We
assess declines in the value of individual investments to
determine whether the decline is other-than-temporary and thus
the investment is impaired. We make this assessment by
considering available evidence, including changes in general
market conditions, specific industry and individual company
data, the length of time and the extent to which the market
value has been less than cost, the financial condition and
near-term prospects of the individual company and our intent and
ability to hold the investment. In connection with Nextel
Internationals review, Nextel International recognized a
$188 million reduction in fair value of its investment in
TELUS Corporation based on its stock price at September 30,
2001.

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

10



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

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

|                                                                                                                                        |                                              |                       |        |              |     |   |        |        |     |  
|--------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | --------------------- | ------ | ------------ | --- | - | ------ | ------ | --- | -
|                                                                                                                                        |                                              | September 30,         |        | December 31,
|                                                                                                                                        |                                              | 2001                  |        | 2000        
|                                                                                                                                        |                                              |                       |        |             
|                                                                                                                                        |                                              |                      
|                                                                                                                                        |                                              | (dollars in millions)
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|10.65% senior redeemable discount notes due
	2007, net of unamortized discount of
	$79 and $136                                         |                                              | $                     | 761    |              |     | $ | 704    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.75% senior serial redeemable discount notes
	due 2007, net of unamortized discount
	of $110 and $180                                  |                                              |                       | 1,019  |              |     |   | 949    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|4.75% convertible senior notes due
	2007                                                                                                |                                              |                       | 354    |              |     |   | 354    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.95% senior serial redeemable discount notes
	due 2008, net of unamortized discount
	of $203 and $303                                  |                                              |                       | 1,424  |              |     |   | 1,324  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12% senior serial redeemable notes due
	2008, net of unamortized discount of
	$4 and $4                                                 |                                              |                       | 296    |              |     |   | 296    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.375% senior serial redeemable notes due
	2009                                                                                         |                                              |                       | 2,000  |              |     |   | 2,000  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|5.25% convertible senior notes due
	2010                                                                                                |                                              |                       | 1,150  |              |     |   | 1,150  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|9.5% senior serial redeemable notes due
	2011, including a fair value hedge
	adjustment of $33                                          |                                              |                       | 1,283  |              |     |   |       |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|6% convertible senior notes due 2011                                                                                                    |                                              |                       | 1,000  |              |     |   |       |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Bank credit facility                                                                                                                    |                                              |                       | 4,500  |              |     |   | 4,500  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Other long-term debt                                                                                                                    |                                              |                       | 19     |              |     |   | 1      |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|13% senior redeemable discount notes due
	2007, issued by Nextel International,
	net of unamortized discount of $42 and $156            |                                              |                       | 488    |              |     |   | 795    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12.125% senior serial redeemable discount
	notes due 2008, issued by Nextel
	International, net of unamortized discount of $81 and $172 |                                              |                       | 408    |              |     |   | 558    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|12.75% senior serial redeemable notes due
	2010, issued by Nextel International,
	net of unamortized discount of $6 and $9              |                                              |                       | 450    |              |     |   | 641    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Nextel International credit
	facilities                                                                                                 |                                              |                       | 499    |              |     |   | 525    |       
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       
|                                                                                                                                        | Total long-term debt                         |                       |        | 15,651       |     |   |        | 13,797 |    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        |                                              | Less current portion  |        |              | (35 | ) |        |        | (34 | )
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       
|                                                                                                                                        |                                              | $                     | 15,616 |              |     | $ | 13,763 |       
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       
|Capital lease obligations                                                                                                               |                                              | $                     | 313    |              |     | $ | 260    |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Finance obligation                                                                                                                      |                                              |                       | 691    |              |     |   | 674    |       
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       
|                                                                                                                                        | Total capital lease and finance
	obligations |                       |        | 1,004        |     |   |        | 934    |    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        |                                              | Less current portion  |        |              | (98 | ) |        |        | (68 | )
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       
|                                                                                                                                        |                                              | $                     | 906    |              |     | $ | 866    |       
|                                                                                                                                        |                                              |                       |        |              |     |   |        |       

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

In July 2001, we entered into three interest
rate swap agreements to hedge the risk of changes in fair value
attributable to changes in market interest rates associated with
$500 million of our 9.5% senior serial

11



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

redeemable notes. As a result of this hedge and
in accordance with SFAS No. 133, we have recognized a
$33 million increase to the carrying value of these notes
as of September 30, 2001. However, this fair value hedge
adjustment does not change the amounts due at maturity.

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

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

Debt
Purchases.In August 2001,
Nextel Communications, Inc. purchased in private placement
transactions an aggregate of $422 million in principal
amount of Nextel Internationals 13% senior redeemable
discount notes due 2007, $241 million in principal amount
of Nextel Internationals 12.125% senior serial redeemable
discount notes due 2008 and $194 million in principal
amount of Nextel Internationals 12.75% senior serial
redeemable notes due 2010 in exchange for about
21.6 million shares of our class A common stock.
Nextel Communications, Inc. continues to hold these notes,
and therefore, these notes remain outstanding obligations of
Nextel International. However, in accordance with generally
accepted accounting principles, these transactions have been
recorded as an early retirement of debt in our consolidated
financial statements. As a result, we recognized an
extraordinary gain of $469 million, representing the excess
of the net carrying values of the repurchased notes over the
market value of the 21.6 million shares on the dates of the
exchange.

Note 4.  Contingencies

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

Note 5.  Mandatorily Redeemable
Preferred Stock

|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ----- | ------------ |  | - | ----- | 
|                                                                                                                                                                                                                                                                                                 |  | September 30,         |       | December 31,
|                                                                                                                                                                                                                                                                                                 |  | 2001                  |       | 2000        
|                                                                                                                                                                                                                                                                                                 |  |                       |       |             
|                                                                                                                                                                                                                                                                                                 |  |                      
|                                                                                                                                                                                                                                                                                                 |  | (dollars in millions)
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Series D exchangeable preferred stock
	mandatorily redeemable 2009, 13%
	cumulative annual dividend; 832,340 and 756,185 shares issued;
	832,329 and 756,174 shares outstanding; stated at liquidation
	value                                                                                    |  | $                     | 855   |              |  | $ | 777   | 
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Series E exchangeable preferred stock
	mandatorily redeemable 2010, 11.125%
	cumulative annual dividend; 1,102,498 and 1,015,397 shares
	issued; 1,102,484 and 1,015,383 shares outstanding; stated at
	liquidation value                                                                        |  |                       | 1,118 |              |  |   | 1,029 | 
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Zero coupon convertible preferred stock
	mandatorily redeemable 2013, no
	dividend; convertible into 4,779,386 shares of class A
	common stock; 245,245 shares issued and outstanding; stated at
	fair value when issued plus accretion of liquidation preference
	at 9.25% compounded quarterly |  |                       | 80    |              |  |   | 75    | 
|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 
|                                                                                                                                                                                                                                                                                                 |  | $                     | 2,053 |              |  | $ | 1,881 | 
|                                                                                                                                                                                                                                                                                                 |  |                       |       |              |  |   |       | 

12



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

Note 6.  Segment
Reporting

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

|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|------------------------------------------------------ |  | ------------------------------------ | ------ | ------------------------------------ |  | ------------ | ---- | ------------ |  | -------- | --- | ------------- |  | ------------ | ------ | ------------ |  | - | ----- | - |  | - | ---- | - |  | - | - |  |  | - | ----- | -
|                                                       |  |                                      |        |                                      |  | Intercompany |      |              |  |          |     |               |  | Intercompany |        |             
|                                                       |  | Domestic                             |        | International                        |  | Eliminations |      | Consolidated |  | Domestic |     | International |  | Eliminations |        | Consolidated
|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |             
|                                                       |  |                                      |        |                                     
|                                                       |  | Nine Months Ended September 30, 2001 |        | Nine Months Ended September 30, 2000
|                                                       |  |                                      |        |                                     
|                                                       |  |                                     
|                                                       |  | (in millions)                       
|                                                      
|                                                      
|                                                      
|                                                      
|Operating revenues                                     |  | $                                    | 5,132  |                                      |  | $            | 486  |              |  | $        | (3  | )             |  | $            | 5,615  |              |  | $ | 3,856 |   |  | $ | 212  |   |  | $ |  |  |  | $ | 4,068 |  
|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Segment earnings (losses)                              |  | $                                    | 1,362  |                                      |  | $            | (96  | )            |  | $        | (1  | )             |  | $            | 1,265  |              |  | $ | 977   |   |  | $ | (100 | ) |  | $ |  |  |  | $ | 877   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Restructuring and impairment charges                   |  |                                      | (22    | )                                    |  |              | (147 | )            |  |          |    |               |  |              | (169   | )            |  |   |      |   |  |   |     |   |  |   |  |  |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Depreciation and amortization                          |  |                                      | (1,097 | )                                    |  |              | (173 | )            |  |          |    |               |  |              | (1,270 | )            |  |   | (795  | ) |  |   | (103 | ) |  |   |  |  |  |   | (898  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest expense                                       |  |                                      | (862   | )                                    |  |              | (220 | )            |  |          | 11  |               |  |              | (1,071 | )            |  |   | (735  | ) |  |   | (177 | ) |  |   |  |  |  |   | (912  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |  |                                      | 178    |                                      |  |              | 11   |              |  |          | (11 | )             |  |              | 178    |              |  |   | 283   |   |  |   | 15   |   |  |   |  |  |  |   | 298   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Other expense, net                                     |  |                                      | (71    | )                                    |  |              | (269 | )            |  |          |    |               |  |              | (340   | )            |  |   | (78   | ) |  |   | (15  | ) |  |   |  |  |  |   | (93   | )
|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Loss before income tax benefit and extraordinary
	item |  | $                                    | (512   | )                                    |  | $            | (894 | )            |  | $        | (1  | )             |  | $            | (1,407 | )            |  | $ | (348  | ) |  | $ | (380 | ) |  | $ |  |  |  | $ | (728  | )
|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Capital expenditures                                   |  | $                                    | 1,854  |                                      |  | $            | 524  |              |  | $        |    |               |  | $            | 2,378  |              |  | $ | 2,054 |   |  | $ | 404  |   |  | $ |  |  |  | $ | 2,458 |  
|                                                       |  |                                      |        |                                      |  |              |      |              |  |          |     |               |  |              |        |              |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  

|                                                       |  |                                       |       |                                       |  |   |      |   |  |   |     |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|------------------------------------------------------ |  | ------------------------------------- | ----- | ------------------------------------- |  | - | ---- | - |  | - | --- | - |  | - | ----- | - |  | - | ----- | - |  | - | ---- | - |  | - | - |  |  | - | ----- | -
|                                                       |  |                                       |       |                                      
|                                                       |  | Three Months Ended September 30, 2001 |       | Three Months Ended September 30, 2000
|                                                       |  |                                       |       |                                      
|                                                       |  |                                       |       |                                       |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Operating revenues                                     |  | $                                     | 1,807 |                                       |  | $ | 186  |   |  | $ | (1  | ) |  | $ | 1,992 |   |  | $ | 1,437 |   |  | $ | 91   |   |  | $ |  |  |  | $ | 1,528 |  
|                                                       |  |                                       |       |                                       |  |   |      |   |  |   |     |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Segment earnings (losses)                              |  | $                                     | 526   |                                       |  | $ | (29  | ) |  | $ |    |   |  | $ | 497   |   |  | $ | 392   |   |  | $ | (33  | ) |  | $ |  |  |  | $ | 359   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Impairment charge                                      |  |                                       |      |                                       |  |   | (147 | ) |  |   |    |   |  |   | (147  | ) |  |   |      |   |  |   |     |   |  |   |  |  |  |   |      |  
|                                                      
|                                                      
|                                                      
|                                                      
|Depreciation and amortization                          |  |                                       | (390  | )                                     |  |   | (59  | ) |  |   |    |   |  |   | (449  | ) |  |   | (277  | ) |  |   | (38  | ) |  |   |  |  |  |   | (315  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest expense                                       |  |                                       | (292  | )                                     |  |   | (73  | ) |  |   | 11  |   |  |   | (354  | ) |  |   | (263  | ) |  |   | (70  | ) |  |   |  |  |  |   | (333  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |  |                                       | 51    |                                       |  |   | 3    |   |  |   | (11 | ) |  |   | 43    |   |  |   | 101   |   |  |   | 10   |   |  |   |  |  |  |   | 111   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Other expense, net                                     |  |                                       | (21   | )                                     |  |   | (208 | ) |  |   |    |   |  |   | (229  | ) |  |   | (6    | ) |  |   | (8   | ) |  |   |  |  |  |   | (14   | )
|                                                       |  |                                       |       |                                       |  |   |      |   |  |   |     |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Loss before income tax benefit and extraordinary
	item |  | $                                     | (126  | )                                     |  | $ | (513 | ) |  | $ |    |   |  | $ | (639  | ) |  | $ | (53   | ) |  | $ | (139 | ) |  | $ |  |  |  | $ | (192  | )
|                                                       |  |                                       |       |                                       |  |   |      |   |  |   |     |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  
|Capital expenditures                                   |  | $                                     | 556   |                                       |  | $ | 130  |   |  | $ |    |   |  | $ | 686   |   |  | $ | 681   |   |  | $ | 144  |   |  | $ |  |  |  | $ | 825   |  
|                                                       |  |                                       |       |                                       |  |   |      |   |  |   |     |   |  |   |       |   |  |   |       |   |  |   |      |   |  |   |   |  |  |   |       |  

|                                   |  |                    |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 
|---------------------------------- |  | ------------------ | ------ | ----------------- |  | - | ----- |  |  | - | --- | - |  | - | ------ |  |  | - | ------ |  |  | - | ----- |  |  | - | ---- | - |  | - | ------ | 
|                                   |  |                    |        |                  
|                                   |  | September 30, 2001 |        | December 31, 2000
|                                   |  |                    |        |                  
|                                   |  |                    |        |                   |  |   |       | 
|                                  
|                                  
|                                  
|                                  
|Property, plant and equipment, net |  | $                  | 8,692  |                   |  | $ | 1,282 |  |  | $ |    |   |  | $ | 9,974  |  |  | $ | 7,721  |  |  | $ | 1,070 |  |  | $ |     |   |  | $ | 8,791  | 
|                                   |  |                    |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 
|Identifiable assets                |  | $                  | 20,874 |                   |  | $ | 2,869 |  |  | $ | (83 | ) |  | $ | 23,660 |  |  | $ | 19,687 |  |  | $ | 3,193 |  |  | $ | (194 | ) |  | $ | 22,686 | 
|                                   |  |                    |        |                   |  |   |       |  |  |   |     |   |  |   |        |  |  |   |        |  |  |   |       |  |  |   |      |   |  |   |        | 

13



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)






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

Overview

The following is a discussion and analysis of:



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

You should read this discussion in conjunction
with our 2000 annual report on Form 10-K and our subsequent
quarterly reports on Form 10-Q. Historical results may not
indicate future performance. See Forward Looking
Statements.

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

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

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



| |   |                                                                                                   
| | - | --------------------------------------------------------------------------------------------------
| |  | digital mobile telephone service;                                                                 
|
| |  | digital two-way radio dispatch service, which is
	marketed as Nextel Direct Connect(R)
	service;



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Internet applications, mobile messaging services,
	e-mail and advanced business applications, which are marketed as
	Nextel Wireless Web services;



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | advanced calling features, such as three-way
	calling, voicemail, call forwarding and additional line service;
|
| |  | international roaming capabilities, which are
	marketed as Nextel WorldwideSM; and                          
|
| |  | text and numeric paging.                                                                                      

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

As of September 30, 2001:



| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we provided service to about 8,165,600 digital
	handsets in the United States;                                                                                                                                                                                      
|
| |  | our digital mobile network and the compatible
	digital mobile network of Nextel Partners, Inc., our affiliate
	providing service in small and medium sized markets, was
	operational in 191 of the top 200 metropolitan statistical areas
	in the United States; and
|
| |  | Nextel International provided service to about
	1,189,500 digital handsets in its managed markets.                                                                                                                                                                  

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

14



---



##### Table of Contents



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

In September 2001, we announced that
Paul N. Saleh had been named our Executive Vice President
and Chief Financial Officer. He replaces John S.
Brittain, Jr., who remains our Vice President and
Treasurer. In September 2001, J. Timothy Bryan, Chief
Financial Officer of Eagle River, Inc., an affiliate of
Craig O. McCaw, joined our board of directors as a designee
of Digital Radio, L.L.C. In October 2001, Daniel F.
Akerson resigned from our board of directors and also from his
position as chairman of the board of directors of Nextel
International.

In October 2001, Motorola and we announced
an anticipated significant technology upgrade to our iDEN
digital mobile network, which Motorola is developing for our
expected deployment in 2003. We expect that this upgrade will
effectively double our voice capacity and leverage our existing
infrastructure more efficiently. We also announced a compression
technology enhancement expected to be rolled out in 2002 to
deliver packet data service more efficiently at perceived higher
speeds. See Forward Looking Statements.

Results of Operations

Operating revenues.

|                          |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |    |  
|------------------------- | ------------------ | --------------------- | ----- | ------------ |  | ------------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | --- | - | - | ----- | ----- |  |  | --- | -- | -
|                          |                    |                       |       |              |  |               |    |              |   |              
|                          |                    |                       |       | % of         |  |               |    | % of         |   | Change from  
|                          |                    |                       |       | Consolidated |  |               |    | Consolidated |   | Previous Year
|                          |                    | September 30,         |       | Operating    |  | September 30, |    | Operating    |   |              
|                          |                    | 2001                  |       | Revenues     |  | 2000          |    | Revenues     |   | Dollars       |       | Percent
|                          |                    |                       |       |              |  |               |    |              |   |               |       |        
|                          |                    |                      
|                          |                    | (dollars in millions)
|Nine Months Ended         |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                    | $                     | 5,132 |              |  |               | 91 | %            |   | $             | 3,856 |         |  |  | 95 | %   |   | $ | 1,276 |       |  |  | 33  | % 
|                         
|                         
|                         
|                         
|International             |                    |                       | 486   |              |  |               | 9  | %            |   |               | 212   |         |  |  | 5  | %   |   |   | 274   |       |  |  | 129 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                    |                       | (3    | )            |  |               |   |              |   |               |      |         |  |  |   |     |   |   | (3    | )     |  |  |    |   
|                          |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   
|                          | Operating revenues |                       | $     | 5,615        |  |               |    | 100          | % |               | $     | 4,068   |  |  |    | 100 | % |   | $     | 1,547 |  |  |     | 38 | %
|                          |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   
|Three Months Ended        |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                    | $                     | 1,807 |              |  |               | 91 | %            |   | $             | 1,437 |         |  |  | 94 | %   |   | $ | 370   |       |  |  | 26  | % 
|                         
|                         
|                         
|                         
|International             |                    |                       | 186   |              |  |               | 9  | %            |   |               | 91    |         |  |  | 6  | %   |   |   | 95    |       |  |  | 104 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                    |                       | (1    | )            |  |               |   |              |   |               |      |         |  |  |   |     |   |   | (1    | )     |  |  |    |   
|                          |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   
|                          | Operating revenues |                       | $     | 1,992        |  |               |    | 100          | % |               | $     | 1,528   |  |  |    | 100 | % |   | $     | 464   |  |  |     | 30 | %
|                          |                    |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |     |   |   |       |       |  |  |     |   

|                                     |  |  |       |  |  |  |   |          |  |         |       |  |  |  |   |  |  |  |       |  |  |  |    |  
|------------------------------------ |  |  | ----- |  |  |  | - | -------- |  | ------- | ----- |  |  |  | - |  |  |  | ----- |  |  |  | -- | -
|                                     |  |  |       |  |  |  |   |          |  |        
|Digital handsets in service at end   |  |  |       |  |  |  |   |          |  |        
|of period for consolidated           |  |  |       |  |  |  |   | Handsets |  | Percent
|subsidiaries (handsets in thousands) |  |  |       |  |  |  |   |          |  |        
|Domestic                             |  |  | 8,166 |  |  |  |  |          |  |         | 6,157 |  |  |  |  |  |  |  | 2,009 |  |  |  | 33 | %
|                                    
|                                    
|                                    
|                                    
|International                        |  |  | 1,189 |  |  |  |  |          |  |         | 639   |  |  |  |  |  |  |  | 550   |  |  |  | 86 | %

The increase in domestic operating revenues from
the nine months ended September 30, 2000 to the nine months
ended September 30, 2001 consists of a $1.24 billion
or 35% increase in wireless service and other revenues to
$4.8 billion and a $34 million or 11% increase in
revenues from digital handset and accessory sales to
$332 million. The increase in domestic operating revenues
from the three months ended September 30, 2000 to the three
months ended September 30, 2001 consists of a
$359 million or 27% increase in wireless service and other
revenues to $1.69 billion and an $11 million or 10%
increase in revenues from digital handset and accessory sales to
$118 million. We continue to sell handsets at prices below
our cost to attract new customers and as handset upgrade and
retention inducements for existing customers. Additionally, as

15



---



##### Table of Contents



competition has intensified, the prices at which
we sell handsets to our new and existing customers have
generally declined from the nine months ended September 30,
2000. Accordingly, revenues from domestic digital handset and
accessory sales have not increased in proportion to the increase
in the number of handsets sold. To mitigate this effect, during
the second quarter of 2001, we began to raise prices on existing
handsets and introduce more feature rich and higher priced
handsets, in an effort to limit the level of subsidy offered to
attract and retain customers in our targeted segments. However,
in order to stimulate sales of slow-moving handset models, we
continue to rely on various customer inducements, including
reductions in the sales prices of affected handset models.


Domestic service and other revenues increased
principally as a result of a 33% increase in domestic handsets
in service. Average monthly revenue per domestic handset
decreased from about $74 during the first nine months of 2000 to
about $71 during the first nine months of 2001. Additionally, as
compared to the same periods in 2000, average monthly minutes of
use per subscriber increased 19% in the nine months ended
September 30, 2001 to about 560 minutes. We attribute both
the decrease in average monthly revenue per domestic handset and
the increase in minutes of use per subscriber to the
introduction of pricing plans designed to provide additional
value to our customers. These new pricing plans, developed in
part to meet competitive demands, generally provide lower
per-minute rates made available in conjunction with fixed-rate
service plans. These plans typically include a fixed amount of
interconnect minutes combined with an unlimited or fixed amount
of digital two-way radio service, unlimited Nextel Wireless Web
services or free long distance service, all for a stated package
price. The growth in handsets in service is the result of a
number of factors, principally:



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

We expect our average monthly revenue per
domestic handset may continue to decrease in the future:



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



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



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | if we expand our marketing efforts to attract
	non-business users as customers.

The increase in international operating revenues
from the nine months ended September 30, 2000 to the nine
months ended September 30, 2001 consists of a
$266 million or 135% increase in wireless service and other
revenues to $463 million and an $8 million or 53%
increase in revenues from digital handset and accessory sales to
$23 million. The increase in international operating
revenues from the three months ended September 30, 2000 to
the three months ended September 30, 2001 consists of a
$92 million or 107% increase in wireless service and other
revenues to $178 million and a $3 million or 60%
increase in revenues from digital handset and accessory sales to
$8 million. Operating revenues increased primarily as a
result of an 86% increase in the number of digital handsets in
service in Nextel Internationals managed markets from

16



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##### Table of Contents



September 30, 2000 to September 30,
2001, particularly in the Mexican and Brazilian markets.
Additionally, the successful introduction of higher priced
service plans, primarily in Mexico, contributed to the increase,
but was partially offset by more competitive pricing plans in
our other international markets offering lower per-minute rates.


Cost of revenues.

|                          |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |    |  
|------------------------- | ---------------- | --------------------- | ----- | ------------ |  | ------------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | --- | -- | -
|                          |                  |                       |       |              |  |               |    |              |   |              
|                          |                  |                       |       | % of         |  |               |    | % of         |   | Change from  
|                          |                  |                       |       | Consolidated |  |               |    | Consolidated |   | Previous Year
|                          |                  | September 30,         |       | Operating    |  | September 30, |    | Operating    |   |              
|                          |                  | 2001                  |       | Revenues     |  | 2000          |    | Revenues     |   | Dollars       |       | Percent
|                          |                  |                       |       |              |  |               |    |              |   |               |       |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Nine Months Ended         |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                  | $                     | 1,868 |              |  |               | 33 | %            |   | $             | 1,432 |         |  |  | 35 | %  |   | $ | 436 |     |  |  | 30  | % 
|                         
|                         
|                         
|                         
|International             |                  |                       | 249   |              |  |               | 5  | %            |   |               | 117   |         |  |  | 3  | %  |   |   | 132 |     |  |  | 113 | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (3    | )            |  |               |   |              |   |               |      |         |  |  |   |    |   |   | (3  | )   |  |  |    |   
|                          |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   
|                          | Cost of revenues |                       | $     | 2,114        |  |               |    | 38           | % |               | $     | 1,549   |  |  |    | 38 | % |   | $   | 565 |  |  |     | 36 | %
|                          |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   
|Three Months Ended        |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   
|                         
|                         
|                         
|                         
|Domestic                  |                  | $                     | 639   |              |  |               | 32 | %            |   | $             | 538   |         |  |  | 35 | %  |   | $ | 101 |     |  |  | 19  | % 
|                         
|                         
|                         
|                         
|International             |                  |                       | 94    |              |  |               | 5  | %            |   |               | 49    |         |  |  | 3  | %  |   |   | 45  |     |  |  | 92  | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (1    | )            |  |               |   |              |   |               |      |         |  |  |   |    |   |   | (1  | )   |  |  |    |   
|                          |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   
|                          | Cost of revenues |                       | $     | 732          |  |               |    | 37           | % |               | $     | 587     |  |  |    | 38 | % |   | $   | 145 |  |  |     | 25 | %
|                          |                  |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |     |   

The increase in cost of revenues from the nine
months ended September 30, 2000 to the nine months ended
September 30, 2001 for our domestic operations consists of
a $247 million or 35% increase in cost of providing
wireless services to $955 million and a $189 million
or 26% increase in cost of digital handset and accessory sales
to $913 million. The increase in cost of revenues from the
three months ended September 30, 2000 to the three months
ended September 30, 2001 for our domestic operations
consists of a $77 million or 29% increase in cost of
providing wireless services to $341 million and a
$24 million or 9% increase in cost of digital handset and
accessory sales to $298 million. Cost of digital handset
and accessory sales increased primarily due to the increase in
the number of handsets sold to new and existing customers, and
to a lesser extent, the increase in the percentage of higher
cost handsets sold.

Domestic cost of service revenues increased
primarily as a result of increased costs incurred related to
variable interconnect fees on higher minutes of use and
increased costs incurred related to direct switch and
transmitter and receiver site costs including rent, utility and
fixed interconnection fees. Total system minutes of use grew 66%
from the nine months ended September 30, 2000 to the nine
months ended September 30, 2001 principally due to the
larger number of handsets in service as well as the 19% increase
in average monthly minutes of use per subscriber in the nine
months ended September 30, 2001 compared to the same period
in 2000. The transmitter and receiver site and switch costs
increased due to a 31% increase in transmitter and receiver
sites and related equipment and an 11% increase in the number of
switches we placed in service from September 30, 2000 to
September 30, 2001.

The increase in international cost of revenues
from the nine months ended September 30, 2000 to the nine
months ended September 30, 2001 consists of a
$79 million or 152% increase in cost of providing wireless
services to $131 million, and a $53 million or 82% increase
in cost of digital handset and accessory sales to
$118 million. The increase in international cost of
revenues from the three months ended September 30, 2000 to
the three months ended September 30, 2001 consists of a
$27 million or 123% increase in cost of providing wireless
services to $49 million, and an $18 million or 67%
increase in cost of digital handset and accessory sales to
$45 million. The increase in the cost of providing
international wireless services is primarily attributable to:



| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in costs related to variable
	interconnect fees on significantly increased minutes of use, as
	well as higher fixed interconnect costs per minute, primarily in
	Brazil; and

17



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in site ground lease and utility
	expenses incurred due to a 65% increase in the number of
	transmitter and receiver sites placed in service by Nextel
	Internationals consolidated subsidiaries from
	September 30, 2000 to September 30, 2001.

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

We expect the amount of cost of revenues to
increase as we place more sites and switches into service to add
capacity and coverage to our networks, as customer usage of the
digital mobile networks increases and as we sell more handsets
and accessories to new customers and provide handset upgrade and
retention inducements to existing customers, partially offset by
a reduction in the average cost we expect to pay for the
handsets sold. See Forward Looking Statements.

Selling, general and administrative
expenses.

|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|----------------------------------- | -------------------------- | --------------------- | ----- | ------------ |  | ------------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                                    |                            |                       |       |              |  |               |    |              |   |              
|                                    |                            |                       |       | % of         |  |               |    | % of         |   | Change from  
|                                    |                            |                       |       | Consolidated |  |               |    | Consolidated |   | Previous Year
|                                    |                            | September 30,         |       | Operating    |  | September 30, |    | Operating    |   |              
|                                    |                            | 2001                  |       | Revenues     |  | 2000          |    | Revenues     |   | Dollars       |       | Percent
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |        
|                                    |                            |                      
|                                    |                            | (dollars in millions)
|Nine Months Ended                   |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                            | $                     | 2,236 |              |  |               | 40 | %            |   | $             | 1,642 |         |  |  | 40 | %  |   | $ | 594 |     |  |  | 36 | % 
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 924   |              |  |               | 17 | %            |   | $             | 745   |         |  |  | 18 | %  |   | $ | 179 |     |  |  | 24 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 163   |              |  |               | 3  | %            |   |               | 104   |         |  |  | 3  | %  |   |   | 59  |     |  |  | 57 | % 
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 1,087        |  |               |    | 20           | % |               | $     | 849     |  |  |    | 21 | % |   | $   | 238 |  |  |    | 28 | %
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 978   |              |  |               | 17 | %            |   | $             | 702   |         |  |  | 17 | %  |   | $ | 276 |     |  |  | 39 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 170   |              |  |               | 3  | %            |   |               | 91    |         |  |  | 2  | %  |   |   | 79  |     |  |  | 87 | % 
|                                   
|                                   
|                                   
|                                   
|Intercompany eliminations           |                            |                       | 1     |              |  |               |   |              |   |               |      |         |  |  |   |    |   |   | 1   |     |  |  |   |   
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 1,149        |  |               |    | 20           | % |               | $     | 793     |  |  |    | 19 | % |   | $   | 356 |  |  |    | 45 | %
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Three Months Ended                  |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                            | $                     | 763   |              |  |               | 38 | %            |   | $             | 582   |         |  |  | 38 | %  |   | $ | 181 |     |  |  | 31 | % 
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 296   |              |  |               | 15 | %            |   | $             | 249   |         |  |  | 16 | %  |   | $ | 47  |     |  |  | 19 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 59    |              |  |               | 3  | %            |   |               | 41    |         |  |  | 3  | %  |   |   | 18  |     |  |  | 44 | % 
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | Selling and marketing      |                       | $     | 355          |  |               |    | 18           | % |               | $     | 290     |  |  |    | 19 | % |   | $   | 65  |  |  |    | 22 | %
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|Domestic                            |                            | $                     | 346   |              |  |               | 17 | %            |   | $             | 258   |         |  |  | 17 | %  |   | $ | 88  |     |  |  | 34 | % 
|                                   
|                                   
|                                   
|                                   
|International                       |                            |                       | 62    |              |  |               | 3  | %            |   |               | 34    |         |  |  | 2  | %  |   |   | 28  |     |  |  | 82 | % 
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   
|                                    | General and administrative |                       | $     | 408          |  |               |    | 20           | % |               | $     | 292     |  |  |    | 19 | % |   | $   | 116 |  |  |    | 40 | %
|                                    |                            |                       |       |              |  |               |    |              |   |               |       |         |  |  |    |    |   |   |     |     |  |  |    |   

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $61 million and $11 million, or an 18%
	and a 10%, increase in commissions and residuals earned by
	indirect dealers and distributors as a result of increased
	handset sales through these channels;                                                                                                                                                                          
|
| |  | $58 million and $14 million, or a 40%
	and a 29%, increase in advertising expenses due to aggressive
	marketing campaigns, including sports-related sponsorships and
	television commercials, directed at growing our customer base
	and increasing brand awareness, as well as promoting our
	differentiated services, such as Nextel Direct Connect and
	Nextel Wireless Web;
|
| |  | $52 million and $23 million, or a 21%
	and a 27%, increase in sales and marketing payroll and related
	expenses including costs associated with our company-owned
	retail stores acquired in May 2001 and                                                                                                                                                                      

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| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | increased commissions attributable to a larger
	direct sales force and increased reliance on our lower cost
	distribution channels beginning in the third quarter of 2001; and
|
| |  | $8 million increase and $1 million
	decrease in other general marketing expenses.                                                                                             

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

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $140 million and $60 million, or a 141%
	and a 154%, increase in bad debt expense, which has increased as
	a percentage of domestic operating revenues primarily due to the
	impact of a slowing economy and aggressive promotions in late
	2000 and early 2001, resulting in an ongoing increased focus on
	and strengthening of our credit policies and procedures,
	including modifying credit scoring models and requiring more
	forms of identification and deposits from more classes of
	customers;
|
| |  | $125 million and $35 million, or a 49%
	and a 35%, increase in expenses related to billing, collection,
	customer retention and customer care activities, including the
	costs associated with our fifth customer care center which
	commenced operations in January 2001 and our sixth customer
	care center which commenced operations in July  2001, as
	well as costs associated with the implementation of our new
	billing system, expected to be completed in mid-2002; and                        
|
| |  | $11 million increase and $7 million
	decrease in personnel, facilities and general corporate expenses.                                                                                                                                                                                                                                                                                                                                                                                                    

International general and administrative expenses
increased from the nine and three months ended
September 30, 2000 to the nine and three months ended
September 30, 2001 primarily due to an increase in billing
and customer care, information technology, facilities and other
general corporate expenses to support a growing customer base.
Additionally, international bad debt expense increased
$17 million and $9 million, or 142% and 300%, from the
nine and three months ended September 30, 2000 to the nine
and three months ended September 30, 2001 and has been
increasing as a percentage of revenues primarily as a result of
a weakening Brazilian economy.

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



| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing aggressive marketing and advertising
	campaigns designed to increase brand awareness in our
	traditional business and government markets, as well as to
	develop brand awareness in the non-business user market;                                                           
|
| |  | costs associated with operating recently acquired
	retail stores and opening additional retail stores in 2002;                                                                                                                                                                         
|
| |  | increasing commission and residual payments as we
	sell more handsets, partially offset by efforts to generate more
	handset sales through our lower cost distribution channels, such
	as company-owned retail stores, Internet sales through our
	website and telemarketing sales; and
|
| |  | increasing customer care costs as a result of our
	sixth customer care center, which is expected to become fully
	operational by the end of 2001.                                                                                                                                      

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Segment earnings (losses).

|                          |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |    |  
|------------------------- | ---------------- | --------------------- | ----- | ------------ |  | ------------- | -- | ------------ | - | ------------- | ---- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | -- | -- | -
|                          |                  |                       |       |              |  |               |    |              |   |              
|                          |                  |                       |       | % of         |  |               |    | % of         |   | Change from  
|                          |                  |                       |       | Consolidated |  |               |    | Consolidated |   | Previous Year
|                          |                  | September 30,         |       | Operating    |  | September 30, |    | Operating    |   |              
|                          |                  | 2001                  |       | Revenues     |  | 2000          |    | Revenues     |   | Dollars       |      | Percent
|                          |                  |                       |       |              |  |               |    |              |   |               |      |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Nine Months Ended         |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   
|                         
|                         
|                         
|                         
|Domestic earnings         |                  | $                     | 1,362 |              |  |               | 24 | %            |   | $             | 977  |         |  |  | 24 | %  |   | $ | 385 |     |  |  | 39 | % 
|                         
|                         
|                         
|                         
|International losses      |                  |                       | (96   | )            |  |               | (2 | )%           |   |               | (100 | )       |  |  | (2 | )% |   |   | 4   |     |  |  | 4  | % 
|                         
|                         
|                         
|                         
|Intercompany eliminations |                  |                       | (1    | )            |  |               |   |              |   |               |     |         |  |  |   |    |   |   | (1  | )   |  |  |   |   
|                          |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   
|                          | Segment earnings |                       | $     | 1,265        |  |               |    | 22           | % |               | $    | 877     |  |  |    | 22 | % |   | $   | 388 |  |  |    | 44 | %
|                          |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   
|Three Months Ended        |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   
|                         
|                         
|                         
|                         
|Domestic earnings         |                  | $                     | 526   |              |  |               | 26 | %            |   | $             | 392  |         |  |  | 26 | %  |   | $ | 134 |     |  |  | 34 | % 
|                         
|                         
|                         
|                         
|International losses      |                  |                       | (29   | )            |  |               | (1 | )%           |   |               | (33  | )       |  |  | (2 | )% |   |   | 4   |     |  |  | 12 | % 
|                          |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   
|                          | Segment earnings |                       | $     | 497          |  |               |    | 25           | % |               | $    | 359     |  |  |    | 24 | % |   | $   | 138 |  |  |    | 38 | %
|                          |                  |                       |       |              |  |               |    |              |   |               |      |         |  |  |    |    |   |   |     |     |  |  |    |   

We define segment earnings as operating income
(loss) before depreciation, amortization, restructuring and
impairment charges. Based on the current stage of development of
each of our reportable segments, most of our operating revenues
and identifiable assets as well as all of our segment earnings
pertains to our domestic operations. In the first quarter of
2001, our domestic segment earnings decreased as a percentage of
consolidated operating revenues as compared to the same period
in 2000 primarily due to customer acquisition, retention and
handset upgrade activities. As described in Future Capital
Needs and Resources, beginning in the second quarter of
2001, we initiated various actions resulting in reduced costs
and increased domestic segment earnings. As a result of these
actions, domestic segment earnings as a percentage of
consolidated operating revenues for each of the three months
ended September 30, 2001 and June 30, 2001 has
improved to 26% as compared to 20% for the three months ended
March 31, 2001. However, as the growth rate of our domestic
customer base has been declining throughout the year, continued
improvement in segment earnings as a percentage of consolidated
operating revenues may be dependent in part on our abilities to
achieve increased economies of scale, control costs and drive
greater sales growth through our lower cost distribution
channels. If general economic conditions worsen or if our new
handset offerings are not well received, we may continue to see
declines in demand for our product and service offerings, which
may adversely affect our domestic segment earnings. See
Forward Looking Statements.

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



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

20



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##### Table of Contents



Depreciation and
amortization.

|                   |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |     | 
|------------------ | ----------------------------- | --------------------- | ----- | ------------ |  | ------------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | --- | --- | 
|                   |                               |                       |       |              |  |               |    |              |   |              
|                   |                               |                       |       | % of         |  |               |    | % of         |   | Change from  
|                   |                               |                       |       | Consolidated |  |               |    | Consolidated |   | Previous Year
|                   |                               | September 30,         |       | Operating    |  | September 30, |    | Operating    |   |              
|                   |                               | 2001                  |       | Revenues     |  | 2000          |    | Revenues     |   | Dollars       |     | Percent
|                   |                               |                       |       |              |  |               |    |              |   |               |     |        
|                   |                               |                      
|                   |                               | (dollars in millions)
|Nine Months Ended  |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    
|                  
|                  
|                  
|                  
|Depreciation       |                               | $                     | 1,089 |              |  |               | 20 | %            |   | $             | 756 |         |  |  | 19 | %  |   | $ | 333 |     |  |  | 44% |    
|                  
|                  
|                  
|                  
|Amortization       |                               |                       | 181   |              |  |               | 3  | %            |   |               | 142 |         |  |  | 3  | %  |   |   | 39  |     |  |  | 27% |    
|                   |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    
|                   | Depreciation and amortization |                       | $     | 1,270        |  |               |    | 23           | % |               | $   | 898     |  |  |    | 22 | % |   | $   | 372 |  |  |     | 41% | 
|                   |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    
|Three Months Ended |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    
|                  
|                  
|                  
|                  
|Depreciation       |                               | $                     | 389   |              |  |               | 20 | %            |   | $             | 268 |         |  |  | 18 | %  |   | $ | 121 |     |  |  | 45% |    
|                  
|                  
|                  
|                  
|Amortization       |                               |                       | 60    |              |  |               | 3  | %            |   |               | 47  |         |  |  | 3  | %  |   |   | 13  |     |  |  | 28% |    
|                   |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    
|                   | Depreciation and amortization |                       | $     | 449          |  |               |    | 23           | % |               | $   | 315     |  |  |    | 21 | % |   | $   | 134 |  |  |     | 43% | 
|                   |                               |                       |       |              |  |               |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    

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

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

Restructuring and impairment charges,
interest and other.

|                                                          |  |                       |        |              |  |               |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|--------------------------------------------------------- |  | --------------------- | ------ | ------------ |  | ------------- | --- | ------------ |  | ------------- | ---- | ------- |  |  | --- | -- |  | - | ---- | - |  |  | --- | --
|                                                          |  |                       |        |              |  |               |     |              |  |              
|                                                          |  |                       |        | % of         |  |               |     | % of         |  | Change from  
|                                                          |  |                       |        | Consolidated |  |               |     | Consolidated |  | Previous Year
|                                                          |  | September 30,         |        | Operating    |  | September 30, |     | Operating    |  |              
|                                                          |  | 2001                  |        | Revenues     |  | 2000          |     | Revenues     |  | Dollars       |      | Percent
|                                                          |  |                       |        |              |  |               |     |              |  |               |      |        
|                                                          |  |                      
|                                                          |  | (dollars in millions)
|Nine Months Ended                                         |  |                       |        |              |  |               |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|                                                         
|                                                         
|                                                         
|                                                         
|Restructuring and impairment charges                      |  | $                     | (169   | )            |  |               | (3  | )%           |  | $             |     |         |  |  |    |    |  | $ | (169 | ) |  |  |    |   
|                                                         
|                                                         
|                                                         
|                                                         
|Interest expense                                          |  |                       | (1,071 | )            |  |               | (19 | )%           |  |               | (912 | )       |  |  | (22 | )% |  |   | (159 | ) |  |  | (17 | )%
|                                                         
|                                                         
|                                                         
|                                                         
|Interest income                                           |  |                       | 178    |              |  |               | 3   | %            |  |               | 298  |         |  |  | 7   | %  |  |   | (120 | ) |  |  | (40 | )%
|                                                         
|                                                         
|                                                         
|                                                         
|Equity in losses of unconsolidated affiliates             |  |                       | (69    | )            |  |               | (1  | )%           |  |               | (106 | )       |  |  | (3  | )% |  |   | 37   |   |  |  | 35  | % 
|                                                         
|                                                         
|                                                         
|                                                         
|Foreign currency transaction (losses) gains,
	net         |  |                       | (71    | )            |  |               | (1  | )%           |  |               | 9    |         |  |  |    |    |  |   | (80  | ) |  |  | NM  |   
|                                                         
|                                                         
|                                                         
|                                                         
|Reduction in fair value of available-for-sale
	securities |  |                       | (188   | )            |  |               | (3  | )%           |  |               |     |         |  |  |    |    |  |   | (188 | ) |  |  |    |   
|                                                         
|                                                         
|                                                         
|                                                         
|Other, net                                                |  |                       | (12    | )            |  |               |    |              |  |               | 4    |         |  |  |    |    |  |   | (16  | ) |  |  | NM  |   
|                                                         
|                                                         
|                                                         
|                                                         
|Income tax benefit                                        |  |                       | 47     |              |  |               | 1   | %            |  |               | 24   |         |  |  | 1   | %  |  |   | 23   |   |  |  | 96  | % 
|                                                         
|                                                         
|                                                         
|                                                         
|Extraordinary gain (loss)                                 |  |                       | 469    |              |  |               | 8   | %            |  |               | (104 | )       |  |  | (3  | )% |  |   | 573  |   |  |  | NM  |   
|                                                         
|                                                         
|                                                         
|                                                         
|Loss attributable to common stockholders                  |  |                       | (1,063 | )            |  |               | (19 | )%           |  |               | (963 | )       |  |  | (24 | )% |  |   | (100 | ) |  |  | (10 | )%

21



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##### Table of Contents



|                                                          |  |                       |      |              |  |               |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |      |   
|--------------------------------------------------------- |  | --------------------- | ---- | ------------ |  | ------------- | --- | ------------ |  | ------------- | ---- | ------- |  |  | --- | -- |  | - | ---- | - |  |  | ---- | --
|                                                          |  |                       |      |              |  |               |     |              |  |              
|                                                          |  |                       |      | % of         |  |               |     | % of         |  | Change from  
|                                                          |  |                       |      | Consolidated |  |               |     | Consolidated |  | Previous Year
|                                                          |  | September 30,         |      | Operating    |  | September 30, |     | Operating    |  |              
|                                                          |  | 2001                  |      | Revenues     |  | 2000          |     | Revenues     |  | Dollars       |      | Percent
|                                                          |  |                       |      |              |  |               |     |              |  |               |      |        
|                                                          |  |                      
|                                                          |  | (dollars in millions)
|Three Months Ended                                        |  |                       |      |              |  |               |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |      |   
|                                                         
|                                                         
|                                                         
|                                                         
|Impairment charge                                         |  | $                     | (147 | )            |  |               | (7  | )%           |  | $             |     |         |  |  |    |    |  | $ | (147 | ) |  |  |     |   
|                                                         
|                                                         
|                                                         
|                                                         
|Interest expense                                          |  |                       | (354 | )            |  |               | (18 | )%           |  |               | (333 | )       |  |  | (22 | )% |  |   | (21  | ) |  |  | (6   | )%
|                                                         
|                                                         
|                                                         
|                                                         
|Interest income                                           |  |                       | 43   |              |  |               | 2   | %            |  |               | 111  |         |  |  | 7   | %  |  |   | (68  | ) |  |  | (61  | )%
|                                                         
|                                                         
|                                                         
|                                                         
|Equity in losses of unconsolidated affiliates             |  |                       | (24  | )            |  |               | (1  | )%           |  |               | (35  | )       |  |  | (2  | )% |  |   | 11   |   |  |  | 31   | % 
|                                                         
|                                                         
|                                                         
|                                                         
|Foreign currency transaction (losses) gain,
	net          |  |                       | (16  | )            |  |               | (1  | )%           |  |               | 3    |         |  |  |    |    |  |   | (19  | ) |  |  | NM   |   
|                                                         
|                                                         
|                                                         
|                                                         
|Reduction in fair value of available-for-sale
	securities |  |                       | (188 | )            |  |               | (9  | )%           |  |               |     |         |  |  |    |    |  |   | (188 | ) |  |  |     |   
|                                                         
|                                                         
|                                                         
|                                                         
|Other, net                                                |  |                       | (1   | )            |  |               |    |              |  |               | 18   |         |  |  | 1   | %  |  |   | (19  | ) |  |  | (106 | )%
|                                                         
|                                                         
|                                                         
|                                                         
|Income tax benefit                                        |  |                       | 20   |              |  |               | 1   | %            |  |               | 8    |         |  |  | 1   | %  |  |   | 12   |   |  |  | 150  | % 
|                                                         
|                                                         
|                                                         
|                                                         
|Extraordinary gain                                        |  |                       | 469  |              |  |               | 24  | %            |  |               |     |         |  |  |    |    |  |   | 469  |   |  |  |     |   
|                                                         
|                                                         
|                                                         
|                                                         
|Loss attributable to common stockholders                  |  |                       | (209 | )            |  |               | (10 | )%           |  |               | (236 | )       |  |  | (15 | )% |  |   | 27   |   |  |  | 11   | % 





---

NMNot Meaningful


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

In connection with Nextel Internationals
continuing efforts to tailor its operations to more closely
align with anticipated sources of financing, and following its
most recent review of economic conditions, operating performance
and other relevant factors relating to its Philippine operating
company, Nextel International decided to discontinue incremental
funding to its Philippine operating company during the third
quarter of 2001. As a result, Nextel International recognized a
pretax impairment charge of $147 million in the third
quarter of 2001.

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

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

The decrease in equity in losses of
unconsolidated affiliates from the nine months ended
September 30, 2000 to the nine months ended
September 30, 2001 is due to $6 million of decreased
losses attributable to our equity method investment in Nextel
Partners, Inc. The remaining decrease is attributable to
our Philippine affiliate, which we began consolidating in the
third quarter of 2000, and to our Japanese investment, which was
written off in the fourth quarter of 2000. The decrease in
equity in losses of unconsolidated affiliates from the three
months ended September 30, 2000 to the three months ended
September 30, 2001 is due to decreased

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losses in our Japanese investment of $14 million
offset by $3 million of increased losses attributable to
our equity method investment in Nextel Partners.


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

On September 30, 2001, Nextel International
recognized a $188 million reduction in fair value of its
investment in TELUS Corporation, as Nextel International
determined the decline in fair value of this investment to be
other-than-temporary.

The extraordinary gain in 2001 relates to the
purchase by Nextel Communications, Inc. of some of Nextel
Internationals senior notes during the third quarter of
2001. The extraordinary loss in 2000 relates to the early
retirement of some of our senior notes during the first quarter
of 2000.

Liquidity and Capital Resources

We had losses attributable to common stockholders
of $1.06 billion for the nine months ended
September 30, 2001 and $963 million for the nine
months ended September 30, 2000. The operating expenses and
capital expenditures associated with developing, enhancing and
operating our digital mobile networks have more than offset
operating revenues. Our anticipated capital expenditures, debt
service obligations and operating expenses are expected to
continue to more than offset operating revenues for the next
several years. We have consistently used external sources of
funds, primarily from debt incurrences and equity issuances, to
fund capital expenditures, acquisitions and other nonoperating
needs.

Cash Flows.Net cash provided by operating activities of $772 million
during the nine months ended September 30, 2001 improved by
$167 million compared to net cash provided by operating
activities of $605 million during the nine months ended
September 30, 2000. This improvement in net cash provided
by operating activities is primarily attributable to domestic
operations, reflecting improved domestic performance resulting
from the economies of scale achieved from the growth in our
customer base.

Capital expenditures to fund the continued
expansion and enhancement of our digital mobile networks
continue to represent the largest use of our funds for investing
activities. Net cash used in investing activities of $2.64
billion during the nine months ended September 30, 2001
decreased as compared to $4.2 billion during the nine
months ended September 30, 2000 primarily due to:



| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $2.51 billion increase in net proceeds
	from short-term investing activities as compared to
	$1.58 billion in net cash used to purchase short-term
	investments in 2000; offset by
|
| |  | a $374 million increase in cash paid for
	capital expenditures;                                                                                                                     
|
| |  | a $288 million increase in cash paid for
	licenses, acquisitions and other investments; and                                                                                         
|
| |  | a $287 million decrease in proceeds from
	sales of assets primarily attributable to the sale-leaseback
	transaction in 2000 involving some of our owned switch equipment.           

Cash payments for capital expenditures totaled
$2.67 billion during the nine months ended
September 30, 2001 and $2.3 billion during the nine
months ended September 30, 2000, including
$489 million during 2001 and $277 million during 2000
for international capital expenditures. Cash paid for capital
expenditures during the nine months ended September 30,
2001 increased primarily due to an increase in network
construction activity resulting in an increase in the number of
switches and transmitter and receiver sites and related
equipment placed in service in our international operations in
2001 compared to 2000. The increase in cash

23



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##### Table of Contents



paid for licenses, acquisitions and other
investments is primarily due to $405 million paid in 2001
to Arch Wireless, Mobex and Motorola for the acquisition of
800 MHz and 900 MHz licenses and related assets, as
well as $32 million to Lets Talk Cellular &
Wireless, Inc. for the purchase of retail stores. The
increase was offset by a decrease in international acquisition
activities as a result of $252 million used in 2000 for
acquisitions in Brazil, Peru and Chile.


Net cash provided by financing activities of
$2.3 billion during 2001 consisted primarily of
$2.22 billion in net proceeds from the private placement of
our 9.5% senior serial redeemable notes due 2011 and our 6%
convertible senior notes due 2011. Net cash provided by
financing activities of $2.55 billion during 2000 was
primarily attributable to $1.75 billion in net proceeds
from the sale of debt securities and $1.85 billion in
proceeds from borrowings under our domestic bank credit
facility, offset by $1.21 billion for the retirement of
debt securities.

Future Capital Needs and Resources

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



| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the expansion and enhancement of our domestic
	digital mobile network, including potential payments in
	connection with any implementation of enhancements to our
	existing iDEN technology to increase voice capacity and deliver
	packet data service at higher speeds;
|
| |  | operating expenses relating to our domestic
	digital mobile network;                                                                                                                                                                                                     
|
| |  | potential acquisitions, including any negotiated
	acquisitions, of spectrum from third parties and any future
	governmental auctions of spectrum;                                                                                                                        
|
| |  | debt service requirements; and                                                                                                                                                                                                                                           
|
| |  | other general corporate expenditures.                                                                                                                                                                                                                                    

We anticipate that our cash utilization for
capital expenditures and other investing activities will
continue to exceed our positive cash flows from domestic
operating activities through the remainder of 2001 and 2002, as
we build out, expand and enhance our digital mobile network. See
Forward Looking Statements.

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



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

As a result of these factors, domestic operating
costs decreased as a percentage of operating revenues and
segment earnings improved in the second and third quarters of
2001 as compared to the first quarter. However, we cannot be
sure that our actions will continue to be successful in further
improving domestic segment earnings during the fourth quarter of
2001. See Forward Looking Statements.

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As of September 30, 2001, our domestic bank
credit facility provided for total secured financing capacity of
up to $6.0 billion, subject to the satisfaction or waiver
of applicable borrowing conditions. This facility consists of a
$1.5 billion revolving loan and $4.5 billion in term
loans that mature over a period from December 31, 2007 to
March 31, 2009. At September 30, 2001, the entire
$4.5 billion of term loans available under our bank credit
facility was outstanding. Amounts outstanding under this bank
credit facility are secured by liens on assets of substantially
all our domestic subsidiaries and bear interest payable
quarterly at an adjustable rate calculated based either on the
U.S. prime rate or the U.S. London Interbank Offered Rate, or
LIBOR. The maturity dates of the loans can accelerate if the
aggregate amount of specified debt obligations that mature
before June 30, 2009, including the redemption price of
redeemable stock that is mandatorily redeemable before
June 30, 2009, exceed specified amounts. However, no such
acceleration would occur if the long-term debt rating for
specified outstanding and unsecured indebtedness of Nextel is at
least BBB- by Standard & Poors Ratings Services or Baa3
by Moodys Investors Service, Inc. The availability of
financing under this bank credit facility is subject to
requirements under the indentures governing our public notes and
the terms applicable to some of our preferred stock. As of
September 30, 2001, we were able to access the entire
$6.0 billion available under our bank credit agreement in
compliance with our financial ratio tests, the debt incurrence
covenants contained in our indentures and the relevant terms of
applicable issues of preferred stock.

We are currently in the early stages of
developing our detailed business plans and related budgets for
calendar year 2002. We are not likely to finalize these
processes and the resulting detailed business plans and related
budgets until late 2001 or early 2002. Moreover, we may later
revise any such plans and budgets in light of competitive
factors in the relevant markets, new business opportunities,
including additional spectrum acquisitions and other strategic
or opportunistic transactions or investments, prevailing
conditions in domestic and international debt and equity capital
markets and the actual operating results and apparent prospects
of our business.

We anticipate that 2001 domestic capital
expenditures will be roughly comparable to 2000 domestic capital
expenditures and therefore expect to increase the level of
domestic capital expenditures during the fourth quarter of 2001
as compared to the third quarter. In the future, our domestic
capital spending is expected to be driven by several factors
including:



| |   |                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the contemplated construction of additional
	transmitter and receiver sites to increase system capacity and
	maintain system quality and the installation of related
	switching equipment in the existing domestic core market
	coverage areas;
|
| |  | the contemplated enhancement of our digital
	mobile network coverage around most major domestic market areas;                                                                                                                                  
|
| |  | the contemplated enhancements to our existing
	iDEN technology to increase voice capacity and deliver packet
	data service at higher speeds; and                                                                                               
|
| |  | any future enhancement of our digital mobile
	network by employing contemplated 3G technology.                                                                                                                                               

We have historically provided Nextel
International with significant financial support. In April and
July 2001, through a wholly owned subsidiary, we
contributed an aggregate of $500 million to Nextel
International in exchange for 5,000 shares of its series A
exchangeable redeemable preferred stock. Nextel International
will require a significant amount of capital to fund its
operations and any planned network build-out for at least the
next several years. However, Nextel International has advised us
that, based upon its current capital commitments and anticipated
cash needs, Nextel International presently has available cash
resources to fund its operations only through the remainder of
2001.

In view of Nextel Internationals currently
available cash resources and its lack of funding sources, Nextel
International has determined to pursue a less aggressive growth
strategy that targets conservation of cash resources by slowing
enhancement and expansion of its networks and reducing
subscriber growth and operating expenses. Nextel International
is exploring various potential sources of financing, including
public or private debt or equity financing and sales of
non-strategic assets, including potential sale-leaseback transac-

25



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##### Table of Contents



tions, to meet its current and future funding
requirements. We cannot be sure Nextel International will be
successful in achieving its cash conservation targets. Further,
we cannot be sure that Nextel International will be successful
in raising sufficient additional funds to finance its operations
at the time additional funds will be needed or at all. See
Forward Looking Statements.


If Nextel International cannot obtain sufficient
funds when needed or successfully restructure its indebtedness
and other financial obligations, it may be required to sell
strategic assets, reorganize under applicable law or take other
measures. In addition, in these events, it may be required to
write-down the carrying values of its long-lived assets,
including property, plant and equipment, licenses, goodwill and
other intangible assets, to their estimated fair values, which
may have a material adverse impact on our consolidated financial
position and results of operations. Although we have no legal
obligation to make any investments in, or otherwise advance
funds to, Nextel International, to the extent Nextel
International is unable to obtain necessary funding from other
sources, we may provide Nextel International with funds of up to
$250 million, but any such investment will be conditioned
on, among other matters, Nextel Internationals ability to
complete a satisfactory restructuring of its indebtedness and
other financial obligations and Nextel Internationals
obtaining additional funding from other sources, including sales
of non-strategic assets. Any funding that we elect to provide to
Nextel International may reduce the amount of funding available
for our domestic operations.

Based on available cash resources and the
anticipated cash needs of our operations for capital
expenditures and acquisitions and the anticipated operating cash
flow of our wireless businesses, we believe that we will be able
to fully fund our domestic operations through calendar year
2002. See Forward Looking Statements. In making this
assessment, we have considered:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | consolidated cash, cash equivalents and
	short-term investments on hand as of September 30, 2001 of
	$4.23 billion;            
|
| |  | the availability of $1.5 billion of
	incremental funding over the amounts outstanding under our
	domestic bank credit facility;
|
| |  | the anticipated level of domestic capital
	expenditures during the remainder of 2001 and 2002;                                 
|
| |  | our domestic debt service requirements during the
	remainder of 2001 and 2002; and                                             
|
| |  | the potential investment of up to
	$250 million into Nextel International.                                                     

If our business plans change, or if economic
conditions in any of our markets generally or competitive
practices in the mobile wireless telecommunications industry
change materially from those currently prevailing or from those
now anticipated, or if other presently unexpected circumstances
are encountered that have a material effect on the cash flow or
profitability of the mobile wireless businesses conducted by us,
the anticipated cash needs of our businesses, and the
conclusions as to the adequacy of the available sources, each
also could change significantly. Finally, our conclusion that we
will be able to fully fund our domestic operations through 2002
does not take into account the impact of our participation in
any auctions for the purchase of licenses other than those
already concluded or any significant acquisition transactions or
the pursuit of any significant new business opportunities other
than those currently being pursued by us. Any acquisition or new
business opportunity could involve significant additional
funding needs in excess of the identified currently available
sources, and could require us to raise additional equity and
debt funding to meet those needs.

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

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



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

We have had and may in the future have
discussions with third parties regarding potential equity
investments and debt financing arrangements to satisfy actual or
anticipated financing needs. At present, other than the existing
equity or debt financing arrangements that have been consummated
or are described in this quarterly report, we have no legally
binding commitments or understandings with any third parties to
obtain any material amount of equity or debt financing. Our
ability to incur additional indebtedness, including, in certain
circumstances, indebtedness incurred under our domestic bank
credit agreement, is and will be limited by the terms of our
financing agreements and the terms of some series of our
outstanding preferred stock.

Forward Looking Statements

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



|  |                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | general economic conditions in the geographic
	areas and occupational market segments that we are targeting for
	our digital mobile network service;                                                 
| 
| | the availability of adequate quantities of system
	infrastructure and subscriber equipment and components to meet
	service deployment and marketing plans and customer demand;                       
| 
| | the availability and cost of acquiring additional
	spectrum;                                                                                                                                         
| 
| | the timely development and availability of new
	handsets with expanded applications and features;                                                                                                    
| 
| | the success of efforts to improve and
	satisfactorily address any issues relating to our digital mobile
	network performance;                                                                        
| 
| | the successful implementation and performance of
	the technology being deployed or to be deployed in our various
	market areas, including technologies relating to our Nextel
	Wireless Web services;
| 
| | market acceptance of our new handset and service
	offerings, including our Nextel Wireless Web services and Nextel
	Worldwide;                                                                       
| 
| | the timely delivery and successful implementation
	of new technologies deployed in connection with any future
	enhanced iDEN or third generation (3G) services we
	may offer;                      
| 
| | the ability to achieve market penetration and
	average subscriber revenue levels sufficient to provide
	financial viability to our digital mobile network business;                                  

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##### Table of Contents





|  |                                                                                                                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | our ability to timely and successfully accomplish
	required scale-up of our billing, collection, customer care and
	similar back-office operations to keep pace with customer
	growth, increased system usage rates and growth in levels of
	accounts receivables being generated by the digital mobile
	network customer base;



| |   |                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | access to sufficient debt or equity capital to
	meet operating and financing needs;                                                                                                                                                                                                                                                                                                      
|
| |  | the quality and price of similar or comparable
	wireless communications services offered or to be offered by our
	competitors, including providers of cellular and personal
	communication services;                                                                                                                                                                                     
|
| |  | legislation or regulatory actions relating to
	specialized mobile radio services, other wireless communications
	services or telecommunications generally; and                                                                                                                                                                                                                           
|
| |  | other risks and uncertainties described from time
	to time in our reports and, with specific reference to risk
	factors relating to international operations, in Nextel
	Internationals reports, filed with the Securities and
	Exchange Commission, including our annual reports on
	Form 10-K for the year ended December 31, 2000 and our
	subsequent quarterly reports on Form 10-Q.




Item 3.  Quantitative and
Qualitative Disclosures about Market Risk.

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

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

As of September 30, 2001, we held
$1.19 billion of short-term investments consisting of debt
securities in the form of commercial paper and corporate bonds.
As the weighted average maturity from the date of purchase was
less than five months, these short-term investments do not
expose us to a significant amount of interest rate risk.

As of September 30, 2001, the fair value of
our investments in the common stock of publicly traded companies
totaled $189 million. These investments are reported at
their fair values in our financial statements. Negative
fluctuations in the stock prices of these companies expose us to
equity price risks. A 10% decline in their stock price would
result in a $19 million decrease in the fair value of our
investments in these public companies.

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

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interest rate swap agreements, the table presents
notional amounts and the related reference interest rates by
year of maturity. Fair values included in this section have been
determined based on:




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

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

|                                                                                                   |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       |  
|-------------------------------------------------------------------------------------------------- | --------------------- | -------------------------- | - | ---- | - | ---- | - | ---- | - | ---- | - | ---------- | - | ----- | - | ---------- | - |  | - | --- | - |  | - | ------ | - |  | - | ------ | - |  | - | ----- | -
|                                                                                                   |                       |                            |   |      |   |     
|                                                                                                   |                       | Year of Maturity           |   |      |   |     
|                                                                                                   |                       |                            |   |      |   |     
|                                                                                                   |                       | 2001                       |   | 2002 |   | 2003 |   | 2004 |   | 2005 |   | Thereafter |   | Total |   | Fair Value
|                                                                                                   |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |           
|                                                                                                   |                       |                           
|                                                                                                   |                       | (U.S. dollars in millions)
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|I. Interest Rate Sensitivity                                                                       |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|Long-Term Debt, Capital Lease and Finance
	Obligations and Mandatorily Redeemable Preferred
	Stock |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Fixed Rate            |                            | $ | 20   |   |      | $ | 101  |   |      | $ | 108        |   |       | $ | 107        |   |  | $ | 95  |   |  | $ | 14,190 |   |  | $ | 14,621 |   |  | $ | 7,868 |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 9    | % |      |   | 9    | % |      |   | 9          | % |       |   | 9          | % |  |   | 9   | % |  |   | 10     | % |  |   | 10     | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable Rate         |                            | $ | 9    |   |      | $ | 122  |   |      | $ | 418        |   |       | $ | 421        |   |  | $ | 508 |   |  | $ | 3,539  |   |  | $ | 5,017  |   |  | $ | 5,017 |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 8    | % |      |   | 7    | % |      |   | 7          | % |       |   | 7          | % |  |   | 7   | % |  |   | 7      | % |  |   | 7      | % |  |   |       |  
|Interest Rate Swaps                                                                                |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable to Fixed (1) |                            | $ |     |   |      | $ |     |   |      | $ |           |   |       | $ |           |   |  | $ |    |   |  | $ | 570    |   |  | $ | 570    |   |  | $ | (97   | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Pay Rate      |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 8      | % |  |   | 8      | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Receive Rate  |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 4      | % |  |   | 4      | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable to Variable  |                            | $ |     |   |      | $ |     |   |      | $ | 400        |   |       | $ |           |   |  | $ |    |   |  | $ |       |   |  | $ | 400    |   |  | $ | (14   | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Pay Rate      |                            |   |     |   |      |   |     |   |      |   | 6          | % |       |   |           |   |  |   |    |   |  |   |       |   |  |   | 6      | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Receive Rate  |                            |   |     |   |      |   |     |   |      |   | 4          | % |       |   |           |   |  |   |    |   |  |   |       |   |  |   | 4      | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Fixed to Variable     |                            | $ |     |   |      | $ |     |   |      | $ |           |   |       | $ |           |   |  | $ |    |   |  | $ | 500    |   |  | $ | 500    |   |  | $ | 33    |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Pay Rate      |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 7      | % |  |   | 7      | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Receive Rate  |                            |   |     |   |      |   |     |   |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 10     | % |  |   | 10     | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|II. Foreign Exchange Rate
	Sensitivity                                                             |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|Long-Term Debt                                                                                     |                       |                            |   |      |   |      |   |      |   |      |   |            |   |       |   |            |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Fixed Rate            |                            | $ |     |   |      | $ | 1    |   |      | $ |           |   |       | $ |           |   |  | $ |    |   |  | $ | 1,475  |   |  | $ | 1,476  |   |  | $ | 275   |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   |     |   |      |   | 14   | % |      |   |           |   |       |   |           |   |  |   |    |   |  |   | 13     | % |  |   | 13     | % |  |   |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Variable Rate         |                            | $ | 8    |   |      | $ | 74   |   |      | $ | 219        |   |       | $ | 94         |   |  | $ | 75  |   |  | $ | 28     |   |  | $ | 498    |   |  | $ | 498   |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Average Interest Rate |                            |   | 8    | % |      |   | 8    | % |      |   | 8          | % |       |   | 9          | % |  |   | 9   | % |  |   | 9      | % |  |   | 8      | % |  |   |       |  




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

29



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##### Table of Contents






PART II  OTHER INFORMATION.




Item 1.  Legal
Proceedings.

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




Item 2.  Changes in Securities
and Use of Proceeds.

In July 2001, various members of the McCaw
family (and entities affiliated with them) who previously were
members of Digital Radio, L.L.C., an affiliate of
Craig O. McCaw, exercised in full options to purchase an
aggregate of 10 million shares of our class A common stock
for an aggregate purchase price of about $108 million.
These shares were issued pursuant to the exemption of
Section 4(2) of the Securities Act in reliance upon
representations of the relevant purchasers.

In August 2001, we issued 21,577,098 shares
of our class A common stock in exchange for an aggregate of
$422 million principal amount of Nextel
Internationals 13% senior redeemable discount notes due
2007, $241 million principal amount of Nextel
Internationals 12.125% senior serial redeemable discount
notes due 2008, and $194 million principal amount of Nextel
Internationals 12.75% senior serial redeemable notes due
2010. These shares were issued in private placements exempt
under Section 4(2) of the Securities Act in reliance upon
representations of the exchanging note holders.




Item 5.  Other
Information.

On June 22, 2001, the United States Court of
Appeals for the District of Columbia Circuit found that the
cancellation by the Federal Communications Commission, or FCC,
of personal communications services licenses formerly belonging
to Next Wave Communications, Inc. was improper, and on
August 31, 2001, the FCC reinstated the licenses. The FCC
has appealed the courts decision to the United States
Supreme Court and has been discussing various settlement
alternatives with NextWave. Until the litigation is complete or
a settlement is reached, the status of those licenses is
uncertain.

On October 12, 2001, the FCC approved our
plan for the provision of wireless enhanced 911 location
information. We have been granted additional time for the
initial rollout of a handset-based enhanced 911 technology and
have until the end of 2005 to complete deployment of enhanced
911 capable handsets.

On October 15, 2001, the FCC announced that
the auction of 700 MHz spectrum will be held on
June 19, 2002, thus allowing wireless carriers access to
spectrum expected to be used for 3G technology and other
advanced services.

On November 8, 2001, the FCC voted to
eliminate the limit on spectrum holdings effective
January 1, 2003. In the interim, the FCC also raised the
limit to 55 MHz in all markets effective until
January 1, 2003.




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

(a)  Inapplicable

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



| |    |                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Current report on Form 8-K dated and filed
	on July 24, 2001 reporting under Item 5 the
	announcement of our financial results and other data for the
	quarter ended June 30, 2001.                         
|
| | 2. | Current report on Form 8-K dated and filed
	on August 27, 2001 reporting under Item 5 the
	announcement of our agreement to purchase outstanding senior
	notes of our subsidiary, Nextel International, Inc.
|
| | 3. | Current report on Form 8-K dated and filed
	on September 7, 2001 reporting under Item 5 the
	announcement of certain financial and other information.                                                       

30



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##### Table of Contents






SIGNATURE

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



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



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

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

Date:  November 14, 2001


31