##### 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 March 31,
    2002
|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 April 17, 2002           
|                                                     |  |                             
|Class A Common Stock, $0.001 par value               |  |                              | 779,238,249 | 
|Class B Nonvoting Common Stock, $0.001 par
    value |  |                              | 35,660,000  | 



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TABLE OF CONTENTS



|                                                |                                                                                                |                                                                        |  |  |  |  |  | 
|----------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION.               
|                                                | Item 1. Financial Statements -- Unaudited.                                                    
|                                                |                                                                                                | Condensed Consolidated Balance Sheets                                 
|                                                |                                                                                                | Condensed Consolidated Statements of Operations and Comprehensive Loss
|                                                |                                                                                                | Condensed Consolidated Statement of Changes in Stockholders Deficit  
|                                                |                                                                                                | 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 3. Defaults Upon Senior Securities.                                                      
|                                                | Item 6. Exhibits and Reports on Form 8-K.                                                     
|Amendment to iDEN Subscriber Supply Agreement  
|Amendment to Availability/Outage Goals for 2002



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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 March
    31, 2002 and December 31, 2001                                              |  |  | 3  | 
| |          |  |  |                        |  | Condensed Consolidated Statements of Operations
    and Comprehensive Loss For the Three Months Ended March 31, 2002
    and 2001 |  |  | 4  | 
| |          |  |  |                        |  | Condensed Consolidated Statement of Changes in
    Stockholders Deficit For the Three Months Ended March 31,
    2002            |  |  | 5  | 
| |          |  |  |                        |  | Condensed Consolidated Statements of Cash Flows
    For the Three Months Ended March 31, 2002 and 2001                            |  |  | 6  | 
| |          |  |  |                        |  | Notes to Condensed Consolidated Financial
    Statements                                                                          |  |  | 7  | 
| |          |  |  | Item 2.                |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                         |  |  | 15 | 
| |          |  |  | Item 3.                |  | Quantitative and Qualitative Disclosures about
    Market Risk                                                                    |  |  | 29 | 
| | Part  II |  |  | Other Information.    
| |          |  |  | Item 1.                |  | Legal Proceedings                                                                                                                 |  |  | 31 | 
| |          |  |  | Item 3.                |  | Defaults Upon Senior Securities                                                                                                   |  |  | 31 | 
| |          |  |  | Item 6.                |  | Exhibits and Reports on Form 8-K                                                                                                  |  |  | 31 | 



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##### Table of Contents






PART I  FINANCIAL INFORMATION.




Item 1.     Financial
Statements  Unaudited.

NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES






Condensed Consolidated Balance
Sheets


As of March 31, 2002 and
December 31, 2001


(in millions)


Unaudited


|                                                                                           |                                                                                          |                             |        |        |        |   |        |        |        |  
|------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------- | --------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                                                           |                                                                                          | 2002                        |        | 2001  
|                                                                                           |                                                                                          |                             |        |       
|ASSETS                                                                                    
|Current assets                                                                             |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           | Cash and cash equivalents, of which $153 and $250
    is restricted                      |                             | $      | 1,915  |        |   | $      | 2,481  |       
|                                                                                           | Restricted cash of NII Holdings held in escrow                                           |                             |        | 69     |        |   |        | 84     |       
|                                                                                           | Short-term investments                                                                   |                             |        | 1,306  |        |   |        | 1,236  |       
|                                                                                           | Accounts and notes receivable, less allowance for
    doubtful accounts of $165 and $167 |                             |        | 1,076  |        |   |        | 1,129  |       
|                                                                                           | Handset and accessory inventory                                                          |                             |        | 240    |        |   |        | 260    |       
|                                                                                           | Prepaid expenses and other current assets                                                |                             |        | 563    |        |   |        | 533    |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | Total current assets        |        |        | 5,169  |   |        |        | 5,723  |  
|Investments                                                                                |                                                                                          |                             | 131    |        |        |   | 188    |       
|Property, plant and equipment,net of accumulated depreciation of
    $4,054 and $3,667     |                                                                                          |                             | 9,428  |        |        |   | 9,274  |       
|Intangible assets and other,net of accumulated amortization of $51
    and $1,121 (note 1) |                                                                                          |                             | 6,927  |        |        |   | 6,067  |       
|Other assets                                                                               |                                                                                          |                             | 803    |        |        |   | 812    |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | $                           | 22,458 |        |        | $ | 22,064 |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|LIABILITIES AND STOCKHOLDERS
    DEFICIT                                                 
|Current liabilities                                                                        |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           | Accounts payable                                                                         |                             | $      | 494    |        |   | $      | 756    |       
|                                                                                           | Accrued expenses and other                                                               |                             |        | 1,680  |        |   |        | 1,470  |       
|                                                                                           | Due to related parties                                                                   |                             |        | 287    |        |   |        | 341    |       
|                                                                                           | Current portion of long-term debt, capital lease
    and finance obligations             |                             |        | 197    |        |   |        | 145    |       
|                                                                                           | Debt of NII Holdings, nonrecourse to and not held
    by parent (note 3)                 |                             |        | 1,887  |        |   |        | 1,865  |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | Total current liabilities   |        |        | 4,545  |   |        |        | 4,577  |  
|Long-term debt                                                                             |                                                                                          |                             | 13,840 |        |        |   | 13,815 |       
|Capital lease and finance
    obligations                                                  |                                                                                          |                             | 887    |        |        |   | 905    |       
|Deferred income taxes                                                                      |                                                                                          |                             | 1,581  |        |        |   | 669    |       
|Deferred revenues and other                                                                |                                                                                          |                             | 638    |        |        |   | 566    |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | Total liabilities           |        |        | 21,491 |   |        |        | 20,532 |  
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|Contingencies (note 5)                                                                     |                                                                                          |                             |        |        |        |   |        |       
|Mandatorily redeemable preferred
    stock                                                 |                                                                                          |                             | 2,177  |        |        |   | 2,114  |       
|Stockholders deficit                                                                      |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           | Convertible preferred stock, 5 and 8 shares
    issued and outstanding                   |                             |        | 191    |        |   |        | 283    |       
|                                                                                           | Common stock, class A, 778 and 763 shares issued
    and outstanding                     |                             |        | 1      |        |   |        | 1      |       
|                                                                                           | Common stock, class B, nonvoting convertible, 36
    shares issued and outstanding       |                             |        |       |        |   |        |       |       
|                                                                                           | Paid-in capital                                                                          |                             |        | 8,615  |        |   |        | 8,581  |       
|                                                                                           | Accumulated deficit                                                                      |                             |        | (9,770 | )      |   |        | (9,179 | )     
|                                                                                           | Deferred compensation, net                                                               |                             |        | (14    | )      |   |        | (17    | )     
|                                                                                           | Accumulated other comprehensive loss                                                     |                             |        | (233   | )      |   |        | (251   | )     
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | Total stockholders deficit |        |        | (1,210 | ) |        |        | (582   | )
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       
|                                                                                           |                                                                                          | $                           | 22,458 |        |        | $ | 22,064 |       
|                                                                                           |                                                                                          |                             |        |        |        |   |        |       

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

3



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES




Condensed Consolidated Statements of
Operations and Comprehensive Loss

For the Three Months Ended March 31, 2002
and 2001


(in millions, except per share
amounts)


Unaudited


|                                                                          |                                                           |                                                                    |       |      |    |   |       |      |     |  
|------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------------------------ | ----- | ---- | -- | - | ----- | ---- | --- | -
|                                                                          |                                                           | 2002                                                               |       | 2001
|                                                                          |                                                           |                                                                    |       |     
|Operating revenues                                                        |                                                           | $                                                                  | 2,155 |      |    | $ | 1,742 |     
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Operating expenses                                                        |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          | Cost of revenues                                          |                                                                    |       | 736  |    |   |       | 698  |    
|                                                                          | Selling, general and administrative                       |                                                                    |       | 809  |    |   |       | 726  |    
|                                                                          | Restructuring and other charges                           |                                                                    |       | 40   |    |   |       |     |    
|                                                                          | Depreciation and amortization                             |                                                                    |       | 399  |    |   |       | 394  |    
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          |                                                           |                                                                    | 1,984 |      |    |   | 1,818 |     
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Operating income (loss)                                                   |                                                           |                                                                    | 171   |      |    |   | (76   | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Other income (expense)                                                    |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          | Interest expense                                          |                                                                    |       | (326 | )  |   |       | (358 | )  
|                                                                          | Interest income                                           |                                                                    |       | 16   |    |   |       | 79   |    
|                                                                          | Equity in losses of unconsolidated affiliates             |                                                                    |       | (25  | )  |   |       | (21  | )  
|                                                                          | Foreign currency transaction losses, net                  |                                                                    |       | (72  | )  |   |       | (10  | )  
|                                                                          | Other, net                                                |                                                                    |       | (2   | )  |   |       |     |    
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          |                                                           |                                                                    | (409  | )    |    |   | (310  | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Loss before income tax
    (expense) benefit                              |                                                           |                                                                    | (238  | )    |    |   | (386  | )   
|Income tax (expense) benefit (note
    1)                                 |                                                           |                                                                    | (353  | )    |    |   | 14    |     
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Net loss                                                                  |                                                           |                                                                    | (591  | )    |    |   | (372  | )   
|Mandatorily redeemable preferred stock
    dividends                      |                                                           |                                                                    | (63   | )    |    |   | (56   | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Loss attributable to common
    stockholders                              |                                                           | $                                                                  | (654  | )    |    | $ | (428  | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Loss per share attributable to common
    stockholders, basic and diluted |                                                           | $                                                                  | (0.82 | )    |    | $ | (0.56 | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Weighted average number of common shares
    outstanding                  |                                                           |                                                                    | 801   |      |    |   | 764   |     
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|Comprehensive loss, net of income
    tax                                 |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          | Unrealized loss on available-for-sale securities,
    net |                                                                    | $     | (20  | )  |   | $     | (162 | )  
|                                                                          | Foreign currency translation adjustment                   |                                                                    |       | 26   |    |   |       | (46  | )  
|                                                                          | Cash flow hedge:                                          |                                                                    |       |      |    |   |       |      |    
|                                                                          |                                                           | Cumulative effect of accounting change for cash
    flow hedge     |       |      |   |   |       |      | (20 | )
|                                                                          |                                                           | Reclassification of transition adjustment
    included in net loss |       |      | 2  |   |       |      | 2   |  
|                                                                          |                                                           | Unrealized gain (loss) on cash flow hedge                          |       |      | 10 |   |       |      | (12 | )
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          | Other comprehensive income (loss)                         |                                                                    |       | 18   |    |   |       | (238 | )  
|                                                                          | Net loss                                                  |                                                                    |       | (591 | )  |   |       | (372 | )  
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     
|                                                                          |                                                           | $                                                                  | (573  | )    |    | $ | (610  | )   
|                                                                          |                                                           |                                                                    |       |      |    |   |       |     

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 Deficit


For the Three Months Ended March 31,
2002


(in millions)


Unaudited


|                         |                                                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        |      |   |   |     |   |  |   |      |    |  |   |        |      |   | 
|------------------------ | ------------------------------------------------ | ----------------------------- | - | ------------ | -- | ------------ | --- | ------- | --- | ----------- | --- | -------- | -- | ------------- | - | ------- | - | ------------ | -- | ------------- |  | ----- | - |  |  | - | ----- | --- | -- | - | ------ | ---- | - | - | --- | - |  | - | ---- | -- |  | - | ------ | ---- | - | 
|                         |                                                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |        
|                         |                                                  | Convertible                   |   | Class A      |    | Class B      |     |         |     |             |     |          |    | Accumulated   |   |        
|                         |                                                  | Preferred Stock               |   | Common Stock |    | Common Stock |     |         |     |             |     |          |    | Other         |   |        
|                         |                                                  |                               |   |              |    |              |     | Paid-in |     | Accumulated |     | Deferred |    | Comprehensive |   |        
|                         |                                                  | Shares                        |   | Amount       |    | Shares       |     | Amount  |     | Shares      |     | Amount   |    | Capital       |   | Deficit |   | Compensation |    | (Loss) Income |  | Total
|                         |                                                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |      
|Balance, January 1, 2002 |                                                  |                               | 8 |              |    | $            | 283 |         |     |             | 763 |          |    | $             | 1 |         |   |              | 36 |               |  | $     |  |  |  | $ | 8,581 |     |    | $ | (9,179 | )    |   | $ | (17 | ) |  | $ | (251 | )  |  | $ | (582   | )   
|                         | Net loss                                         |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        | (591 | ) |   |     |   |  |   |      |    |  |   |        | (591 | )
|                         | Other comprehensive income                       |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        |      |   |   |     |   |  |   |      | 18 |  |   |        | 18   |  
|                         | Issuance of common stock:                        |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        |      |   |   |     |   |  |   |      |    |  |   |        |      |  
|                         |                                                  | Conversion of preferred stock |   |              | (3 | )            |     |         | (92 | )           |     |          | 15 |               |   |         |  |              |    |               |  |       |   |  |  |   |       |     | 92 |   |        |      |   |   |     |   |  |   |      |    |  |   |        |      |  | 
|                         |                                                  | Employee stock purchase plan  |   |              |    |              |     |         |     |             |     |          |   |               |   |         |  |              |    |               |  |       |   |  |  |   |       |     | 5  |   |        |      |   |   |     |   |  |   |      |    |  |   |        |      | 5 | 
|                         | Deferred compensation and other                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |    |    |   |        |      |   |   |     | 3 |  |   |      |    |  |   |        | 3    |  
|                         | Mandatorily redeemable preferred stock dividends |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       | (63 | )  |   |        |      |   |   |     |   |  |   |      |    |  |   |        | (63  | )
|                         |                                                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        |      |   |   |     |   |  |   |      |    |  |   |        |     
|Balance, March 31, 2002  |                                                  |                               | 5 |              |    | $            | 191 |         |     |             | 778 |          |    | $             | 1 |         |   |              | 36 |               |  | $     |  |  |  | $ | 8,615 |     |    | $ | (9,770 | )    |   | $ | (14 | ) |  | $ | (233 | )  |  | $ | (1,210 | )   
|                         |                                                  |                               |   |              |    |              |     |         |     |             |     |          |    |               |   |         |   |              |    |               |  |       |   |  |  |   |       |     |    |   |        |      |   |   |     |   |  |   |      |    |  |   |        |     

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 Three Months Ended March 31, 2002
and 2001


(in millions)


Unaudited


|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |        |     |     |       |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------ | -------------------------------------------- | ------------------------------------------------------- | --- | --- | ----- | ------ | --- | --- | ----- | -
|                                                                 |                                                                                      | 2002                                                                                       |                                              | 2001                                                   
|                                                                 |                                                                                      |                                                                                            |                                              |                                                        
|Cash flows from operating activities                             |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 | Net loss                                                                             |                                                                                            | $                                            | (591                                                    | )   |     | $     | (372   | )  
|                                                                 | Adjustments to reconcile net loss to net cash
    provided by operating activities:  |                                                                                            |                                              |                                                         |     |     |       |        |    
|                                                                 |                                                                                      | Amortization of debt financing costs and
    accretion of senior redeemable discount notes |                                              |                                                         | 121 |     |       |        | 126 |    
|                                                                 |                                                                                      | Provision for losses on accounts receivable                                                |                                              |                                                         | 105 |     |       |        | 63  |    
|                                                                 |                                                                                      | Restructuring charges                                                                      |                                              |                                                         | 31  |     |       |        |    |    
|                                                                 |                                                                                      | Depreciation                                                                               |                                              |                                                         | 385 |     |       |        | 335 |    
|                                                                 |                                                                                      | Amortization                                                                               |                                              |                                                         | 14  |     |       |        | 59  |    
|                                                                 |                                                                                      | Equity in losses of unconsolidated affiliates                                              |                                              |                                                         | 25  |     |       |        | 21  |    
|                                                                 |                                                                                      | Foreign currency transaction losses, net                                                   |                                              |                                                         | 72  |     |       |        | 10  |    
|                                                                 |                                                                                      | Income tax expense (benefit)                                                               |                                              |                                                         | 353 |     |       |        | (14 | )  
|                                                                 |                                                                                      | Other                                                                                      |                                              |                                                         | 3   |     |       |        | (6  | )  
|                                                                 |                                                                                      | Change in assets and liabilities, net of effects
    from acquisitions:                    |                                              |                                                         |     |     |       |        |     |    
|                                                                 |                                                                                      |                                                                                            | Accounts and notes receivable                |                                                         |     | (81 | )     |        |     | (60 | )    
|                                                                 |                                                                                      |                                                                                            | Handset and accessory inventory              |                                                         |     | 21  |       |        |     | (20 | )    
|                                                                 |                                                                                      |                                                                                            | Prepaid expenses and other assets            |                                                         |     | (37 | )     |        |     | 182 |      
|                                                                 |                                                                                      |                                                                                            | Accounts payable, accrued expenses and other |                                                         |     | 41  |       |        |     | (15 | )    
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 |                                                                                      |                                                                                            |                                              | Net cash provided by operating activities               |     |     | 462   |        |     |     | 309   |  
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|Cash flows from investing activities                             |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 | Capital expenditures                                                                 |                                                                                            |                                              | (671                                                    | )   |     |       | (1,005 | )  
|                                                                 | Proceeds from maturities and sales of short-term
    investments                     |                                                                                            |                                              | 974                                                     |     |     |       | 1,815  |    
|                                                                 | Purchases of short-term investments                                                  |                                                                                            |                                              | (1,037                                                  | )   |     |       | (1,163 | )  
|                                                                 | Payments for licenses, acquisitions, investments
    and other, net of cash acquired |                                                                                            |                                              | (253                                                    | )   |     |       | (426   | )  
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 |                                                                                      |                                                                                            |                                              | Net cash used in investing activities                   |     |     | (987  | )      |     |     | (779  | )
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|Cash flows from financing activities                             |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 | Issuance of debt securities                                                          |                                                                                            |                                              |                                                        |     |     |       | 1,250  |    
|                                                                 | Repayments under long-term credit facilities                                         |                                                                                            |                                              | (7                                                      | )   |     |       | (8     | )  
|                                                                 | Proceeds from exercise of stock options                                              |                                                                                            |                                              |                                                        |     |     |       | 10     |    
|                                                                 | Repayments under capital lease and finance
    obligations                           |                                                                                            |                                              | (28                                                     | )   |     |       | (17    | )  
|                                                                 | Proceeds from sale-leaseback transactions                                            |                                                                                            |                                              | 1                                                       |     |     |       | 17     |    
|                                                                 | Debt financing costs                                                                 |                                                                                            |                                              |                                                        |     |     |       | (10    | )  
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|                                                                 |                                                                                      |                                                                                            |                                              | Net cash (used in) provided by financing
    activities |     |     | (34   | )      |     |     | 1,242 |  
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|Effect of exchange rate changes on cash and
    cash equivalents |                                                                                      |                                                                                            | (7                                           | )                                                       |     |     | 1     |       
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|Net (decrease) increase in cash and cash
    equivalents         |                                                                                      |                                                                                            | (566                                         | )                                                       |     |     | 773   |       
|Cash and cash equivalents, beginning of
    period               |                                                                                      |                                                                                            | 2,481                                        |                                                         |     |     | 2,609 |       
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       
|Cash and cash equivalents, end of
    period                     |                                                                                      | $                                                                                          | 1,915                                        |                                                         |     | $   | 3,382 |       
|                                                                 |                                                                                      |                                                                                            |                                              |                                                         |     |     |       |       

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

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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, 2001.

You should also read NII Holdings, Inc.s
annual report on Form 10-K for the year ended
December 31, 2001 for matters related to the operations of
NII Holdings, 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. In view of the capital constrained environment and NII
Holdings lack of funding sources, during the fourth
quarter of 2001, NII Holdings undertook an extensive review of
its business plan and determined to pursue a less aggressive
growth strategy that targets conservation of cash resources by
slowing enhancement and expansion of its networks and reducing
subscriber growth and operating expenses. NII Holdings is
currently in discussions with its various creditors regarding
the restructuring of its debt obligations.

Restricted Cash and Cash Equivalents.NII Holdings and its subsidiaries
held cash and cash equivalents of $153 million at
March 31, 2002 and $250 million at December 31, 2001
that were not available to fund any of the cash needs of our
domestic operations due to restrictions contained in NII
Holdings financing agreements. NII Holdings also had
$69 million at March 31, 2002 and $84 million at
December 31, 2001 in escrow to fund some of its debt
obligations, which is not available to fund any of the other
cash needs of NII Holdings.

Accumulated
Other Comprehensive Loss.

|                                                                 |  |               |      |              |  |   |      |  
|---------------------------------------------------------------- |  | ------------- | ---- | ------------ |  | - | ---- | -
|                                                                 |  | March 31,     |      | December 31,
|                                                                 |  | 2002          |      | 2001        
|                                                                 |  |               |      |             
|                                                                 |  |              
|                                                                 |  | (in millions)
|Unrealized (loss) gain on available-for-sale
    securities, net |  | $             | (13  | )            |  | $ | 7    |  
|Cumulative foreign currency translation adjustment               |  |               | (203 | )            |  |   | (229 | )
|Cumulative effect of accounting change for cash
    flow hedge   |  |               | (10  | )            |  |   | (12  | )
|Unrealized loss on cash flow hedge                               |  |               | (7   | )            |  |   | (17  | )
|                                                                 |  |               |      |              |  |   |      |  
|                                                                 |  | $             | (233 | )            |  | $ | (251 | )
|                                                                 |  |               |      |              |  |   |      |  

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NEXTEL COMMUNICATIONS, INC. AND
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Notes to Condensed Consolidated
Financial Statements  (Continued)

Supplemental
Cash Flow Information.

|                                                         |                                                                            |               |     |      |   |   |     |       |  
|-------------------------------------------------------- | -------------------------------------------------------------------------- | ------------- | --- | ---- | - | - | --- | ----- | -
|                                                         |                                                                            |              
|                                                         |                                                                            | Three Months 
|                                                         |                                                                            | Ended        
|                                                         |                                                                            | March 31,    
|                                                         |                                                                            |              
|                                                         |                                                                            | 2002          |     | 2001
|                                                         |                                                                            |               |     |     
|                                                         |                                                                            |              
|                                                         |                                                                            | (in millions)
|Capital expenditures, including capitalized
    interest |                                                                            |               |     |      |   |   |     |      
|                                                         | Cash paid for capital expenditures                                         |               | $   | 671  |   |   | $   | 1,005 |  
|                                                         | Changes in capital expenditures accrued and
    unpaid or financed         |               |     | (116 | ) |   |     | (125  | )
|                                                         |                                                                            |               |     |      |   |   |     |      
|                                                         |                                                                            | $             | 555 |      |   | $ | 880 |      
|                                                         |                                                                            |               |     |      |   |   |     |      
|Interest costs                                           |                                                                            |               |     |      |   |   |     |      
|                                                         | Interest expense                                                           |               | $   | 326  |   |   | $   | 358   |  
|                                                         | Interest capitalized                                                       |               |     | 15   |   |   |     | 35    |  
|                                                         |                                                                            |               |     |      |   |   |     |      
|                                                         |                                                                            | $             | 341 |      |   | $ | 393 |      
|                                                         |                                                                            |               |     |      |   |   |     |      
|                                                        
|Cash paid for interest, net of amounts
    capitalized   |                                                                            | $             | 185 |      |   | $ | 189 |      
|                                                         |                                                                            |               |     |      |   |   |     |      
|Other non-cash investing and financing
    activities    |                                                                            |               |     |      |   |   |     |      
|                                                         | Net decrease in fair value of marketable equity
    securities and warrant |               | $   | (35  | ) |   | $   | (215  | )
|                                                         | Mandatorily redeemable preferred stock dividends                           |               |     | 63   |   |   |     | 56    |  
|                                                         | Conversion of preferred stock                                              |               |     | 92   |   |   |     |      |  

Adoption of SFAS No. 142.In June 2001, the Financial
Accounting Standards Board, or FASB, issued Statement of
Financial Accounting Standards, or 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 continue to be amortized over their useful
lives. Effective January 1, 2002, we applied the provisions
of SFAS No. 142 to all goodwill and intangible assets
recognized on our financial statements at that date.

In connection with the adoption of SFAS
No. 142, effective January 1, 2002, we ceased
amortizing Federal Communications Commission, or FCC, license
costs as we believe that our portfolio of FCC licenses
represents an intangible asset with an indefinite useful life.
Additionally, in the first quarter 2002, we incurred a non-cash
charge to income tax expense of $350 million, consisting of
a one-time cumulative charge of $335 million and an
incremental first quarter 2002 charge of $15 million. The
$335 million cumulative charge was required since we have
significant deferred tax liabilities related to our FCC licenses
that have a significantly lower tax basis than book basis.
Historically, we did not need a valuation allowance for the
portion of our net operating loss equal to the reversal of
deferred tax liabilities related to FCC licenses expected to
occur during the carryforward period of our net operating loss.
Since we ceased amortizing FCC licenses, we can no longer
estimate the amount, if any, of deferred tax liabilities related
to our FCC licenses, which will reverse during the carryforward
period. Accordingly, we needed to increase our valuation
allowance. The incremental $15 million charge relates to
FCC licenses for which we have a tax basis. As these FCC
licenses are no longer amortized for book purposes but are
amortized for tax purposes, we need to record additional
deferred tax liabilities as amortization occurs.

On January 1, 2002, we reclassified
$898 million of the net carrying value of our goodwill
(consisting of a gross carrying value of $1,162 million and
accumulated amortization of $264 million as of
December 31, 2001) to FCC licenses. The goodwill arose from
transactions predominantly involving the acquisition of FCC
licenses, and we believe that the values of our FCC licenses and
goodwill are inseparable. Historically, we recorded as goodwill
only the amount that represented the deferred tax effects of the
acquired FCC licenses. Except for these deferred tax effects,
the residual in the purchase price allocation process was

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NEXTEL COMMUNICATIONS, INC. AND
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Notes to Condensed Consolidated
Financial Statements  (Continued)

accounted for as FCC licenses. Prior to
January 1, 2002, we amortized both FCC licenses and related
goodwill over the same period, using the same straight-line
method. In connection with this reclassification, we recorded an
additional deferred tax liability of $574 million as of
January 1, 2002, in accordance with the provisions of SFAS
No. 109, Accounting for Income Taxes. The
offsetting increase related to recognizing this deferred tax
liability was recorded to FCC licenses, consistent with the
approach of treating FCC licenses as the residual in the
purchase price allocations for transactions in which the
predominant assets acquired were FCC licenses. We also acquired
about $288 million of FCC licenses in the first quarter
2002. In accordance with SFAS No. 142, we present FCC
licenses and goodwill as of March 31, 2002 net of
accumulated amortization.

Our intangible assets as of March 31, 2002
and December 31, 2001 are as follows after the
reclassifications discussed above (in millions):

|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |       | 
|----------------------------- | --------------------------- | -------------- | ----- | ----------------- |  | -------- | -- | -------- |  | ------------ | ----- | -------- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                              |                             |                |       |                  
|                              |                             | March 31, 2002 |       | December 31, 2001
|                              |                             |                |       |                  
|                              |                             | Gross          |       |                   |  | Net      |    | Gross    |  |              |       | Net     
|                              |                             | Carrying       |       | Accumulated       |  | Carrying |    | Carrying |  | Accumulated  |       | Carrying
|                              |                             | Value          |       | Amortization      |  | Value    |    | Value    |  | Amortization |       | Value   
|                              |                             |                |       |                   |  |          |    |          |  |              |       |         
|Amortized intangible assets   |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              | International licenses      |                | $     | 197               |  |          | $  | 5        |  |              | $     | 192      |  |   | $     | 192   |  |   | $     |      |  |   | $     | 192   | 
|                              | Customer lists              |                |       | 130               |  |          |    | 35       |  |              |       | 95       |  |   |       | 114   |  |   |       | 25    |  |   |       | 89    | 
|                              | Other                       |                |       | 30                |  |          |    | 11       |  |              |       | 19       |  |   |       | 24    |  |   |       | 9     |  |   |       | 15    | 
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              |                             |                | 357   |                   |  |          | 51 |          |  |              | 306   |          |  |   | 330   |       |  |   | 34    |       |  |   | 296   |      
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|Unamortized intangible assets |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              | FCC licenses                |                |       | 6,323             |  |          |    |         |  |              |       | 6,323    |  |   |       | 6,547 |  |   |       | 1,086 |  |   |       | 5,461 | 
|                              | Goodwill (Domestic segment) |                |       | 21                |  |          |    |         |  |              |       | 21       |  |   |       | 22    |  |   |       | 1     |  |   |       | 21    | 
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              |                             |                | 6,344 |                   |  |          |   |          |  |              | 6,344 |          |  |   | 6,569 |       |  |   | 1,087 |       |  |   | 5,482 |      
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|Total intangible assets       |                             | $              | 6,701 |                   |  | $        | 51 |          |  | $            | 6,650 |          |  | $ | 6,899 |       |  | $ | 1,121 |       |  | $ | 5,778 |      
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              | Debt financing costs, net   |                |       |                   |  |          |    |          |  |              |       | 277      |  |   |       |       |  |   |       |       |  |   |       | 289   | 
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      
|                              |                             |                |       |                   |  |          |    |          |  | $            | 6,927 |          |  |   |       |       |  |   |       |       |  | $ | 6,067 |      
|                              |                             |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |       |  |   |       |       |  |   |       |      

We recorded aggregate amortization expense of
$14 million for the three months ended March 31, 2002
and $59 million for the three months ended March 31, 2001.
Had we adopted SFAS No. 142 effective January 1, 2001
and accordingly not amortized our FCC licenses and goodwill, the
financial results for the three months ended March 31, 2001
would have been as follows:

|                                                                          |             |                |   |       |  
|------------------------------------------------------------------------- | ----------- | -------------- | - | ----- | -
|                                                                          |             | Three Months  
|                                                                          |             | Ended         
|                                                                          |             | March 31, 2001
|                                                                          |             |               
|Loss before income tax (expense) benefit
    (in millions)                |             |                |   |      
|                                                                          | As reported |                | $ | (386  | )
|                                                                          |             |                |   |      
|                                                                          | Pro forma   |                | $ | (351  | )
|                                                                          |             |                |   |      
|Loss attributable to common stockholders (in
    millions)                |             |                |   |      
|                                                                          | As reported |                | $ | (428  | )
|                                                                          |             |                |   |      
|                                                                          | Pro forma   |                | $ | (717  | )
|                                                                          |             |                |   |      
|Loss per share attributable to common
    stockholders, basic and diluted |             |                |   |      
|                                                                          | As reported |                | $ | (0.56 | )
|                                                                          |             |                |   |      
|                                                                          | Pro forma   |                | $ | (0.94 | )
|                                                                          |             |                |   |      

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Notes to Condensed Consolidated
Financial Statements  (Continued)

The pro forma loss attributable to common
stockholders and the pro forma loss per share attributable to
common stockholders in the table above include the effects of a
one-time cumulative income tax charge of $300 million and
an incremental first quarter 2001 income tax charge of
$11 million. These 2001 charges are similar in nature to
the actual income tax charges recorded in the first quarter 2002
which are discussed above.

Based solely on the amortized intangible assets
existing at March 31, 2002, we estimate the amortization
expense for each of the succeeding five years ending
December 31 to be: $61 million for 2002,
$58 million for 2003, $40 million for 2004,
$14 million for 2005 and $12 million for 2006. Actual
amortization expense to be reported in future periods could
differ from these estimates as a result of license acquisitions,
changes in exchange rates and other relevant factors.

Upon adoption of SFAS No. 142, we tested all
of our FCC licenses for impairment and concluded that there was
no impairment as of January 1, 2002 as the fair value of
these licenses was greater than their carrying value.

We concluded, based on the guidance in Emerging
Issues Task Force Issue No. 02-7, Unit of Accounting
for Testing Impairment of Indefinite-Lived Intangible
Assets, that the unit of accounting for our 800 MHz and
900 MHz FCC licenses is our nationwide footprint. We used a
residual value approach wherein we measured the fair value of
these licenses by deducting the fair values of our domestic net
assets, other than licenses, from our domestic reporting
units fair value, which was determined based on discounted
cash flows.

NII Holdings wrote off its entire goodwill
carrying value as of December 31, 2001 in connection with
its revised business plan. Additionally, its portfolios of
wireless communications licenses continue to be accounted for as
intangible assets with finite lives of 20 years.
Accordingly, NII Holdings did not have any unamortized
intangible assets subject to the impairment testing requirements
of SFAS No. 142 as of January 1, 2002.

New Accounting Pronouncement.In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. SFAS No. 145 requires us
to classify gains and losses from extinguishments of debt as
extraordinary items only if they meet the criteria for such
classification in Accounting Principles Board Opinion
No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. These provisions are effective
January 1, 2003. Any gain or loss on extinguishment of debt
classified as an extraordinary item in prior periods that does
not meet the criteria for such classification must be
reclassified to other income or expense. Additionally, SFAS
No. 145 requires sale-leaseback accounting for certain
lease modifications that have economic effects similar to
sale-leaseback transactions. These lease provisions are
effective for transactions occurring after May 15, 2002. We
are evaluating the impact of adopting SFAS No. 145 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, or SAB, No. 101, Revenue Recognition in
Financial Statements, we recognized revenues from handset
sales and activation fees and equal amounts of cost of revenues
during the following periods that are attributable to handset
sales and activation fees previously reported in periods prior
to 2000 as follows:

|                            |  |               |    |      |  |   |    | 
|--------------------------- |  | ------------- | -- | ---- |  | - | -- | 
|                            |  | 2002          |    | 2001
|                            |  |               |    |     
|                            |  |              
|                            |  | (in millions)
|Three months ended March 31 |  | $             | 51 |      |  | $ | 73 | 

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NEXTEL COMMUNICATIONS, INC. AND
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Notes to Condensed Consolidated
Financial Statements  (Continued)

Note 2.     First
Quarter 2002 Developments

Restructuring.In January 2002, we announced a
five-year information technology outsourcing agreement with
Electronic Data Systems Corp., or EDS, under which EDS manages
our corporate data center, database administration, helpdesk,
desktop services and other technical functions. Additionally, in
January 2002, we announced an eight-year customer relationship
management agreement with IBM and TeleTech Holdings, Inc. to
manage our customer care centers. In connection with these
outsourcing agreements, we recorded a $35 million domestic
restructuring charge in the first quarter 2002, of which about
$31 million related to vacating unneeded facilities. As of
March 31, 2002, we had $32 million of the charge
accrued as a liability. Also during the first quarter 2002, NII
Holdings recorded $5 million in restructuring and other
charges.

Chadmoore Acquisition.In February 2002, we purchased
from Chadmoore Wireless Group, Inc. 800 MHz and
900 MHz specialized mobile radio licenses and related
assets for an aggregate cash purchase price of
$130 million. As the purchase price was allocated on a
preliminary basis, adjustments may be necessary.

Preferred Stock Conversion.In March 2002, Digital Radio,
L.L.C., an affiliate of Craig O. McCaw, converted
2.5 million shares of class A preferred stock into
15.0 million shares of class A common stock.

Argentine Foreign Currency Losses.During the first quarter 2002, as
a result of the devaluation of the Argentine peso, NII Holdings
recorded $77 million in foreign currency transaction losses
related to its U.S. dollar denominated liabilities in Argentina,
primarily its Argentine credit facilities.

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NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

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

|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |        |        |  
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | ---------------------------------- | ------ | ------------ | ------ | - | ------ | ------ | ------ | -
|                                                                                                                                     |                                                                     | March 31,                          |        | December 31,
|                                                                                                                                     |                                                                     | 2002                               |        | 2001        
|                                                                                                                                     |                                                                     |                                    |        |             
|                                                                                                                                     |                                                                     |                                   
|                                                                                                                                     |                                                                     | (dollars in millions)             
|Domestic                                                                                                                             |                                                                     |                                    |        |              |        |   |        |       
|10.65% senior redeemable discount notes due
    2007, net of unamortized discount of
    $39 and $59                                 |                                                                     | $                                  | 801    |              |        | $ | 781    |       
|9.75% senior serial redeemable discount notes
    due 2007, net of unamortized discount
    of $60 and $86                           |                                                                     |                                    | 1,069  |              |        |   | 1,043  |       
|4.75% convertible senior notes due
    2007                                                                                          |                                                                     |                                    | 354    |              |        |   | 354    |       
|9.95% senior serial redeemable discount notes
    due 2008, net of unamortized discount
    of $132 and $168                         |                                                                     |                                    | 1,495  |              |        |   | 1,459  |       
|12% senior serial redeemable notes due
    2008, net of unamortized discount of
    $3 and $3                                        |                                                                     |                                    | 297    |              |        |   | 297    |       
|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 $4 and $11                          |                                                                     |                                    | 1,254  |              |        |   | 1,261  |       
|6% convertible senior notes due 2011                                                                                                 |                                                                     |                                    | 1,000  |              |        |   | 1,000  |       
|Bank credit facility                                                                                                                 |                                                                     |                                    | 4,500  |              |        |   | 4,500  |       
|Other                                                                                                                                |                                                                     |                                    | 18     |              |        |   | 19     |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     | Total domestic long-term debt                                       |                                    |        | 13,938       |        |   |        | 13,864 |       
|                                                                                                                                     |                                                                     | Less domestic current portion      |        |              | (98    | ) |        |        | (49    | )
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     |                                                                     | $                                  | 13,840 |              |        | $ | 13,815 |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|International                                                                                                                        |                                                                     |                                    |        |              |        |   |        |       
|13% senior redeemable discount notes due
    2007, issued by NII Holdings, net of
    unamortized discount of $10 and $26            |                                                                     | $                                  | 520    |              |        | $ | 504    |       
|12.125% senior serial redeemable discount
    notes due 2008, issued by NII
    Holdings, net of unamortized discount of $56 and $69 |                                                                     |                                    | 433    |              |        |   | 420    |       
|12.75% senior serial redeemable notes due
    2010, issued by NII Holdings, net of
    unamortized discount of $5 and $5             |                                                                     |                                    | 451    |              |        |   | 451    |       
|NII Holdings credit facilities                                                                                                      |                                                                     |                                    | 483    |              |        |   | 490    |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     | Total NII Holdings debt, nonrecourse to
    and not held by parent |                                    |        | 1,887        |        |   |        | 1,865  |       
|                                                                                                                                     |                                                                     | Less NII Holdings current portion |        |              | (1,887 | ) |        |        | (1,865 | )
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     |                                                                     | $                                  |       |              |        | $ |       |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|Consolidated                                                                                                                         |                                                                     |                                    |        |              |        |   |        |       
|Total consolidated debt                                                                                                              |                                                                     | $                                  | 15,825 |              |        | $ | 15,729 |       
|                                                                                                                                     |                                                                     | Less current portion               |        |              | (1,985 | ) |        |        | (1,914 | )
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     |                                                                     | $                                  | 13,840 |              |        | $ | 13,815 |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|Domestic capital lease and finance
    obligations                                                                                   |                                                                     |                                    |        |              |        |   |        |       
|Capital lease obligations                                                                                                            |                                                                     | $                                  | 293    |              |        | $ | 308    |       
|Finance obligation                                                                                                                   |                                                                     |                                    | 693    |              |        |   | 693    |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     | Total capital lease and finance
    obligations                     |                                    |        | 986          |        |   |        | 1,001  |       
|                                                                                                                                     |                                                                     | Less current portion               |        |              | (99    | ) |        |        | (96    | )
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       
|                                                                                                                                     |                                                                     | $                                  | 887    |              |        | $ | 905    |       
|                                                                                                                                     |                                                                     |                                    |        |              |        |   |        |       

12



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

On December 31, 2001, NII Holdings
Argentine operating company failed to make a scheduled principal
payment of $8 million under its Argentine credit
facilities. On February 1, 2002, NII Holdings failed to
make a $41 million interest payment due on its 12.75%
senior serial redeemable notes due 2010. Furthermore, on
March 31, 2002, NII Holdings failed to make a
$1 million interest payment due on its $57 million
vendor credit facility with Motorola. Also on March 31,
2002, NII Holdings Argentine operating company failed to
make a second scheduled principal payment of $8 million as well
as an interest payment of $1 million to the lenders under
its Argentine credit facilities. As a result of these events of
default and the operation of cross-default provisions contained
in NII Holdings debt arrangements, NII Holdings
entire debt balance is callable or subject to acceleration, and
is therefore classified in current liabilities. NII
Holdings lenders are free to pursue any of their
respective remedies under these agreements, including, in the
case of the Motorola and Argentine credit facilities, seizing
the assets of NII Holdings and its subsidiaries that are pledged
as collateral. NII Holdings is currently in discussions with its
various creditors regarding the restructuring of its debt
obligations.

Note 4.  Derivative Instruments
and Hedging Activities

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

In July 2001, we entered into interest rate swap
agreements to hedge the risk of changes in fair value of a
portion of our long-term fixed rate debt, which are attributable
to changes in the London Interbank Offered Rate, or LIBOR, as
the benchmark interest rate. These fair value hedges qualify for
hedge accounting using the short-cut method since the swap terms
match the critical terms of the hedged debt. Accordingly, there
was no net effect on our results of operations for the three
months ended March 31, 2002, relating to the
ineffectiveness of these fair value hedges. As of March 31,
2002, we have recognized the interest rate swaps at their fair
values of $7 million, consisting of $3 million in
interest receivable and $4 million in other assets, with an
offsetting $4 million adjustment to the carrying value of
our hedged debt.

We also use interest rate swaps to hedge the
variability of future cash flows, which are caused by changes in
LIBOR, as the benchmark interest rate, associated with some of
our long-term variable rate debt. As of March 31, 2002, we
have recognized all of our cash flow hedges at their fair values
of $85 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 $7 million, representing the effective portion of
the change in its fair value as of March 31, 2002, is
reported in other comprehensive loss and will be reclassified to
interest expense in the same period during which our hedged debt
affects interest expense. 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. Interest expense
includes a gain of $2 million for the three months ended
March 31, 2002 and a loss of $4 million for the three
months ended March 31, 2001, representing changes in the
fair values of our swaps not qualifying for hedge accounting.
There was no net effect on interest expense for the three months
ended March 31, 2002 and 2001 relating to the ineffective
portion of the change in fair value of our swap qualifying for
hedge accounting.

Note 5.  Contingencies

In April 2001, a purported class action lawsuit
was filed in the Circuit Court in Baltimore, Maryland by the Law
Offices of Peter Angelos, and subsequently in other state courts
in Pennsylvania, New York and Georgia by Mr. Angelos and other
firms, alleging that wireless telephones pose a health risk to
users of those telephones and that the defendants failed to
disclose these risks. We, along with numerous other companies,

13



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##### Table of Contents



NEXTEL COMMUNICATIONS, INC. AND
SUBSIDIARIES


Notes to Condensed Consolidated
Financial Statements  (Continued)

are defendants in these cases. The defendants
have removed the cases to federal court, and the plaintiffs have
filed motions to remand back to state court in some of the
cases. Mr. Angelos firm has also participated in the
filing of an amended complaint in a similar suit pending in
federal court in Louisiana, in which we are also named. These
suits seek to require the defendants to provide headsets, or
reimburse the cost of headsets, for use with wireless
telephones, as well as attorneys fees and punitive
damages. The cases have been transferred to federal court in
Baltimore, Maryland by the judicial panel on Multi-district
Litigation. While we cannot predict the outcome of this
litigation, we believe that the claims against us are without
merit and intend to vigorously defend against them.

Note 6.  Mandatorily Redeemable
Preferred Stock

|                                                                                                                                                                                                                                                                                  |  |                       |       |              |  |   |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | ------------ |  | - | ----- | 
|                                                                                                                                                                                                                                                                                  |  | March 31,             |       | December 31,
|                                                                                                                                                                                                                                                                                  |  | 2002                  |       | 2001        
|                                                                                                                                                                                                                                                                                  |  |                       |       |             
|                                                                                                                                                                                                                                                                                  |  |                      
|                                                                                                                                                                                                                                                                                  |  | (dollars in millions)
|Series D exchangeable preferred stock
    mandatorily redeemable 2009, 13%
    cumulative annual dividend; 887,321 and 859,391 shares issued;
    887,310 and 859,380 shares outstanding; stated at liquidation
    value                                                         |  | $                     | 912   |              |  | $ | 883   | 
|Series E exchangeable preferred stock
    mandatorily redeemable 2010, 11.125%
    cumulative annual dividend; 1,164,677 and 1,133,161 shares
    issued; 1,164,663 and 1,133,147 shares outstanding; stated at
    liquidation value                                             |  |                       | 1,181 |              |  |   | 1,149 | 
|Zero coupon convertible preferred stock
    mandatorily redeemable 2013, no
    dividend; convertible into 4,779,386 shares of class A common
    stock; 245,245 shares issued and outstanding; stated at accreted
    liquidation preference value at 9.25% compounded quarterly |  |                       | 84    |              |  |   | 82    | 
|                                                                                                                                                                                                                                                                                  |  |                       |       |              |  |   |       | 
|                                                                                                                                                                                                                                                                                  |  | $                     | 2,177 |              |  | $ | 2,114 | 
|                                                                                                                                                                                                                                                                                  |  |                       |       |              |  |   |       | 

Note 7.  Segment
Reporting

We operate in two business segments: domestic and
international. These reportable segments are strategic business
units that are in different phases of development that we manage
and finance separately based on the fundamental differences in
their operations. We define segment earnings as earnings before
interest, taxes, depreciation and amortization and other charges
determined to be non-recurring in nature, such as restructuring
and other charges.

|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |    |   |  |   |       |  
|---------------------------------------- |  | --------------------------------- | ----- | --------------------------------- |  | ------------ | ---- | ------------ |  | -------- | -- | ------------- |  | ------------ | ----- | ------------ |  | - | ----- | - |  | - | ---- | - |  | - | -- | - |  | - | ----- | -
|                                         |  |                                   |       |                                   |  | Intercompany |      |              |  |          |    |               |  | Intercompany |       |             
|                                         |  | Domestic                          |       | International                     |  | Eliminations |      | Consolidated |  | Domestic |    | International |  | Eliminations |       | Consolidated
|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |             
|                                         |  |                                  
|                                         |  | (in millions)                    
|                                         |  |                                   |       |                                  
|                                         |  | Three Months Ended March 31, 2002 |       | Three Months Ended March 31, 2001
|                                         |  |                                   |       |                                  
|Operating revenues                       |  | $                                 | 1,957 |                                   |  | $            | 199  |              |  | $        | (1 | )             |  | $            | 2,155 |              |  | $ | 1,603 |   |  | $ | 139  |   |  | $ |   |   |  | $ | 1,742 |  
|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |    |   |  |   |       |  
|Segment earnings (losses)                |  | $                                 | 586   |                                   |  | $            | 25   |              |  | $        | (1 | )             |  | $            | 610   |              |  | $ | 353   |   |  | $ | (34  | ) |  | $ | (1 | ) |  | $ | 318   |  
|Restructuring and other charges          |  |                                   | (35   | )                                 |  |              | (5   | )            |  |          |   |               |  |              | (40   | )            |  |   |      |   |  |   |     |   |  |   |   |   |  |   |      |  
|Depreciation and amortization            |  |                                   | (382  | )                                 |  |              | (17  | )            |  |          |   |               |  |              | (399  | )            |  |   | (338  | ) |  |   | (56  | ) |  |   |   |   |  |   | (394  | )
|Interest expense                         |  |                                   | (273  | )                                 |  |              | (79  | )            |  |          | 26 |               |  |              | (326  | )            |  |   | (286  | ) |  |   | (72  | ) |  |   |   |   |  |   | (358  | )
|Interest income                          |  |                                   | 15    |                                   |  |              | 1    |              |  |          |   |               |  |              | 16    |              |  |   | 74    |   |  |   | 5    |   |  |   |   |   |  |   | 79    |  
|Other expense, net                       |  |                                   | (25   | )                                 |  |              | (74  | )            |  |          |   |               |  |              | (99   | )            |  |   | (21   | ) |  |   | (10  | ) |  |   |   |   |  |   | (31   | )
|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |    |   |  |   |       |  
|Loss before income tax (expense) benefit |  | $                                 | (114  | )                                 |  | $            | (149 | )            |  | $        | 25 |               |  | $            | (238  | )            |  | $ | (218  | ) |  | $ | (167 | ) |  | $ | (1 | ) |  | $ | (386  | )
|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |    |   |  |   |       |  
|Capital expenditures                     |  | $                                 | 486   |                                   |  | $            | 69   |              |  | $        |   |               |  | $            | 555   |              |  | $ | 660   |   |  | $ | 220  |   |  | $ |   |   |  | $ | 880   |  
|                                         |  |                                   |       |                                   |  |              |      |              |  |          |    |               |  |              |       |              |  |   |       |   |  |   |      |   |  |   |    |   |  |   |       |  

|                                   |  |                |        |                   |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        |  |  |   |       |  |  |   |       |  |  |   |        | 
|---------------------------------- |  | -------------- | ------ | ----------------- |  | - | ----- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------ |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|                                   |  |                |        |                  
|                                   |  | March 31, 2002 |        | December 31, 2001
|                                   |  |                |        |                  
|                                   |  |                |        |                   |  |   |       | 
|Property, plant and equipment, net |  | $              | 9,036  |                   |  | $ | 392   |  |  | $ |      |  |  | $ | 9,428  |  |  | $ | 8,924  |  |  | $ | 350   |  |  | $ |      |  |  | $ | 9,274  | 
|                                   |  |                |        |                   |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        |  |  |   |       |  |  |   |       |  |  |   |        | 
|Identifiable assets                |  | $              | 19,432 |                   |  | $ | 1,134 |  |  | $ | 1,892 |  |  | $ | 22,458 |  |  | $ | 19,083 |  |  | $ | 1,244 |  |  | $ | 1,737 |  |  | $ | 22,064 | 
|                                   |  |                |        |                   |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        |  |  |   |       |  |  |   |       |  |  |   |        | 

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##### Table of Contents






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

Overview

The following is a discussion and analysis of:



| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | our consolidated financial condition and results
    of operations for the three-month periods ended March 31,
    2002 and 2001; and
|
| |  | significant factors that could affect our
    prospective financial condition and results of operations.                             

You should read this discussion in conjunction
with our 2001 annual report on Form 10-K, including the
discussion regarding our critical accounting policies and our
future domestic contractual obligations. Historical results may
not indicate future performance. See Forward Looking
Statements.

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

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



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

As of March 31, 2002:



| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we had about 9.17 million handsets in
    service in the United States; and                                                                                                                        
|
| |  | our digital mobile network or the compatible
    digital mobile network of Nextel Partners, Inc. was operational
    in 197 of the top 200 metropolitan statistical areas in the
    United States.

We owned about 32% of the common stock of Nextel
Partners as of March 31, 2002. Nextel Partners provides
digital wireless communications services under the Nextel brand
name in mid-sized and tertiary U.S. markets. Nextel Partners has
the right to operate in 55 of the top 200 metropolitan
statistical areas in the United States ranked by population.

In addition to our domestic operations, we have
ownership interests in international wireless companies through
our substantially wholly owned subsidiary, NII Holdings. NII
Holdings, through its operating subsidiaries, provides wireless
communications services targeted at meeting the needs of
business customers in selected international markets. Its
principal operations are in selected major business centers and
related transportation corridors in Mexico, Brazil, Argentina
and Peru. As of March 31, 2002, NII Holdings had about
1.16 million digital handsets in service in its Latin
American markets.

Our condensed consolidated financial statements
include the accounts of NII Holdings and its consolidated
subsidiaries. Since December 31, 2001, NII Holdings and its
operating subsidiaries have failed to make scheduled principal
and interest payments on its credit facilities and 12.75% senior
notes. For additional information, see note 3, Long-Term
Debt, Capital Lease and Finance Obligations, in our
condensed consolidated financial statements appearing at the
beginning of this quarterly report on Form 10-Q. As a
result of these events of default and the operation of
cross-default provisions contained in NII Holdings debt
arrangements, NII Holdings entire debt balance is callable
or subject to acceleration, and is therefore classified in
current liabilities. NII Holdings lenders are free to
pursue any of their respective remedies under

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##### Table of Contents



these agreements, including, in the case of the
Motorola and Argentine credit facilities, seizing the assets of
NII Holdings and its subsidiaries that are pledged as
collateral. NII Holdings is currently in discussions with its
various creditors regarding the restructuring of its debt
obligations. If NII Holdings is unable to obtain additional
funding or successfully restructure its obligations, it may be
required to reorganize under Chapter 11 of the United
States Bankruptcy Code or take other measures, which could
include liquidation of assets. More detailed information
relating specifically to NII Holdings may be found in the
reports filed by NII Holdings under the Securities and Exchange
Act of 1934. In April 2002, Messrs. Conway, Donahue, Judson
and Weibling resigned from NII Holdings board of directors.


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

Results of Operations

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

We recognize revenue for access charges and other
services charged at fixed amounts ratably over the service
period, net of credits and adjustments for service discounts. We
recognize excess usage and long distance revenue at contractual
rates per minute as minutes are used. We recognize revenue from
activation fees on a straight-line basis over the expected
relationship periods of up to four years, starting when wireless
service is activated. We recognize revenue from accessory sales
when title passes upon delivery of the accessory to the
customer. We establish an allowance for doubtful accounts
receivable sufficient to cover probable and reasonably estimable
losses.

We recognize revenue from handset sales on a
straight-line basis over the expected customer relationship
periods of up to four years, starting when the customer has
taken title. Therefore, handset revenues recognized in the
current period largely reflect amortization of handset sales
that occurred and were deferred in prior periods. Our wireless
service is essential to the functionality of our handsets due to
the fact that the handsets can, with very limited exceptions,
only be used on our digital mobile network. Accordingly, this
multiple element arrangement is not accounted for separately.

Cost of revenues primarily consists of the cost
of providing wireless service and the cost of handset and
accessory sales. Cost of providing wireless service consists
primarily of costs of interconnection with local exchange
carrier facilities and direct switch and transmitter and
receiver site costs, such as property taxes, maintenance costs,
utility costs and rent for the network switches and sites used
to operate our digital mobile networks. Interconnection costs
have fixed and variable components. The fixed component of
interconnection costs consists of monthly flat-rate fees for
facilities leased from local exchange carriers. The variable
component of interconnection costs, which fluctuates in relation
to the level and duration of wireless calls, generally consists
of per-minute use fees charged by wireline and wireless
providers for wireless calls terminating on their networks. Cost
of handset and accessory sales consists primarily of the cost of
the handset and accessories, order fulfillment related expenses
and write-downs of handset and related accessory inventory for
shrinkage. We recognize the costs of activation and handset
sales over the expected customer relationship periods of up to
four years in amounts equivalent to revenue recognized from
activation fees and handset sales. Costs in excess of the
revenue generated by activation fees and handset sales are
expensed at the time of sale.

16



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##### Table of Contents



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

Operating revenues.

|                          |                    |                       |       |              |  |           |    |              |   |               |       |         |  |  |    |     |   |   |     |     |  |  |    |    |  
|------------------------- | ------------------ | --------------------- | ----- | ------------ |  | --------- | -- | ------------ | - | ------------- | ----- | ------- |  |  | -- | --- | - | - | --- | --- |  |  | -- | -- | -
|                          |                    |                       |       |              |  |           |    |              |   |              
|                          |                    |                       |       | % of         |  |           |    | % of         |   | Change from  
|                          |                    |                       |       | Consolidated |  |           |    | Consolidated |   | Previous Year
|                          |                    | March 31,             |       | Operating    |  | March 31, |    | Operating    |   |              
|                          |                    | 2002                  |       | Revenues     |  | 2001      |    | Revenues     |   | Dollars       |       | Percent
|                          |                    |                       |       |              |  |           |    |              |   |               |       |        
|                          |                    |                      
|                          |                    | (dollars in millions)
|Three Months Ended        |                    |                       |       |              |  |           |    |              |   |               |       |         |  |  |    |     |   |   |     |     |  |  |    |   
|Domestic                  |                    | $                     | 1,957 |              |  |           | 91 | %            |   | $             | 1,603 |         |  |  | 92 | %   |   | $ | 354 |     |  |  | 22 | % 
|International             |                    |                       | 199   |              |  |           | 9  | %            |   |               | 139   |         |  |  | 8  | %   |   |   | 60  |     |  |  | 43 | % 
|Intercompany eliminations |                    |                       | (1    | )            |  |           |   |              |   |               |      |         |  |  |   |     |   |   | (1  | )   |  |  |   |   
|                          |                    |                       |       |              |  |           |    |              |   |               |       |         |  |  |    |     |   |   |     |     |  |  |    |   
|                          | Operating revenues |                       | $     | 2,155        |  |           |    | 100          | % |               | $     | 1,742   |  |  |    | 100 | % |   | $   | 413 |  |  |    | 24 | %
|                          |                    |                       |       |              |  |           |    |              |   |               |       |         |  |  |    |     |   |   |     |     |  |  |    |   

|                                     |  |  |       |  |  |  |   |          |  |         |       |  |  |  |   |  |  |  |       |  |  |  |    |  
|------------------------------------ |  |  | ----- |  |  |  | - | -------- |  | ------- | ----- |  |  |  | - |  |  |  | ----- |  |  |  | -- | -
|                                     |  |  |       |  |  |  |   |          |  |        
|Digital handsets in service at end   |  |  |       |  |  |  |   |          |  |        
|of period for consolidated           |  |  |       |  |  |  |   | Handsets |  | Percent
|subsidiaries (handsets in thousands) |  |  |       |  |  |  |   |          |  |        
|Domestic                             |  |  | 9,167 |  |  |  |  |          |  |         | 7,199 |  |  |  |  |  |  |  | 1,968 |  |  |  | 27 | %
|International                        |  |  | 1,208 |  |  |  |  |          |  |         | 935   |  |  |  |  |  |  |  | 273   |  |  |  | 29 | %

Domestic service revenues.Domestic service revenues
increased $336 million or 23% from the first quarter 2001
to the first quarter 2002 to $1.83 billion principally as a
result of a 27% increase in domestic handsets in service.
Average monthly revenue per domestic handset decreased from
about $71 during the first quarter of 2001 to about $68 during
the first quarter 2002. Additionally, as compared to the same
period in 2001, average monthly minutes of use per subscriber
increased 15% in the first quarter 2002 to about
590 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
providing more minutes of use at a lower price to the
subscriber. These plans typically include a fixed amount of
interconnect minutes combined with an unlimited or fixed amount
of digital two-way radio service, unlimited Nextel Wireless Web
services, free incoming calls or free long distance service, all
for a stated package price.

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



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the introduction of more 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 enhanced Nextel Direct Connect and Nextel Wireless Web;                                                                                                          
|
| |  | increased brand name recognition through
    increased advertising and marketing campaigns;                                                                                                                              
|
| |  | handset pricing promotions and increased handset
    choices; and                                                                                                                                                        
|
| |  | increased sales force and marketing staff,
    including staff associated with our Nextel stores, and selling
    efforts targeted at specific vertical markets.                                                         

For the full year 2002, we currently expect our
average monthly revenue per domestic handset to remain at a
similar level to that experienced in the first quarter 2002 due
to revenue enhancement initiatives being implemented during the
year. These initiatives include additional charges to customers
that we implemented in the first quarter 2002 to recover some
costs of government mandated telecommunications services such as

17



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##### Table of Contents



Enhanced 911 and number portability. However, our
average monthly revenue per domestic handset could be adversely
affected in the future:




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



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

Domestic handset and accessory revenues.Domestic handset and accessory
revenues increased $18 million or 17% from the first
quarter 2001 to the first quarter 2002 to $126 million. In
accordance with our revenue recognition policy and Staff
Accounting Bulletin, or SAB, No. 101, we recognize handset
sales on a straight-line basis over the expected customer
relationship period. Handset revenues recognized in the current
period largely reflect amortization of handset sales that
occurred and were deferred in prior periods. During the first
quarter 2002, we experienced an increase in sales of our new
feature rich and higher priced handsets to new and existing
subscribers.

International revenues.The increase in international
operating revenues from the first quarter 2001 to the first
quarter 2002 consists of a $59 million or 45% increase in
wireless service revenues to $191 million and a
$1 million or 14% increase in revenues from digital handset
and accessory sales to $8 million. Operating revenues increased
primarily as a result of a 29% increase in the number of digital
handsets in service in NII Holdings consolidated markets
from the first quarter 2001 to the first quarter 2002. The
increase is primarily attributable to NII Holdings Mexican
operating company and reflects, in part, the implementation of
NII Holdings revised business plan under which
NII Holdings is focusing substantially all of its available
funding towards continuing the growth of its Mexican operations.
Additionally, the successful introduction of higher priced
service plans, primarily in Mexico, contributed to the increase.

Cost of revenues.

|                          |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |    |    |  |  |    |   |  
|------------------------- | ---------------- | --------------------- | --- | ------------ |  | --------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | -- | -- |  |  | -- | - | -
|                          |                  |                       |     |              |  |           |    |              |   |              
|                          |                  |                       |     | % of         |  |           |    | % of         |   | Change from  
|                          |                  |                       |     | Consolidated |  |           |    | Consolidated |   | Previous Year
|                          |                  | March 31,             |     | Operating    |  | March 31, |    | Operating    |   |              
|                          |                  | 2002                  |     | Revenues     |  | 2001      |    | Revenues     |   | Dollars       |     | Percent
|                          |                  |                       |     |              |  |           |    |              |   |               |     |        
|                          |                  |                      
|                          |                  | (dollars in millions)
|Three Months Ended        |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |    |    |  |  |    |  
|Domestic                  |                  | $                     | 656 |              |  |           | 30 | %            |   | $             | 627 |         |  |  | 36 | %  |   | $ | 29 |    |  |  | 5  | %
|International             |                  |                       | 81  |              |  |           | 4  | %            |   |               | 71  |         |  |  | 4  | %  |   |   | 10 |    |  |  | 14 | %
|Intercompany eliminations |                  |                       | (1  | )            |  |           |   |              |   |               |    |         |  |  |   |    |   |   | (1 | )  |  |  |   |  
|                          |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |    |    |  |  |    |  
|                          | Cost of revenues |                       | $   | 736          |  |           |    | 34           | % |               | $   | 698     |  |  |    | 40 | % |   | $  | 38 |  |  |    | 5 | %
|                          |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |    |    |  |  |    |  

Domestic cost of service revenues.Domestic cost of service revenues
increased $54 million or 18% from the first quarter 2001 to
the first quarter 2002 to $351 million primarily as a
result of a 25% increase in costs incurred related to variable
interconnect fees on higher minutes of use and a 20% increase in
costs incurred related to direct switch and transmitter and
receiver site costs including rent, utility and fixed
interconnection costs. Total system minutes of use increased 48%
from the first quarter 2001 to the first quarter 2002
principally due to the larger number of handsets in service as
well as the 15% increase in average monthly minutes of use per
subscriber in the first quarter 2002 compared to the first
quarter 2001. This increase in variable interconnection cost
from increased system minutes of use was partially offset by
rate savings achieved through new agreements with service
providers. The direct switch and transmitter and receiver site
costs increased primarily due to a 19% increase in transmitter
and receiver sites and related equipment and a 9% increase in
the number of switches we placed in service from the first
quarter 2001 to the first quarter 2002.

18



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##### Table of Contents



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

Domestic cost of handset and accessory
sales.Domestic cost of handset
and accessory sales decreased $25 million or 8% from the
first quarter 2001 to the first quarter 2002 to
$305 million. In accordance with SAB No. 101, a
portion of our cost of handset sales is being recognized over
the expected customer relationship period in amounts equivalent
to revenue recognized from handset sales. The primary impact on
the current quarter cost of handset and accessory sales is the
cost in excess of revenue generated by the current
quarters handset sales, which is expensed as incurred.
This amount decreased from the first quarter 2001 to the first
quarter 2002 primarily due to higher priced handsets sold.

International cost of revenues.The increase in international cost
of revenues from the first quarter 2001 to the first quarter
2002 consists of a $19 million or 54% increase in cost of
providing wireless services to $54 million, offset by a
$9 million or 25% decrease in cost of digital handset and
accessory sales to $27 million. The decrease in
international cost of digital handset and accessory sales is
primarily due to the decrease in the number of digital handsets
sold in the first quarter 2002 as compared to the first quarter
2001 as a result of the implementation of NII Holdings
revised business plan.

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



| |   |                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in costs related to variable
    interconnect fees on increased minutes of use primarily in
    Brazil and Mexico, partially due to a larger number of handsets
    in service; and                                                            
|
| |  | an increase in site ground lease and utility
    expenses incurred due to a 39% increase in the number of
    international transmitter and receiver sites placed in service
    by NII Holdings from the first quarter 2001 to the first quarter
    2002.

Selling, general and administrative
expenses.

|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |    |  
|----------------------------------- | -------------------------- | --------------------- | --- | ------------ |  | --------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | -- |  |  | --- | -- | -
|                                    |                            |                       |     |              |  |           |    |              |   |              
|                                    |                            |                       |     | % of         |  |           |    | % of         |   | Change from  
|                                    |                            |                       |     | Consolidated |  |           |    | Consolidated |   | Previous Year
|                                    |                            | March 31,             |     | Operating    |  | March 31, |    | Operating    |   |              
|                                    |                            | 2002                  |     | Revenues     |  | 2001      |    | Revenues     |   | Dollars       |     | Percent
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |        
|                                    |                            |                      
|                                    |                            | (dollars in millions)
|Three Months Ended                  |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   
|Domestic                            |                            | $                     | 346 |              |  |           | 16 | %            |   | $             | 327 |         |  |  | 19 | %  |   | $ | 19  |    |  |  | 6   | % 
|International                       |                            |                       | 36  |              |  |           | 2  | %            |   |               | 47  |         |  |  | 3  | %  |   |   | (11 | )  |  |  | (23 | )%
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   
|                                    | Selling and marketing      |                       | $   | 382          |  |           |    | 18           | % |               | $   | 374     |  |  |    | 22 | % |   | $   | 8  |  |  |     | 2  | %
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   
|Domestic                            |                            | $                     | 369 |              |  |           | 17 | %            |   | $             | 296 |         |  |  | 17 | %  |   | $ | 73  |    |  |  | 25  | % 
|International                       |                            |                       | 57  |              |  |           | 3  | %            |   |               | 55  |         |  |  | 3  | %  |   |   | 2   |    |  |  | 4   | % 
|Intercompany eliminations           |                            |                       | 1   |              |  |           |   |              |   |               | 1   |         |  |  |   |    |   |   |    |    |  |  |    |   
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   
|                                    | General and administrative |                       | $   | 427          |  |           |    | 20           | % |               | $   | 352     |  |  |    | 20 | % |   | $   | 75 |  |  |     | 21 | %
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   
|Selling, general and administrative |                            | $                     | 809 |              |  |           | 38 | %            |   | $             | 726 |         |  |  | 42 | %  |   | $ | 83  |    |  |  | 11  | % 
|                                    |                            |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |    |  |  |     |   

Domestic selling and marketing.The increase in domestic selling
and marketing expenses from the first quarter 2001 to the first
quarter 2002 primarily reflects increased costs incurred in
connection with growing our customer base, including:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $13 million or 15% increase in sales and
    marketing payroll and related expenses, consisting primarily of
    costs associated with additional employees related to our Nextel
    stores acquired and opened beginning in May 2001, and
|
| |  | a $12 million or 13% increase in other
    general selling and marketing expenses, including facilities
    costs related to our Nextel stores; offset by                                                                                    

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| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | a $6 million or 4% decrease in commissions
    and residuals earned by indirect dealers and distributors.

Domestic selling and marketing expenses decreased
as a percentage of consolidated operating revenues primarily as
a result of lower indirect commissions as a result of decreased
handset sales through our indirect channels and an increased
reliance on our direct channels.

International selling and marketing.The $11 million decrease in
international selling and marketing expenses from the first
quarter 2001 to the first quarter 2002 is primarily attributable
to decreased commissions to indirect dealers and distributors as
a result of the implementation of NII Holdings revised
business plan.

Domestic general and administrative.Domestic general and
administrative expenses increased from the first quarter 2001 to
the first quarter 2002 primarily as a result of:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $38 million or 69% increase in bad debt
    expense, which has increased as a percentage of domestic
    operating revenues from 3.4% in the first quarter 2001 to 4.8%
    in the first quarter 2002;                                                                                                                                                                                                                  
|
| |  | a $31 million or 27% increase in expenses
    related to billing, collection, customer retention and customer
    care activities, including the costs to support a larger
    customer base, as well as costs associated with the
    implementation of our new billing and customer care system,
    which was put into operation in the first quarter 2002 and is
    expected to be fully operational by mid-2002; and
|
| |  | a $4 million increase in personnel,
    facilities and general corporate expenses.                                                                                                                                                                                                                                                                                                                                        

During the second and third quarters of 2001, bad
debt expense increased as a percentage of domestic operating
revenues from the first quarter 2001 primarily due to the impact
of a slow economy and aggressive promotions during 2001. This
increase in bad debt has resulted in an ongoing increased focus
on and strengthening of our credit policies and procedures,
including modifying credit scoring models and requiring more
forms of identification and deposits from more customers,
limiting account sizes for designated high risk accounts and
suspending accounts earlier than in the past. As a result of
these initiatives, bad debt expense as a percentage of domestic
operating revenues improved from 5.5% in the third quarter 2001
to 4.8% in the first quarter 2002.

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 marketing and advertising as we
    introduce and continue strategic television product placement
    and national print advertising campaigns designed to increase
    brand awareness in our markets;                                                            
|
| |  | costs associated with operating our Nextel stores
    acquired and opened beginning in May 2001 and the additional
    Nextel stores we plan to open in 2002; and                                                                                                             
|
| |  | costs associated with billing, collection, bad
    debt, customer retention and customer care activities to support
    a growing customer base partially offset by savings expected
    from our new outsourcing arrangements and a new billing and
    customer care system.

International general and administrative.International general and
administrative expenses remained relatively flat from the first
quarter 2001 to the first quarter 2002 primarily due to:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in personnel, information technology,
    facilities and general corporate expenses as well as billing,
    collection and customer care activities in Mexico to support
    growth in operations and a larger customer base; and
|
| |  | an increase in international bad debt expense of
    $4 million or 50%, primarily in Argentina as a result of a
    weakening of the Argentine economy, which has been increasing as
    a percentage of revenues; offset by                 
|
| |  | a decrease in personnel, information technology,
    facilities and general corporate expenses in NII Holdings
    corporate headquarters and in Brazil.                                                                                    

20



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##### Table of Contents



Segment earnings (losses).

|                                |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |    |  
|------------------------------- | ---------------- | --------------------- | --- | ------------ |  | --------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | --- |  |  | --- | -- | -
|                                |                  |                       |     |              |  |           |    |              |   |              
|                                |                  |                       |     | % of         |  |           |    | % of         |   | Change from  
|                                |                  |                       |     | Consolidated |  |           |    | Consolidated |   | Previous Year
|                                |                  | March 31,             |     | Operating    |  | March 31, |    | Operating    |   |              
|                                |                  | 2002                  |     | Revenues     |  | 2001      |    | Revenues     |   | Dollars       |     | Percent
|                                |                  |                       |     |              |  |           |    |              |   |               |     |        
|                                |                  |                      
|                                |                  | (dollars in millions)
|Three Months Ended              |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|Domestic earnings               |                  | $                     | 586 |              |  |           | 27 | %            |   | $             | 353 |         |  |  | 20 | %  |   | $ | 233 |     |  |  | 66  | % 
|International earnings (losses) |                  |                       | 25  |              |  |           | 1  | %            |   |               | (34 | )       |  |  | (2 | )% |   |   | 59  |     |  |  | 174 | % 
|Intercompany eliminations       |                  |                       | (1  | )            |  |           |   |              |   |               | (1  | )       |  |  |   |    |   |   |    |     |  |  |    |   
|                                |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   
|                                | Segment earnings |                       | $   | 610          |  |           |    | 28           | % |               | $   | 318     |  |  |    | 18 | % |   | $   | 292 |  |  |     | 92 | %
|                                |                  |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |     |  |  |     |   

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

Domestic segment earnings.Domestic segment earnings as a
percentage of consolidated operating revenues have increased
primarily due to:



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | increased revenues from a larger customer base;                                          
|
| |  | decreased losses incurred in selling handsets; and                                       
|
| |  | decreased selling and marketing costs as a
    percentage of domestic operating revenues.

We expect domestic segment earnings to increase
in 2002 as compared to 2001 partially as a result of, among
other things, cost savings we expect to achieve through
economies of scale and increased operating efficiencies.
However, if general economic conditions worsen, if competitive
conditions in the wireless telecommunications industry worsen or
if our new handset or service offerings are not well received,
we may see declines in demand for our product and service
offerings, which may adversely affect our domestic segment
earnings. See Forward Looking Statements.

International segment earnings (losses).International segment earnings
(losses) improved due to:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased operating revenues from growth in NII
    Holdings customer base; and                                                                                                                                   
|
| |  | decreased aggregate amounts of digital handset
    costs and related commissions resulting from decreased handset
    sales as a result of the implementation of NII Holdings
    revised business plan; offset by
|
| |  | operating costs associated with the build-out of
    the international digital mobile networks and higher customer
    minutes of use.                                                                             

Depreciation and
amortization.

|                   |                               |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |   |  |  |     |    |  
|------------------ | ----------------------------- | --------------------- | --- | ------------ |  | --------- | -- | ------------ | - | ------------- | --- | ------- |  |  | -- | -- | - | - | --- | - |  |  | --- | -- | -
|                   |                               |                       |     |              |  |           |    |              |   |              
|                   |                               |                       |     | % of         |  |           |    | % of         |   | Change from  
|                   |                               |                       |     | Consolidated |  |           |    | Consolidated |   | Previous Year
|                   |                               | March 31,             |     | Operating    |  | March 31, |    | Operating    |   |              
|                   |                               | 2002                  |     | Revenues     |  | 2001      |    | Revenues     |   | Dollars       |     | Percent
|                   |                               |                       |     |              |  |           |    |              |   |               |     |        
|                   |                               |                      
|                   |                               | (dollars in millions)
|Three Months Ended |                               |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |   |  |  |     |   
|Depreciation       |                               | $                     | 385 |              |  |           | 18 | %            |   | $             | 335 |         |  |  | 19 | %  |   | $ | 50  |   |  |  | 15  | % 
|Amortization       |                               |                       | 14  |              |  |           | 1  | %            |   |               | 59  |         |  |  | 3  | %  |   |   | (45 | ) |  |  | (76 | )%
|                   |                               |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |   |  |  |     |   
|                   | Depreciation and amortization |                       | $   | 399          |  |           |    | 19           | % |               | $   | 394     |  |  |    | 22 | % |   | $   | 5 |  |  |     | 1  | %
|                   |                               |                       |     |              |  |           |    |              |   |               |     |         |  |  |    |    |   |   |     |   |  |  |     |   

Domestic depreciation increased $74 million
from the first quarter 2001 to the first quarter 2002 primarily
as a result of placing into service, as well as modifying,
additional switches and transmitter and receiver sites in
existing markets primarily to enhance the coverage and capacity
of our digital mobile networks and

21



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##### Table of Contents



increased depreciation as a result of our
shortening the useful lives of some assets in the fourth quarter
2001 due to our customer care and information technology
outsourcing arrangements. This increase is slightly offset by
the impact of fully depreciated assets.


International depreciation decreased
$24 million from the first quarter 2001 to the first
quarter 2002 primarily as a result of NII Holdings
write-down of substantially all of its long-lived assets in the
fourth quarter 2001 in connection with its revised business
plan. As a result, we expect that international depreciation
expense in the remainder of 2002 will continue to be less than
the amounts recorded for comparable periods of 2001.

Domestic amortization decreased $30 million
from the first quarter 2001 to the first quarter 2002. The
decrease is primarily attributable to the adoption of SFAS
No. 142, Goodwill and Other Intangible Assets,
under which domestic goodwill and FCC licenses are no longer
amortized effective January 1, 2002.

International amortization decreased
$15 million from the first quarter 2001 to the first
quarter 2002 primarily as a result of NII Holdings
write-down of substantially all of its long-lived assets in the
fourth quarter 2001 in connection with its revised business
plan. As a result, we expect that international amortization
expense in the remainder of 2002 will continue to be less than
the amounts recorded for comparable periods of 2001.

Restructuring charges, interest and
other.

|                                              |  |                       |      |              |  |           |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|--------------------------------------------- |  | --------------------- | ---- | ------------ |  | --------- | --- | ------------ |  | ------------- | ---- | ------- |  |  | --- | -- |  | - | ---- | - |  |  | --- | --
|                                              |  |                       |      |              |  |           |     |              |  |              
|                                              |  |                       |      | % of         |  |           |     | % of         |  | Change from  
|                                              |  |                       |      | Consolidated |  |           |     | Consolidated |  | Previous Year
|                                              |  | March 31,             |      | Operating    |  | March 31, |     | Operating    |  |              
|                                              |  | 2002                  |      | Revenues     |  | 2001      |     | Revenues     |  | Dollars       |      | Percent
|                                              |  |                       |      |              |  |           |     |              |  |               |      |        
|                                              |  |                      
|                                              |  | (dollars in millions)
|Three Months Ended                            |  |                       |      |              |  |           |     |              |  |               |      |         |  |  |     |    |  |   |      |   |  |  |     |   
|Restructuring and other charges               |  | $                     | (40  | )            |  |           | (2  | )%           |  | $             |     |         |  |  |    |    |  | $ | (40  | ) |  |  |    |   
|Interest expense                              |  |                       | (326 | )            |  |           | (15 | )%           |  |               | (358 | )       |  |  | (21 | )% |  |   | 32   |   |  |  | 9   | % 
|Interest income                               |  |                       | 16   |              |  |           | 1   | %            |  |               | 79   |         |  |  | 5   | %  |  |   | (63  | ) |  |  | (80 | )%
|Equity in losses of unconsolidated affiliates |  |                       | (25  | )            |  |           | (1  | )%           |  |               | (21  | )       |  |  | (1  | )% |  |   | (4   | ) |  |  | (19 | )%
|Foreign currency transaction losses, net      |  |                       | (72  | )            |  |           | (3  | )%           |  |               | (10  | )       |  |  | (1  | )% |  |   | (62  | ) |  |  | NM  |   
|Other, net                                    |  |                       | (2   | )            |  |           |    |              |  |               |     |         |  |  |    |    |  |   | (2   | ) |  |  | NM  |   
|Income tax (expense) benefit                  |  |                       | (353 | )            |  |           | (16 | )%           |  |               | 14   |         |  |  | 1   | %  |  |   | (367 | ) |  |  | NM  |   
|Loss attributable to common stockholders      |  |                       | (654 | )            |  |           | (30 | )%           |  |               | (428 | )       |  |  | (25 | )% |  |   | (226 | ) |  |  | (53 | )%





---

NMNot Meaningful


In January 2002, we announced a five-year
information technology outsourcing agreement with EDS, under
which EDS manages our corporate data center, database
administration, helpdesk, desktop services and other technical
functions. Additionally, in January 2002, we announced an
eight-year customer relationship management agreement with IBM
and TeleTech to manage our customer care centers. In connection
with these outsourcing agreements, we recorded a
$35 million domestic restructuring charge in the first
quarter 2002, of which about $31 million related to
vacating unneeded facilities. Also during the first quarter
2002, NII Holdings recorded $5 million in restructuring and
other charges.

The $32 million decrease in interest expense
from the first quarter 2001 to the first quarter 2002 resulted
primarily from a reduction in the weighted average interest rate
for our domestic bank credit facility and from the repurchase by
Nextel Communications, Inc. of some of NII Holdings senior
notes in the third quarter 2001 and the resulting elimination in
consolidation of the interest expense associated with these
senior notes. This decrease in interest expense is partially
offset by the issuance in January 2001 of our 9.5% senior notes
and the issuance in May 2001 of our 6% convertible notes.

22



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The $63 million decrease in interest income
from the first quarter 2001 to the first quarter 2002 is
primarily due to a decrease in interest rates as well as a lower
average cash and short-term investments balance in 2002.

The $4 million increase in equity in losses
of unconsolidated affiliates from the first quarter 2001 to the
first quarter 2002 is due to increased losses attributable to
our equity method investment in Nextel Partners.

The $72 million foreign currency transaction
loss in the first quarter 2002 is primarily due to a
$77 million foreign currency transaction loss recorded by
NII Holdings as a result of the devaluation of the Argentine
peso related to its U.S. dollar denominated liabilities in
Argentina, primarily its Argentine credit facilities. The
$10 million foreign currency transaction loss in the first
quarter 2001 is primarily attributable to the weakening of the
Brazilian real as a result of the economic environment in both
Brazil and Argentina.

The increase in the income tax expense in the
first quarter 2002 is primarily attributable to the adoption of
SFAS No. 142, as a result of which we incurred non-cash
charges of $350 million to income tax expense. For more
detailed information, see note 1 to the condensed consolidated
financial statements appearing at the beginning of this
quarterly report on Form 10-Q.

Liquidity and Capital Resources

We had losses attributable to common stockholders
of $654 million for the three months ended March 31,
2002, including restructuring and other charges of
$40 million and non-cash income tax expense charges of
$350 million. For the three months ended March 31,
2001, we had losses attributable to common stockholders of
$428 million. The operating expenses and capital
expenditures associated with developing, enhancing and operating
our digital mobile network have more than offset operating
revenues. Our operating expenses, debt service obligations and
anticipated capital expenditures are expected to continue to
exceed operating revenues through 2003. We have consistently
used external sources of funds, primarily from debt incurrences
and equity issuances, to fund operations, capital expenditures,
acquisitions and other nonoperating needs.

Cash flows.Net cash provided by operating activities of $462 million
during the three months ended March 31, 2002 improved by
$153 million compared to net cash provided by operating
activities of $309 million during the three months ended
March 31, 2001. This improvement in net cash provided by
operating activities reflects the implementation of cash
conservation measures by NII Holdings and the improved
performance of our domestic operations from our achievement of
certain economies of scale and from the growth in our domestic
customer base.

Net cash used in investing activities of
$987 million during the three months ended March 31,
2002 increased by $208 million as compared to $779 million
during the three months ended March 31, 2001 primarily due
to a $715 million increase in net cash used to purchase short
term investments from the three months ended March 31, 2001
to the three months ended March 31, 2002 offset by:



| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | a $334 million decrease in cash paid for
    capital expenditures; and                                  
|
| |  | a $173 million decrease in cash paid for
    purchases of licenses, acquisitions, investments and other.

Capital expenditures to fund the continued
expansion and enhancement of our digital mobile networks
continued to represent the largest use of our funds for
investing activities. Cash payments for capital expenditures
totaled $671 million during the three months ended
March 31, 2002 and $1,005 million during the three
months ended March 31, 2001, including $72 million
during 2002 and $157 million during 2001 of capital
expenditures for NII Holdings. Cash payments for domestic
capital expenditures decreased primarily due to a 43% decrease
in the number of transmitter and receiver sites placed into
service during the first quarter 2002 as compared to the first
quarter 2001. We attribute this decrease principally to improved
quality of our digital mobile network as well as anticipated
future technology improvements. See Future Capital Needs
and Resources  Capital Needs. Cash payments for
international capital expenditures decreased primarily as a
result of NII Holdings decision in the fourth quarter 2001
to pursue a less aggressive growth strategy. Cash payments for
licenses, acquisitions, investments and other totaled
$253 million during the three

23



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##### Table of Contents



months ended March 31, 2002 and includes the
acquisition of 800 MHz and 900 MHz licenses and
related assets from Chadmoore Wireless Group.


Net cash used in financing activities of
$34 million during the three months ended March 31,
2002 consisted primarily of repayments under capital lease and
finance obligations and long-term credit facilities. Net cash
provided by financing activities of $1,242 million during
the three months ended March 31, 2001 consisted primarily
of $1,245 million in net proceeds from the private
placement of our 9.5% senior serial redeemable notes due in 2011.

Future Capital Needs and Resources

Capital Resources.

As of March 31, 2002, our consolidated
capital resources included $3.29 billion of cash, cash
equivalents and short-term investments; however,
$222 million of those amounts were not available to fund
any of the cash needs of our domestic operations due to the
terms of NII Holdings debt agreements. Therefore, we had
available about $3.07 billion of cash, cash equivalents and
short-term investments to fund our domestic operations. At
March 31, 2002, we also had available to us about
$1.5 billion of the revolving loan commitment under our
domestic bank credit facility as discussed below. Our resulting
total amount of liquidity to fund our domestic operations at
March 31, 2002 was about $4.5 billion.

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



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

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

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

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##### Table of Contents



subsidiaries. As of March 31, 2002, we were
in compliance with all financial ratio tests required under our
bank credit facility.


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

Our ability to access additional amounts under
the bank credit facility may be restricted by provisions
included in some of our public notes and preferred stock that
limit the incurrence of additional indebtedness in certain
circumstances. The availability of borrowings under this
facility also is subject to the satisfaction or waiver of
specified borrowing conditions. As of March 31, 2002, we
were able to access substantially all of the remaining
$1.5 billion available under the bank credit facility.

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

Capital Needs.

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



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

Capital
Expenditures.Our domestic capital
expenditures in the first quarter 2002 were $486 million.
In the future, our domestic capital spending is expected to be
driven by several factors including:



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

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

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

NII Holdings currently has outstanding an
aggregate of $2.71 billion of debt that it incurred to
construct its network and fund its operations, including
$819 million in carrying amount, or $857 million in
aggregate principal amount, of notes held by Nextel
Communications. The obligations under this debt are solely those
of NII Holdings and its subsidiaries, and Nextel Communications
is not a party to any of the obligations in respect of that
debt. Since debt service payments are a significant portion of
NII Holdings current and future commitments and because
NII Holdings does not believe that funds generated from its
operating activities or realistically available from other
sources will be sufficient to meet its expected commitments, NII
Holdings is reviewing various alternatives to restructure its
currently outstanding indebtedness. As part of its cash
preservation plan, since December 31, 2001, NII Holdings
and its operating subsidiaries have failed to make scheduled
principal and interest payments on its credit facilities and
12.75% senior notes. For additional information, see
note 3, Long-Term Debt, Capital Lease and Finance
Obligations, in our condensed consolidated financial
statements appearing at the beginning of this quarterly report
on Form 10-Q.

As a result of these events of default and the
operation of cross-default provisions contained in NII
Holdings debt arrangements, NII Holdings entire debt
balance is callable or subject to acceleration, and is therefore
classified in current liabilities. NII Holdings lenders
are free to pursue any of their respective remedies under these
agreements, including, in the case of the Motorola and Argentine
credit facilities, seizing the assets of NII Holdings and its
subsidiaries that are pledged as collateral. NII Holdings is
currently in discussions with its various creditors regarding
the restructuring of its debt obligations. In addition, NII
Holdings independent auditors have issued a going
concern opinion with respect to NII Holdings 2001
annual financial statements, which indicates that, in their
opinion, substantial doubt exists about NII Holdings
ability to continue operating.

Nextel Communications had previously announced
that it might elect to provide up to $250 million to NII
Holdings if certain conditions were met. Since those conditions
have not been met, in April 2002, Nextel Communications withdrew
its proposal to provide NII Holdings with up to
$250 million. While Nextel Communications continues to
evaluate strategic alternatives with respect to NII Holdings,
there can be no assurances that Nextel Communications will reach
agreement with NII Holdings creditors with respect to a
potential restructuring of NII Holdings, or provide any
additional funds to NII Holdings. If NII Holdings is unable to
obtain additional funding or successfully restructure its
obligations, it may be required to reorganize under
Chapter 11 of the United States Bankruptcy Code or take
other measures, which could include liquidation of assets.

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

In making these assessments, we have considered:



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cash, cash equivalents and short-term investments
    on hand and available for our domestic operations as of
    March 31, 2002 of $3.07 billion;                                                                                 
|
| |  | the availability of about $1.5 billion of
    incremental funding over the amounts outstanding under our
    domestic bank credit facility;                                                                                        
|
| |  | the anticipated level of domestic capital
    expenditures through 2004, including a significant positive
    impact associated with our anticipated receipt of the
    contemplated iDEN technology upgrade from Motorola in 2003;
|
| |  | our scheduled domestic debt service requirements
    through 2004; and                                                                                                                                                             
|
| |  | any potential investment in NII Holdings.                                                                                                                                                                                          

If our business plans change, including as a
result of changes in technology, or if economic conditions in
any of our markets generally or competitive practices in the
mobile wireless telecommunications industry change materially
from those currently prevailing or from those now anticipated,
or if other presently unexpected circumstances are encountered
that have a material effect on the cash flow or profitability of
our mobile wireless businesses, the anticipated cash needs of
our businesses, as well as the conclusions as to the adequacy of
the available sources and timing or ability to achieve
free cash flow positive status, could change
significantly.

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



| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the impact of our participation in any future
    auctions for the purchase of spectrum licenses;                                                                                                                             
|
| |  | any significant acquisition transactions or the
    pursuit of any significant new business opportunities other than
    those currently being pursued by us;                                                                 
|
| |  | deployment of third generation or other new
    technologies;                                                                                                                                                                 
|
| |  | costs of compliance with FCC or state regulations
    to the extent we are unable to recover those costs; and                                                                                                                 
|
| |  | potential material changes to our business plan
    which could result from the spectrum realignment proposal we
    filed with the FCC in November 2001, if effected, including a
    potential related $500 million payment.

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



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

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

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

Forward Looking Statements

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



| |   |                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general economic conditions in the geographic
    areas and occupational market segments that we are targeting for
    our digital mobile network service;                                                                                                                                                                                                         
|
| |  | the availability of adequate quantities of system
    infrastructure and handset equipment and components to meet
    service deployment and marketing plans and customer demand;                                                                                                                                                                                  
|
| |  | the availability and cost of acquiring additional
    spectrum;                                                                                                                                                                                                                                                                                                    
|
| |  | the timely development and availability of new
    handsets with expanded applications and features;                                                                                                                                                                                                                                                               
|
| |  | the success of efforts to improve, and
    satisfactorily address any issues relating to, our digital
    mobile network performance;                                                                                                                                                                                                                              
|
| |  | the successful implementation and performance of
    the technology being deployed or to be deployed in our various
    market areas, including technologies relating to our Nextel
    Wireless Web services;                                                                                                                                                     
|
| |  | market acceptance of our new line of Java
    embedded handsets and service offerings, including our Nextel
    Wireless Web services and Nextel Worldwide;                                                                                                                                                                                                        
|
| |  | the timely delivery and successful implementation
    of new technologies deployed in connection with any future
    enhanced iDEN or third generation services we may offer;                                                                                                                                                                                      
|
| |  | the ability to achieve market penetration and
    average subscriber revenue levels sufficient to provide
    financial viability to our digital mobile network business;                                                                                                                                                                                          
|
| |  | our ability to successfully scale, in some
    instances in conjunction with third parties under outsourcing
    arrangements, our billing, collection, customer care and similar
    back-office operations to keep pace with customer growth,
    increased system usage rates and growth in levels of accounts
    receivables being generated by our customers;

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| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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
    communications services;                                                                                                                                         
|
| |  | future legislation or regulatory actions relating
    to specialized mobile radio services, other wireless
    communications services or telecommunications generally;                                                                                                                                                                                
|
| |  | the success of NII Holdings efforts to
    restructure its indebtedness and obtain additional financing; and                                                                                                                                                                                                                                          
|
| |  | other risks and uncertainties described from time
    to time in our reports and, with specific reference to risk
    factors relating to international operations, in NII
    Holdings reports, filed with the Securities and Exchange
    Commission, including our respective annual reports on
    Form 10-K for the year ended December 31, 2001.




Item 3.     Quantitative
and Qualitative Disclosures about Market Risk.

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

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

As of March 31, 2002, we held
$1.31 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 six months, these short-term investments do not expose
us to a significant amount of interest rate risk.

As of March 31, 2002, the fair value of our
investment in the common stock of SpectraSite Holdings, Inc., a
publicly traded company, totaled $15 million. This
investment is reported at its fair value in our condensed
consolidated financial statements. Negative fluctuations in the
stock price of SpectraSite expose us to equity price risk. A 10%
decline in its stock price would result in a $1.5 million
decrease in the fair value of our investment in SpectraSite.

The table below summarizes our market risks as of
March 31, 2002 in U.S. dollars. Since our financial
instruments expose us to interest rate and foreign currency
exchange rate risks, these instruments are presented within each
market risk category. The table presents principal cash flows
and related interest rates by year of maturity for our senior
notes, bank and vendor credit facilities, capital lease and
finance obligations and mandatorily redeemable preferred stock
in effect at March 31, 2002. In the case of the mandatorily
redeemable preferred stock and senior notes, the table excludes
the potential exercise of the relevant redemption or conversion
features. This table also assumes that we will refinance our
indebtedness to levels necessary to avoid an earlier repayment
obligation with respect to our domestic bank credit agreement.
See Future Capital Needs and Resources. For interest
rate swap agreements, the table presents notional amounts and
the related interest rates by year of maturity. Fair values
included in this section have been determined based on:



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | quoted market prices for senior notes and
    mandatorily redeemable preferred stock;
|
| |  | estimates from bankers for our domestic bank
    credit facility;                    

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| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | carrying values for NII Holdings bank and
    vendor credit facilities as interest rates are reset
    periodically, however, as a result of defaults under these
    facilities, other methods used to determine fair values may
    result in significantly different amounts;
|
| |  | present values of future cash flows for capital
    lease and finance obligations using discount rates available for
    similar obligations; and                                                                                                                                
|
| |  | estimates from bankers to settle interest rate
    swap agreements.                                                                                                                                                                                                              

Notes 7, 8 and 11 to the consolidated financial
statements included in our 2001 annual report on Form 10-K
contain descriptions of our senior notes, bank and vendor credit
facilities, capital lease and finance obligations, interest rate
swap agreements and mandatorily redeemable preferred stock and
should be read together with the following table.

|                                                                                                         |                       |                            |   |       |   |      |   |      |   |      |   |            |   |       |   |       |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |       |  
|-------------------------------------------------------------------------------------------------------- | --------------------- | -------------------------- | - | ----- | - | ---- | - | ---- | - | ---- | - | ---------- | - | ----- | - | ----- | - |  | - | --- | - |  | - | ------ | - |  | - | ------ | - |  | - | ----- | -
|                                                                                                         |                       |                            |   |       |   |     
|                                                                                                         |                       | Year of Maturity           |   |       |   |     
|                                                                                                         |                       |                            |   |       |   | Fair
|                                                                                                         |                       | 2002                       |   | 2003  |   | 2004 |   | 2005 |   | 2006 |   | Thereafter |   | Total |   | 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(1)         |                            | $ | 1,544 |   |      | $ | 106  |   |      | $ | 115        |   |       | $ | 120   |   |  | $ | 113 |   |  | $ | 12,604 |   |  | $ | 14,602 |   |  | $ | 7,484 |  
|                                                                                                         | Average Interest Rate |                            |   | 12    | % |      |   | 9    | % |      |   | 9          | % |       |   | 9     | % |  |   | 9   | % |  |   | 9      | % |  |   | 10     | % |  |   |       |  
|                                                                                                         | Variable Rate(2)      |                            | $ | 531   |   |      | $ | 199  |   |      | $ | 327        |   |       | $ | 433   |   |  | $ | 466 |   |  | $ | 3,045  |   |  | $ | 5,001  |   |  | $ | 4,223 |  
|                                                                                                         | Average Interest Rate |                            |   | 7     | % |      |   | 4    | % |      |   | 4          | % |       |   | 4     | % |  |   | 4   | % |  |   | 5      | % |  |   | 5      | % |  |   |       |  
|Interest Rate Swaps                                                                                      |                       |                            |   |       |   |      |   |      |   |      |   |            |   |       |   |       |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|                                                                                                         | Variable to Fixed(3)  |                            | $ |      |   |      | $ |     |   |      | $ |           |   |       | $ |      |   |  | $ | 570 |   |  | $ |       |   |  | $ | 570    |   |  | $ | (74   | )
|                                                                                                         | Average Pay Rate      |                            |   |      |   |      |   |     |   |      |   |           |   |       |   |      |   |  |   | 8   | % |  |   |       |   |  |   | 8      | % |  |   |       |  
|                                                                                                         | Average Receive Rate  |                            |   |      |   |      |   |     |   |      |   |           |   |       |   |      |   |  |   | 2   | % |  |   |       |   |  |   | 2      | % |  |   |       |  
|                                                                                                         | Variable to Variable  |                            | $ |      |   |      | $ | 400  |   |      | $ |           |   |       | $ |      |   |  | $ |    |   |  | $ |       |   |  | $ | 400    |   |  | $ | (11   | )
|                                                                                                         | Average Pay Rate      |                            |   |      |   |      |   | 5    | % |      |   |           |   |       |   |      |   |  |   |    |   |  |   |       |   |  |   | 5      | % |  |   |       |  
|                                                                                                         | Average Receive Rate  |                            |   |      |   |      |   | 2    | % |      |   |           |   |       |   |      |   |  |   |    |   |  |   |       |   |  |   | 2      | % |  |   |       |  
|                                                                                                         | Fixed to Variable     |                            | $ |      |   |      | $ |     |   |      | $ |           |   |       | $ |      |   |  | $ |    |   |  | $ | 500    |   |  | $ | 500    |   |  | $ | 7     |  
|                                                                                                         | Average Pay Rate      |                            |   |      |   |      |   |     |   |      |   |           |   |       |   |      |   |  |   |    |   |  |   | 5      | % |  |   | 5      | % |  |   |       |  
|                                                                                                         | Average Receive Rate  |                            |   |      |   |      |   |     |   |      |   |           |   |       |   |      |   |  |   |    |   |  |   | 10     | % |  |   | 10     | % |  |   |       |  
|II. Foreign Currency Exchange Rate
    Sensitivity                                                       |                       |                            |   |       |   |      |   |      |   |      |   |            |   |       |   |       |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|Long-Term Debt                                                                                           |                       |                            |   |       |   |      |   |      |   |      |   |            |   |       |   |       |   |  |   |     |   |  |   |        |   |  |   |        |   |  |   |      
|                                                                                                         | Fixed Rate            |                            | $ | 1,475 |   |      | $ |     |   |      | $ |           |   |       | $ |      |   |  | $ |    |   |  | $ |       |   |  | $ | 1,475  |   |  | $ | 49    |  
|                                                                                                         | Average Interest Rate |                            |   | 13    | % |      |   |     |   |      |   |           |   |       |   |      |   |  |   |    |   |  |   |       |   |  |   | 13     | % |  |   |       |  
|                                                                                                         | Variable Rate         |                            | $ | 483   |   |      | $ |     |   |      | $ |           |   |       | $ |      |   |  | $ |    |   |  | $ |       |   |  | $ | 483    |   |  | $ | 483   |  
|                                                                                                         | Average Interest Rate |                            |   | 7     | % |      |   |     |   |      |   |           |   |       |   |      |   |  |   |    |   |  |   |       |   |  |   | 7      | % |  |   |       |  




|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Fixed rate amounts maturing in 2002 include
    $1,475 million of debt of NII Holdings, nonrecourse to and
    not held by parent, callable or subject to acceleration by third
    parties.
|   
|(2) | Variable amounts maturing in 2002 include
    $483 million of debt of NII Holdings, nonrecourse to and
    not held by parent, callable or subject to acceleration by third
    parties.    
|   
|(3) | This interest rate swap requires a cash
    settlement in October 2003.                                                                                                                     

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PART II  OTHER INFORMATION.




Item 1.  Legal
Proceedings.

We are involved in certain legal proceedings that
are described in our 2001 annual report on Form 10-K.
During the three months ended March 31, 2002, there were no
material changes in the status of or developments regarding
those legal proceedings that have not been previously disclosed
in our 2001 annual report on Form 10-K.




Item 3.  Defaults Upon Senior
Securities.

As previously discussed in this quarterly report
on Form 10-Q, on December 31, 2001, NII Holdings
Argentine operating company failed to make a scheduled principal
payment of $8 million under its Argentine credit
facilities. On February 1, 2002, NII Holdings failed to
make a $41 million interest payment due under its 12.75%
senior serial redeemable notes due 2010. Furthermore, on
March 31, 2002, NII Holdings failed to make a
$1 million interest payment due on its $57 million
vendor credit facility with Motorola. Also on March 31,
2002, NII Holdings Argentine operating company failed to
make a second scheduled principal payment of $8 million as
well as an interest payment of $1 million to the lenders under
its Argentine credit facilities. As a result of these events of
default and the operation of cross-default provisions contained
in NII Holdings debt arrangements, NII Holdings
entire debt balance is callable or subject to acceleration. NII
Holdings lenders are free to pursue any of their
respective remedies under these agreements, including, in the
case of the Motorola and Argentine credit facilities, seizing
the assets of NII Holdings and its subsidiaries that are pledged
as collateral. NII Holdings is currently in discussions with its
various creditors regarding the restructuring of its debt
obligations.




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

(a) List of Exhibits.

|        |  |                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                               
|Number  |  | Exhibit Description                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                               
|10.1*   |  | Amendment 004 dated March 15, 2002 to iDEN
    Subscriber Supply Agreement dated November 4, 1991 between
    Nextel Communications and Motorola.                                                             
|10.2*   |  | Amendment 004 dated March 22, 2002 to
    Availability/ Outage Goals for 2002 to iDEN Infrastructure [*]
    Supply Agreement date April 13, 1999, as amended, between
    Nextel Communications and Motorola.




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

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



| |    |                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Current report on Form 8-K dated and filed
    on January 3, 2002 reporting under Item 5 the
    announcement that NII Holdings Argentine operating company
    failed to make scheduled principal payments due under its
    Argentine credit facilities.
|
| | 2. | Current report on Form 8-K dated and filed
    on January 17, 2002 reporting under Item 5 the
    announcement that Nextel Communications and IBM entered into a
    customer care management outsourcing agreement.                                       
|
| | 3. | Current report on Form 8-K dated and filed
    on February 1, 2002 reporting under Item 5 the
    announcement that NII Holdings failed to make an interest
    payment due under its 12.75% senior serial redeemable notes due
    2010.                  
|
| | 4. | Current report on Form 8-K dated and filed
    on February 5, 2002 reporting under Item 5 the
    announcement of certain preliminary financial and other
    information for the first quarter 2002.                                                      
|
| | 5. | Current report on Form 8-K dated and filed
    on February 19, 2002 reporting under Item 5 NII
    Holdings announcement of certain financial and other
    information for the first quarter 2002.                                                       
|
| | 6. | Current report on Form 8-K dated and filed
    on February 21, 2002 reporting under Item 5 the
    announcement of certain financial and other information for the
    first quarter 2002.                                                                 

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SIGNATURE

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



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



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

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

Date: May 15, 2002


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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                               
|Number  |  | Exhibit Description                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                               
|10.1*   |  | Amendment 004 dated March 15, 2002 to iDEN
    Subscriber Supply Agreement dated November 4, 1991 between
    Nextel Communications and Motorola.                                                             
|10.2*   |  | Amendment 004 dated March 22, 2002 to
    Availability/ Outage Goals for 2002 to iDEN Infrastructure [*]
    Supply Agreement date April 13, 1999, as amended, between
    Nextel Communications and Motorola.




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

33