<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC  20549
                                          
                                          
                                     FORM 10-Q
                                          
                                          
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
                                          
                    For the quarterly period ended June 30, 1998
                                          
                         Commission file number: 000-22939
                                          

                           NEXTLINK Communications, Inc.
                                NEXTLINK Capital, Inc. 
               ------------------------------------------------------
               (Exact name of registrant as specified in its charter)

             Washington                               91-1738221 
             Washington                               91-1716062 
     -------------------------------               ------------------
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)


     500 108th Avenue NE, Suite 2200, Bellevue, WA            98004   
     ---------------------------------------------         ----------
        (Address of principal executive offices)           (Zip Code)


                                    (425) 519-8900     
                 ----------------------------------------------------
                 (Registrant's telephone number, including area code)


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      .
                                        -----     -----

As of August 1, 1998, the number of shares of Class A and Class B common 
stock of NEXTLINK Communications, Inc. issued and outstanding was 20,280,822 
and 33,483,502, respectively, and there were 1,000 shares of common stock of 
NEXTLINK Capital, Inc., all of which 1,000 shares were held by NEXTLINK 
Communications, Inc.

NEXTLINK Capital, Inc. meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.


<PAGE>
PART I.       FINANCIAL INFORMATION

Item 1(a).    FINANCIAL STATEMENTS

                            NEXTLINK COMMUNICATIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                     (AMOUNTS AS OF JUNE 30, 1998 ARE UNAUDITED)

<TABLE>
<CAPTION>
                                                      JUNE 30,     DECEMBER 31,
                                                        1998           1997
                                                     ----------   -------------
<S>                                                  <C>            <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents . . . . . . . . . . .   $  300,430     $  389,074
   Marketable securities . . . . . . . . . . . . .      998,216        353,283
   Accounts receivable, net. . . . . . . . . . . .       27,208         22,955
   Other . . . . . . . . . . . . . . . . . . . . .        8,622          4,530
   Pledged securities. . . . . . . . . . . . . . .       42,350         41,425
                                                     ----------     ----------
      Total current assets . . . . . . . . . . . .    1,376,826        811,267
Pledged securities . . . . . . . . . . . . . . . .           --         21,185
Property and equipment, net. . . . . . . . . . . .      372,687        253,653
Goodwill, net. . . . . . . . . . . . . . . . . . .       56,559         52,278
Other assets, net. . . . . . . . . . . . . . . . .      249,860         78,770
                                                     ----------     ----------
      Total assets . . . . . . . . . . . . . . . . $  2,055,932   $  1,217,153
                                                     ----------     ----------
                                                     ----------     ----------

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable. . . . . . . . . . . . . . . .    $  17,327      $  26,776
   Accrued expenses. . . . . . . . . . . . . . . .       26,873         13,082
   Accrued interest payable. . . . . . . . . . . .       28,552         18,880
   Notes payable and current portion of capital 
     lease obligations . . . . . . . . . . . . . .        3,763         10,844
                                                     ----------     ----------
      Total current liabilities. . . . . . . . . .       76,515         69,582
Long-term debt . . . . . . . . . . . . . . . . . .    1,493,901        750,000
Capital lease obligations and other 
  long-term liabilities. . . . . . . . . . . . . .       11,281         10,842
                                                     ----------     ----------
      Total liabilities. . . . . . . . . . . . . .    1,581,697        830,424
Commitments and contingencies
Redeemable preferred stock, par value $0.01 per 
   share, 25,000,000 shares authorized; 14% 
   Preferred, aggregate liquidation preference 
   $346,518; 6,772,317 and 6,322,031 shares 
   issued and outstanding in 1998 and 1997, 
   respectively; 6-1/2% Convertible Preferred, 
   4,000,000 and 0 shares issued and outstanding 
   in 1998 and 1997, respectively. . . . . . . . .      530,772        313,319
Common stock subject to redemption, par value 
   $0.02 per share, 519,950 Class B shares 
   issued and outstanding in 1997. . . . . . . . .           --          4,950
Shareholders' equity (deficit):
   Common Stock, par value $0.02 per share, 
     stated at amounts paid in; Class A, 
     110,334,000 shares authorized, 20,071,914 
     and 19,167,899 shares issued and outstanding 
     in 1998 and 1997, respectively; Class B, 
     44,133,600 shares authorized, 33,672,814 and 
     33,746,573 shares issued and outstanding in 
     1998 and 1997, respectively . . . . . . . . .      345,064        330,561
   Deferred compensation . . . . . . . . . . . . .       (9,332)        (9,596)
   Accumulated deficit . . . . . . . . . . . . . .     (392,269)      (252,505)
                                                     ----------     ----------
      Total shareholders' equity (deficit) . . . .      (56,537)        68,460
                                                     ----------     ----------
      Total liabilities and shareholders' 
        equity (deficit) . . . . . . . . . . . . . $  2,055,932   $  1,217,153
                                                     ----------     ----------
                                                     ----------     ----------
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
<PAGE>

                            NEXTLINK COMMUNICATIONS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                     (UNAUDITED)

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED          SIX MONTHS ENDED
                                                              JUNE 30,                    JUNE 30,
                                                     -------------------------  --------------------------
                                                          1998         1997         1998           1997
                                                     -----------   ----------   -----------     ----------
<S>                                                 <C>           <C>           <C>             <C>
Revenue. . . . . . . . . . . . . . . . . . . . . .  $    32,030    $    11,601  $    58,575     $    21,668

Costs and expenses:
   Operating . . . . . . . . . . . . . . . . . . .       28,070         12,037       52,620          21,941
   Selling, general and administrative . . . . . .       36,077         15,829       68,034          29,103
   Deferred compensation . . . . . . . . . . . . .          760            223        1,384           1,115
   Depreciation. . . . . . . . . . . . . . . . . .        8,415          3,206       14,909           6,054
   Amortization. . . . . . . . . . . . . . . . . .        3,765          1,319        7,454           2,877
                                                    -----------    -----------  -----------     -----------
      Total costs and expenses . . . . . . . . . .       77,087         32,614      144,401          61,090

                                                    -----------    -----------  -----------     -----------
Loss from operations . . . . . . . . . . . . . . .      (45,057)       (21,013)     (85,826)        (39,422)

Interest income. . . . . . . . . . . . . . . . . .       22,822          5,567       34,557          10,692
Interest expense . . . . . . . . . . . . . . . . .      (38,338)       (10,902)     (61,616)        (22,041)

                                                    -----------    -----------  -----------     -----------
Net loss . . . . . . . . . . . . . . . . . . . . .  $   (60,573)   $   (26,348) $  (112,885)    $   (50,771)
                                                    -----------    -----------  -----------     -----------
                                                    -----------    -----------  -----------     -----------

Preferred stock dividends and accretion of 
   preferred stock redemption obligation, 
   including issue costs . . . . . . . . . . . . .      (15,328)       (10,550)     (26,879)        (17,353)
                                                    -----------    -----------  -----------     -----------
Net loss applicable to common shares . . . . . . .  $   (75,901)   $   (36,898) $  (139,764)    $   (68,124)
                                                    -----------    -----------  -----------     -----------
                                                    -----------    -----------  -----------     -----------

Net loss per share . . . . . . . . . . . . . . . .  $     (1.42)   $     (0.94) $     (2.61)    $     (1.73)
                                                    -----------    -----------  -----------     -----------
                                                    -----------    -----------  -----------     -----------
Shares used in computation of net loss per 
   share . . . . . . . . . . . . . . . . . . . . .   53,609,120     39,312,482   53,545,671      39,312,482
                                                    -----------    -----------  -----------     -----------
                                                    -----------    -----------  -----------     -----------

</TABLE>

See accompanying notes to unaudited interim consolidated financial statements.


<PAGE>

                            NEXTLINK COMMUNICATIONS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (DOLLARS IN THOUSANDS)
                                     (UNAUDITED)
<TABLE>
<CAPTION>

                                                        SIX MONTHS ENDED
                                                            JUNE 30,
                                                    --------------------------
                                                         1998           1997
                                                    -----------      ---------
<S>                                                 <C>              <C>
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . .  $  (112,885)     $ (50,771)

Adjustments to reconcile net loss to net 
  cash used in operating activities:
   Deferred compensation expense . . . . . . . . .        1,384          1,115
   Equity in loss of affiliates. . . . . . . . . .        1,643          1,015
   Depreciation and amortization . . . . . . . . .       22,363          8,931
   Accretion of interest on senior notes . . . . .        9,578             --
Changes in assets and liabilities, net of 
  effects from acquisitions:
   Accounts receivable . . . . . . . . . . . . . .       (4,253)        (2,764)
   Other assets. . . . . . . . . . . . . . . . . .       (5,692)           464
   Accounts payable. . . . . . . . . . . . . . . .      (13,539)        (5,333)
   Accrued expenses and other liabilities. . . . .       12,676          1,911
   Accrued interest payable. . . . . . . . . . . .        9,672           (365)
                                                    -----------      ---------
Net cash used in operating activities. . . . . . .      (79,053)       (45,797)

INVESTING ACTIVITIES:
Purchase of property and equipment . . . . . . . .     (126,652)       (55,181)
Net assets acquired in business and asset 
   acquisitions (net of cash acquired) . . . . . .           --        (41,239)
Cash withdrawn from escrow to be used in 
   business acquisition. . . . . . . . . . . . . .           --          6,000
Assets acquired in network lease agreement . . . .      (92,000)            --
Contribution to NEXTBAND for purchase of 
   spectrum licenses . . . . . . . . . . . . . . .      (67,354)            --
Investments in unconsolidated affiliates . . . . .           --         (4,275)
Maturity of pledged securities . . . . . . . . . .       19,636         18,049
Purchase of marketable securities. . . . . . . . .   (2,505,500)       (28,812)
Sale of marketable securities. . . . . . . . . . .    1,860,567             --
                                                    -----------      ---------
Net cash used in investing activities. . . . . . .     (911,303)      (105,458)

</TABLE>


                                   -- Continued --


<PAGE>

                            NEXTLINK COMMUNICATIONS, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
                                (DOLLARS IN THOUSANDS)
                                     (UNAUDITED)

<TABLE>
<CAPTION>

                                                        SIX MONTHS ENDED
                                                            JUNE 30,
                                                    --------------------------
                                                         1998           1997
                                                    -----------      ---------
<S>                                                 <C>              <C>
FINANCING ACTIVITIES:
Net proceeds from issuance of redeemable 
   preferred stock . . . . . . . . . . . . . . . .   $  193,824     $  274,000
Repayment of note payable and capital 
   lease obligations . . . . . . . . . . . . . . .       (8,734)          (789)
Proceeds from issuance of common stock upon 
   exercise of stock options . . . . . . . . . . .          555             --
Dividends paid on convertible preferred stock. . .       (3,250)            --
Repayment of loans to related parties. . . . . . .        2,151             --
Proceeds from issuance of senior notes 
   (net of discount) . . . . . . . . . . . . . . .      734,323             --
Costs incurred in connection with financing. . . .      (17,157)            --
                                                     ----------     ----------
Net cash provided by financing activities. . . . .      901,712        273,211

                                                     ----------     ----------
Net increase (decrease) in cash and cash 
   equivalents . . . . . . . . . . . . . . . . . .      (88,644)       121,956

Cash and cash equivalents, beginning of period . .      389,074         76,807

                                                     ----------     ----------
Cash and cash equivalents, end of period . . . . .   $  300,430     $  198,763
                                                     ----------     ----------
                                                     ----------     ----------

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Noncash financing and investing activities:
  Redeemable preferred stock dividends, paid in 
    redeemable preferred shares. . . . . . . . . .   $   22,515     $   10,086
                                                     ----------     ----------
                                                     ----------     ----------
   Accrued redeemable preferred stock dividends, 
    payable in redeemable preferred shares, 
    and accretion of preferred stock redemption 
    obligation and issue costs . . . . . . . . . .   $    1,114     $    6,885
                                                     ----------     ----------
                                                     ----------     ----------
   Issuance of Class B common stock for purchase 
    of minority interests. . . . . . . . . . . . .   $    5,727     $       --
                                                     ----------     ----------
                                                     ----------     ----------
   Capital lease obligations assumed . . . . . . .   $    2,505     $       --
                                                     ----------     ----------
                                                     ----------     ----------
   Class A common stock issued under lease 
     arrangement . . . . . . . . . . . . . . . . .   $       --     $    1,400
                                                     ----------     ----------
                                                     ----------     ----------

Cash paid for interest . . . . . . . . . . . . . .   $   42,121     $   22,406
                                                     ----------     ----------
                                                     ----------     ----------
</TABLE>

See accompanying notes to unaudited interim consolidated financial statements.


<PAGE>

                           NEXTLINK COMMUNICATIONS, INC.
                NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 
                                     (UNAUDITED)
                                          
1. BASIS OF PRESENTATION
   
   The consolidated financial statements include the accounts of NEXTLINK
Communications, Inc., a Delaware corporation, and its majority-owned
subsidiaries (collectively referred to as the Company). The Company, through
predecessor entities, was formed on September 16, 1994 and, through its
subsidiaries, provides competitive local telecommunications services in selected
markets in the United States. The Company is a majority-owned subsidiary of
Eagle River Investments, L.L.C. (Eagle River).

   The Company's financial statements include 100% of the assets, liabilities
and results of operations of subsidiaries in which the Company has a controlling
interest of greater than 50%. The Company's investment in Telecommunications of
Nevada, L.L.C. (Nevada L.L.C.), a limited liability company in which the Company
has a 40% interest and which operates a network that is managed by the Company
in Las Vegas, Nevada, is accounted for on the equity method. All operational
statistics of the Company included in this Report include 100% of the
operational statistics of Nevada L.L.C. Investments in entities in which the
Company has voting interests of not more than 20% are accounted for on the cost
method. All significant intercompany accounts and transactions have been
eliminated. 

   The interim financial statements are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's Form 10-KSB as filed with the Securities and Exchange Commission on
March 25, 1998.

   The financial information included herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the results for interim periods.
The results of operations for the three and six-month periods ended June 30,
1998 are not necessarily indicative of the results to be expected for the full
year.

2. FINANCINGS

   DEBT
   
   On March 3, 1998, the Company completed the sale of $335.0 million in
aggregate principal amount of 9% Senior Notes due March 15, 2008 (9% Senior
Notes). Proceeds from the sale net of discounts, underwriting commissions,
advisory fees and expenses totaled approximately $326.5 million. Interest
payments on the 9% Senior Notes are due semi-annually. The 9% Senior Notes are
redeemable at the option of the Company, in whole or in part, beginning March
15, 2003.
   
     On April 1, 1998, the Company completed the sale of 9.45% Senior Discount
Notes (9.45% Notes), due April 15, 2008. The 9.45% Notes were issued at a
discount from their principal amount to generate aggregate gross proceeds to the
Company of approximately $400.0 million. Proceeds net of underwriting
commissions, advisory fees and expenses totaled $390.9 million. The 9.45% Notes
accrete at a rate of 9.45% compounded semi-annually, to an aggregate principal
amount of approximately $637.0 million by April 15, 2003. No cash interest will
accrue on the 9.45% Notes until April 15, 2003. Interest will become payable in
cash semi-annually beginning on October 15, 2003. The 9.45% Notes are redeemable
at the option of the Company, in whole or in part, at any time after April 15,
2003.
   
   The indentures pursuant to which the 9% Senior Notes and the 9.45% Notes (the
Notes) are issued contain certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to incur additional indebtedness,
issue stock in subsidiaries, pay dividends or make other distributions,
repurchase equity interests or 


<PAGE>

subordinated indebtedness, engage in sale and leaseback transactions, create 
certain liens, enter into certain transactions with affiliates, sell assets 
of the Company and its subsidiaries, and enter into certain mergers and 
consolidations.
   
   In the event of a change in control or asset disposition of the Company as 
defined in the indentures, holders of the Notes will have the right to 
require the Company to purchase their Notes, in whole or in part, at a price 
equal to 101% of the principal amount thereof, plus accrued and unpaid 
interest, if any, thereon to the date of purchase. The Notes are senior 
unsecured obligations of the Company, and are subordinated to all current and 
future indebtedness of the Company's subsidiaries, including trade payables.

   REDEEMABLE PREFERRED STOCK
   
   On March 31, 1998, the Company completed the sale of 4,000,000 shares of 
6-1/2% cumulative convertible preferred stock (6-1/2% Preferred Stock) with a 
liquidation preference of $50 per share. The sale generated gross proceeds to 
the Company of $200.0 million, and proceeds net of underwriting discounts, 
advisory fees and expenses of $193.8 million. Each share of 6-1/2% Preferred 
Stock is convertible, at the option of the holder, into 1.145 shares of the 
Company's Class A common stock (subject to adjustments in certain 
circumstances). The Company may cause such conversion rights to expire if the 
closing price of the Class A common stock exceeds 120% of an implied 
conversion price (as defined) for 20 days in a 30 consecutive day trading 
period after April 15, 2001 and through April 15, 2006. Dividends on the 
6-1/2% Preferred Stock accrue from March 31, 1998 and are payable in cash 
quarterly, beginning on June 30, 1998, at an annual rate of 6-1/2% of the 
liquidation preference thereof. The Company is required to redeem all of the 
6-1/2% Preferred Stock outstanding on March 31, 2010 at a redemption price 
equal to 100% of the liquidation preference thereof, plus accumulated and 
unpaid dividends to the date of redemption. 

3. NETWORK LEASE
   
   In February 1998, the Company entered into a 20-year capital lease for 
exclusive rights to multiple fibers and innerducts throughout New York, New 
Jersey, Connecticut, Pennsylvania, Delaware, Maryland and Washington D.C. The 
Company paid $92.0 million in the transaction, of which $80.3 million was 
placed into escrow pending completion and delivery of segments of the network 
route to the Company. The payment was recorded as a long-term asset, and will 
be reclassified as property and equipment as portions of the network are 
completed. The Company has the option to renew the lease for two additional 
10-year terms.

4. JOINT VENTURE
   
   In January 1998, the Company and Nextel Communications, Inc. (Nextel), a
nationwide provider of wireless telephone services, formed a joint venture
called NEXTBAND Communications, L.L.C. (NEXTBAND), which is owned 50% each by
the Company and Nextel. NEXTBAND was the successful bidder in 42 markets
covering approximately 105 million POPs, or persons located within the licensed
areas owned, in the FCC's local multipoint distribution service (LMDS) auctions,
which concluded in March 1998. The Company has contributed $67.4 million to
NEXTBAND, representing its pro rata share of NEXTBAND's total bid in the LMDS
auctions. The Company is evaluating means to use its access to NEXTBAND's LMDS
spectrum to enhance its ability to connect customers to its fiber rings, and to
deploy wireless local loop technologies using LMDS frequencies where it
determines it cost effective to do so.

5. RECLASSIFICATIONS

   Certain reclassifications have been made to prior period amounts in order to
conform to the current presentation.  

6. SUBSEQUENT EVENT
   
   In July 1998, the Company announced the formation of INTERNEXT L.L.C., 
which is beneficially owned 50% each by the Company and Eagle River. 
INTERNEXT entered into an agreement whereby INTERNEXT agreed to buy a 
nationwide, multiconduit fiber optic network that is expected to cover more 
than 16,000 route miles and connect 50 cities in the United States and 
Canada. Pursuant to this agreement, INTERNEXT will 

<PAGE>

receive an exclusive interest in 24 fibers in a shared conduit, one entire 
empty conduit and the right to 25% of the fibers pulled through any conduits 
in the network in excess of five. INTERNEXT will pay $700.0 million in 
exchange for these rights, the majority of which will be payable as segments 
of the network are completed and accepted by INTERNEXT, which is expected to 
occur during 2000 and 2001. The Company has guaranteed the obligations of 
INTERNEXT under this agreement, up to 50% of such obligations. The Company 
anticipates that Nextel will acquire a one-third ownership interest in 
INTERNEXT, which would reduce the Company's beneficial interest in and 
obligations with respect to INTERNEXT to one-third.

<PAGE>

PART I.       FINANCIAL INFORMATION

Item 1(b).    FINANCIAL STATEMENTS


                                NEXTLINK CAPITAL, INC.
                                    BALANCE SHEETS
                                     (UNAUDITED)

<TABLE>
<CAPTION>


                                                               JUNE 30,
                                                           1998          1997
                                                         ------         ------
<S>                                                      <C>            <C>
ASSETS
Cash in bank . . . . . . . . . . . . . . . . . . . . .   $  100         $  100
                                                         ------         ------
                                                         ------         ------

SHAREHOLDER'S EQUITY
Common stock, no par value,
   1,000 shares authorized, issued and outstanding . .   $  100         $  100
                                                         ------         ------
                                                         ------         ------
</TABLE>


                              NOTES TO BALANCE SHEETS

1.   DESCRIPTION

     NEXTLINK Capital, Inc. (NEXTLINK Capital) is a Washington corporation and a
wholly owned subsidiary of NEXTLINK Communications, Inc. (NEXTLINK). NEXTLINK
Capital was formed for the sole purpose of obtaining financing from external
sources and is a joint obligor on the 12-1/2% Senior Notes due April 15, 2006 
of NEXTLINK. NEXTLINK Capital was initially funded with a $100 contribution 
from NEXTLINK and has had no operations to date.

2.   BASIS OF PRESENTATION
   
     The interim financial statements have been prepared without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB as filed with the Securities and Exchange Commission on March 25,
1998. 


<PAGE>

PART I.   FINANCIAL INFORMATION

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

OVERVIEW

   Since its inception in 1994, the Company has executed a strategy of
constructing and acquiring fiber optic networks and acquiring related
telecommunications businesses. Over this period, the Company has pursued this
strategy by constructing, acquiring, leasing fibers or capacity on, and entering
into agreements to acquire local telecommunications networks.
 
   The Company develops and operates high capacity, local fiber optic networks
with broad market coverage in a growing number of markets across the United
States. In its switched local service markets, the Company offers its customers
a bundled package of local and long distance services and also offers dedicated
transmission and competitive access services to long distance carriers and end
users. The Company plans to acquire, build or develop networks in new areas,
expand its current networks, and also explore the acquisition or licensing of
additional enhanced communications services and other telecommunications service
providers. These efforts should allow the Company to increase its presence in
the marketplace, and facilitate providing a single source solution for the
telecommunications needs of its customers.
   
   The Company currently operates 18 facilities-based networks providing
switched local and long distance services in 32 markets in nine states. The
Company serves larger markets including Los Angeles, Chicago, Atlanta and the
San Francisco Bay Area, medium-sized markets such as Las Vegas and Nashville,
and clusters of smaller markets in Orange County, California and central
Pennsylvania. The Company anticipates developing additional new markets
throughout a majority of the nation's top 30 markets which, together with its
existing markets, are expected to have a total of approximately 27 million
addressable business lines by the end of 2000. The Company plans to launch
service in New York and New Jersey in the third quarter of 1998; Dallas, Denver
and Miami in the fourth quarter of 1998; San Diego and Washington, D.C. in the
first quarter of 1999; and Seattle in the second quarter of 1999. The Company 
is also developing a national network strategy to enable it to offer its 
customers complete, end-to-end voice and data communications services over 
NEXTLINK-owned facilities.
   
   The table below provides selected key financial and operating data (dollars
are in thousands):

<TABLE>
<CAPTION>
                                                              AS OF AND
                                                         FOR THE THREE MONTHS 
                                                            ENDED JUNE 30,
                                                         1998           1997
                                                     ----------     ----------
<S>                                                  <C>             <C>
FINANCIAL DATA: 
Gross property and equipment. . . . . . . . . . .    $ 424,007       $ 175,630
EBITDA (1). . . . . . . . . . . . . . . . . . . .    $ (32,117)      $ (16,265)
 
OPERATING DATA (2):
Route miles (3).. . . . . . . . . . . . . . . . .        2,099           1,595
Fiber miles (4) . . . . . . . . . . . . . . . . .      152,225         117,464
On-net buildings connected (5). . . . . . . . . .          658             459
Off-net buildings connected (6) . . . . . . . . .        8,448             825
Switches installed. . . . . . . . . . . . . . . .           17              12
Access lines in service (7) . . . . . . . . . . .      102,887          17,409
Employees . . . . . . . . . . . . . . . . . . . .        1,765             845

</TABLE>

(1)  EBITDA represents net loss before interest expense, interest income,
     depreciation, amortization and deferred compensation expense. EBITDA is
     commonly used to analyze companies on the basis of operating performance,
     leverage and liquidity. While EBITDA should not be construed as a
     substitute for operating income or a better measure of liquidity than cash
     flow from operating activities, which are determined in accordance with
     generally accepted accounting principles, it is included herein to provide
     additional information with respect to the ability of the Company to meet
     future debt service, capital expenditure and working capital requirements.

<PAGE>

(2)  The operating data includes 100% of the statistics of the Las Vegas
     network, which the Company manages and in which the Company has a 40%
     membership interest.
(3)  Route miles refers to the number of miles of the telecommunications path in
     which the Company-owned or leased fiber optic cables are installed. 
(4)  Fiber miles refers to the number of route miles installed along a
     telecommunications path, multiplied by the Company's estimate of the number
     of fibers along that path. 
(5)  Represents buildings physically connected to the Company's networks,
     excluding those connected by unbundled incumbent local exchange carrier
     (ILEC) facilities. 
(6)  Represents buildings connected to the Company's networks through leased or
     unbundled ILEC facilities.
(7)  Represents the number of access lines in service, including those lines
     that are provided through resale of Centrex services, for which the Company
     is billing services. The Company serviced 3,550 resold access lines as 
     of June 30, 1998, and does not sell such services to new customers. The 
     Company defines an access line as a telephone connection between a 
     customer purchasing local telephone services and NEXTLINK. This 
     connection does not include the concept of access line equivalents 
     (ALEs), and is a one-for-one relationship with no multipliers used for 
     trunk or station ratios. For instance, customers using direct inward dial
     (DID) extensions are not included in the access lines reported. 
     Additionally, access services, such as a digital trunk connection to an
     IXC, are not counted as access lines. For a trunk over which a primary 
     rate interface (PRI) service is provided, the Company counts 23 access 
     lines.
   
   The Company builds its networks to encompass the significant business
concentrations in each area it serves, focusing on direct connections to end-
user locations and ILEC central offices. The Company employs a uniform
technology platform for each of its local exchange networks that is based on the
Nortel DMS 500 digital local and long distance combination switching platform
and associated distribution technology. As of June 30, 1998, the Company had 15
operational Nortel DMS 500 switches, including one switch in its NEXTLAB
facility, and currently plans to install four additional switches by the end of
1998. NEXTLAB is a fully functional model of one of the Company's networks,
which serves as a testing facility for switch software and the Company's
products and services and will serve as the Company's network operations control
center.

   The development of the Company's businesses and the construction, acquisition
and expansion of its networks require significant expenditures, substantial
portions of which are incurred before the realization of revenues. These
expenditures, together with the associated early operating expenses, result in
negative cash flow until an adequate customer base is established. However, as
the customer base grows, the Company expects that incremental revenues can be
generated with decreasing incremental operating expenses, which may provide
positive contributions to cash flow. The Company has made the strategic decision
to build high capacity networks with broad market coverage, which initially
increases its level of capital expenditures and operating losses. The Company
believes that over the long term this will enhance the Company's financial
performance by increasing the traffic flow over the Company's networks. The
Company has recently entered into leased dark fiber and fiber capacity
arrangements which allow the Company, by installing one or more switches and
related electronics, to enter a market prior to completing construction of its
own fiber optic network.

RESULTS OF OPERATIONS
 
   Revenue increased 176% to $32.0 million during the second quarter of 1998,
from $11.6 million in the same period in 1997. Year to date revenue of $58.6
million represented a 170% increase from the $21.7 million reported for the
comparable period in 1997. The increase was driven by 284% growth in revenues
from bundled local and long distance services and dedicated services, as well as
by the acquisitions of Start Technologies Corporation (Start) and Chadwick
Telecommunications Corporation (Chadwick) in the fourth quarter of 1997.
Revenues reported in the second quarter of 1998 included $26.8 million derived
from local and long distance, competitive access, dedicated line services and
shared tenant services and $5.2 million derived from enhanced communications
services, primarily interactive voice response (IVR) services. The Company's IVR
revenue comprised 15% and 30% of the Company's total revenues during the second
quarter of 1998 and 1997, respectively. 

   The Company increased the number of customer access lines added during the
quarter from 22,703 in the first quarter of 1998 to 30,053 during the second
quarter of 1998. As of June 30, 1998, the Company had 102,887 access lines in
service, compared to 50,131 as of December 31, 1997 and 17,409 as of June 30,
1997. Revenues from the provision of such services are expected to continue to
increase as a component of total revenues over future periods. 

<PAGE>

Access lines in service includes those lines which are provided through 
resale of Centrex services, the number of which is decreasing over time as 
the Company converts those customers to its own network. 
 
   Operating expenses consist of costs directly related to providing facilities-
based network and enhanced communications services and also include salaries and
benefits and related costs of operations and engineering personnel. Operating
expenses increased 133% in the second quarter of 1998 to $28.1 million, an
increase of $16.0 million over the second quarter of 1997. For the six months
ended June 30, 1998, operating expenses rose $30.7 million, or 140%, over the
same period in 1997. These increases were attributed to increased network costs
related to provisioning higher volumes of local, long distance and enhanced
communications services, an increase in employees and an increase in other
related costs primarily to expand the Company's switched local and long distance
service businesses in its existing and planned markets. To a lesser extent, the
acquisitions of Start and Chadwick in the fourth quarter of 1997 also
contributed to the increase in operating costs over those in the second quarter
of 1997.
 
   Selling, general and administrative (SG&A) expenses include salaries and
related personnel costs, facilities expenses, sales and marketing, systems
development costs, consulting and legal fees and equity in loss of affiliates.
SG&A expenses increased 128% and 134% in the three and six-month periods ended
June 30, 1998 as compared to the corresponding periods in 1997. The increases
were due to the Company's increase in employees, as well as other costs
associated with the expansion of the Company's switched local and long distance
service businesses in its existing and planned markets.

   Deferred compensation expense was recorded in connection with the Company's
Equity Option Plan until April 1997, and in connection with the Company's Stock
Option Plan, which replaced the Equity Option Plan, subsequent to April 1997.
The stock options granted under the Equity Option Plan were considered
compensatory and were accounted for on a basis similar to that for stock
appreciation rights. All options outstanding under the Equity Option Plan were
regranted under the new Plan with terms and conditions substantially the same as
under the Equity Option Plan. As such, the Company continues to record deferred
compensation expense for those compensatory stock options issued, as well as for
compensatory stock options issued subsequent to the Plan conversion date.
Compensation expense is recognized over the vesting periods based on the excess
of the fair value of the stock options at the date of grant over the exercise
price.
 
   Depreciation expense increased primarily due to placement in service of
additional telecommunications network assets, including switches, fiber optic
cable, network electronics and related equipment. Amortization of intangible
assets increased primarily as a result of the Start and Chadwick acquisitions in
the fourth quarter of 1997.
 
   Interest expense increased 252% in the second quarter of 1998 over the
comparable period in the prior year due to an increase in the Company's average
outstanding indebtedness over the respective periods. See "--Liquidity and
Capital Resources." Pursuant to Statement of Financial Accounting Standards No.
34, the Company capitalizes a portion of its interest costs as part of the
construction cost of its communications networks. Capitalized interest during
the first six months of 1998 totaled $1.4 million. Interest income results from
investment of excess cash and certain securities that have been pledged as
collateral for interest payments on the 12-1/2% Senior Notes. The increase in
interest income for the three and six-month periods in 1998 over the same
periods in 1997 corresponded to the increase in the Company's average
outstanding cash balances.

 
LIQUIDITY AND CAPITAL RESOURCES
 
   The competitive local telecommunications service business is a capital-
intensive business. The Company's existing operations have required and will
continue to require substantial capital investment for the acquisition and
installation of fiber, electronics and related equipment in order to provide
switched services in the Company's networks and the funding of operating losses
during the start-up phase of each market. In addition, the Company's strategic
plan calls for expansion into additional market areas. Such expansion will
require significant additional capital for: potential acquisitions of businesses
or assets; design, development and construction of new networks; and the funding
of operating losses during the start-up phase of each market. During the first
six months of 1998, 


<PAGE>

the Company used $79.1 million in cash for operating activities, compared to 
$45.8 million for the same period in the prior year. The increase was 
primarily due to a substantial increase in the Company's activities 
associated with the continued development and expansion of switched local and 
long distance service operations. During the first six months of 1998, the 
Company invested an additional $218.7 million in property and equipment and 
acquisitions of telecommunications assets. During the same period in 1997, 
the Company invested $94.7 million in property and equipment, acquisitions of 
telecommunications assets and businesses and equity investments in 
telecommunications businesses.
   
   In July 1998, the Company announced the formation of INTERNEXT L.L.C., 
which is beneficially owned 50% each by the Company and Eagle River 
Investments, L.L.C (Eagle River). INTERNEXT entered into an agreement with 
Level 3 Communications L.L.C. whereby INTERNEXT agreed to buy a nationwide, 
multiconduit fiber optic network that is expected to cover more than 16,000 
route miles and connect 50 cities in the United States and Canada. Pursuant 
to this agreement, INTERNEXT will receive an exclusive interest in 24 fibers 
in a shared conduit, one entire empty conduit and the right to 25% of the 
fibers pulled through any conduits in the network in excess of five. 
INTERNEXT will pay $700.0 million in exchange for these rights, the majority 
of which will be payable as segments of the network are completed and 
accepted by INTERNEXT, which is expected to occur during 2000 and 2001. The 
Company has guaranteed the obligations of INTERNEXT under this agreement, up 
to 50% of such obligations. The Company anticipates that Nextel 
Communications, Inc. (Nextel) will acquire a one-third ownership interest in 
INTERNEXT, which would reduce the Company's beneficial ownership interest in 
and obligations with respect to INTERNEXT to one-third. The Company is in the 
process of defining its plans for implementation of a national network 
strategy, which is anticipated to require additional capital expenditures.
   
   In February 1998, the Company signed a definitive agreement with Metromedia
Fiber Network for exclusive rights to multiple fibers and innerducts for 20
years, with two 10-year renewals. The route covered by the agreement extends
from Manhattan to White Plains (NY), to Stamford (CT), to Newark (NJ) and south
from Manhattan through Philadelphia, Wilmington (DE), Baltimore, and to
Washington (DC). The route will offer frequent splice points within metropolitan
areas and on routes between metropolitan areas, as well as provide access to
ILEC central and tandem switching offices. The Company paid $92.0 million in
cash for this transaction, $80.3 million of which was placed into escrow, to be
released as segments of the route are constructed and delivered to the Company.
   
   In January 1998, the Company and Nextel formed NEXTBAND, a joint venture 
that is owned 50% each by the Company and Nextel. NEXTBAND was the successful 
bidder in 42 markets in the FCC's local multipoint distribution service 
(LMDS) auctions. The Company's pro rata share of NEXTBAND's total bid in the 
LMDS auctions was $67.4 million, which was paid in full in June 1998. The 
Company is in process of defining its operational and financial plans for 
implementation of an LMDS strategy, which likely will involve additional 
capital expenditures.

   On March 3, 1998, the Company completed the sale of $335.0 million in
aggregate principal amount of 9% Senior Notes due March 15, 2008. Proceeds from
the sale net of discounts, underwriting commissions, advisory fees and expenses
totaled approximately $326.5 million. Interest payments on the 9% Senior Notes
are due semi-annually, beginning September 1998.
   
   On March 31, 1998, the Company completed the sale of 4,000,000 shares of 
6-1/2% cumulative convertible preferred stock (6-1/2% Preferred Stock) with a 
liquidation preference of $50 per share. The sale generated gross proceeds to 
the Company of $200.0 million, and proceeds net of underwriting discounts, 
advisory fees and expenses of $193.8 million. Each share of 6-1/2% Preferred 
Stock is convertible, at the option of the holder, into 1.145 shares of the 
Company's Class A common stock (subject to adjustments in certain 
circumstances). Dividends on the 6-1/2% Preferred Stock accrue from March 31, 
1998 and are payable quarterly in cash, beginning on June 30, 1998.
   
    On April 1, 1998, the Company completed the sale of 9.45% Senior Discount
Notes (9.45% Notes), due April 15, 2008. The 9.45% Notes were issued at a
discount from their principal amount to generate aggregate gross proceeds to the
Company of approximately $400.0 million. Proceeds net of underwriting
commissions, advisory fees and expenses totaled $390.9 million. The 9.45% Notes
accrete at a rate of 9.45% compounded semi-annually, 


<PAGE>

to an aggregate principal amount of approximately $637.0 million by April 15, 
2003. No cash interest will accrue on the Notes until April 15, 2003. 
Interest will become payable in cash semi-annually beginning on October 15, 
2003. 

   The Company will use the net proceeds from the sale of the 9% Senior Notes,
the 6-1/2% Preferred Stock and the 9.45% Notes and existing unrestricted cash
balances for expenditures relating to the development, construction, acquisition
and operation of telecommunications networks and service providers and the
offering of telecommunications services in those areas where the Company
currently operates or intends to operate. Expenditures for the construction and
operation of networks include (i) the purchase and installation of switches and
related electronics in existing networks and in networks to be constructed or
acquired in new or adjacent markets, (ii) the purchase and installation of fiber
optic cable and electronics to expand existing networks and develop new
networks, including the connection of new buildings, (iii) the development of
its comprehensive information technology platform, (iv) the acquisition of LMDS
spectrum purchased in the FCC's auction and the construction and deployment of
associated facilities and (v) the funding of operating losses and working
capital. The Company may also acquire or invest in businesses that consist of
existing networks or companies engaged in businesses similar to those engaged in
by the Company and its subsidiaries or other complementary businesses. 
   
   As of June 30, 1998, the Company had unrestricted cash and investments of 
$1,298.6 million. The Company's current plan contemplates an aggressive 
expansion into a number of new markets. The Company may pursue various 
alternatives for achieving its growth strategy, including: additional network 
construction; additional leases of network capacity from third party 
providers; acquisitions of existing networks; and use of spectrum that was 
purchased during the LMDS auctions and construction and deployment of 
associated facilities. The Company also anticipates that a substantial amount 
of additional capital expenditures will be made in 1999 and beyond. The 
funding of these capital expenditures is expected to be provided by existing 
cash balances, future vendor and/or credit facilities, future public or 
private sales of debt securities, future sales of public or private capital 
stock and joint ventures. There can be no assurance, however, that the 
Company will be successful in raising sufficient additional capital on terms 
that it will consider acceptable or that the Company's operations will 
produce positive consolidated cash flow in sufficient amounts to meet its 
interest and dividend obligations on its outstanding securities. Failure to 
raise and generate sufficient funds may require the Company to delay or 
abandon some of its planned future expansion or expenditures, which could 
have a material adverse effect on the Company's growth and its ability to 
compete in the telecommunications services industry.
 
   In addition, the Company's operating flexibility with respect to certain
business matters is, and will continue to be, limited by covenants associated
with the 12-1/2% Senior Notes, the 9-5/8% Senior Notes, the 9% Senior Notes and
the 9.45% Notes (collectively referred to as the Senior Notes). Among other
things, these covenants limit the ability of the Company and its subsidiaries to
incur additional indebtedness, create liens upon assets, apply the proceeds from
the disposal of assets, make dividend payments and other distributions on
capital stock and redeem capital stock. In addition, the terms of the 14% Senior
Exchangeable Redeemable Preferred Shares (14% Preferred Shares) contain certain
covenants that may limit the Company's operating flexibility with respect to the
incurrence of indebtedness and issuance of additional preferred shares. There
can be no assurance that such covenants will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in other
business activities that may be in the interest of the Company. The Company was
in compliance with all covenants associated with the Senior Notes and 14%
Preferred Shares as of June 30, 1998.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

   The statements contained in this report and in associated prior filings by 
the Company with the Securities and Exchange Commission which are not 
historical facts are "forward-looking statements" (as such term is defined in 
the Private Securities Litigation Reform Act of 1995), which can be 
identified by the use of forward-looking terminology such as "believes", 
"expects", "may", "will", "should", or "anticipates" or the negative thereof 
or other variations thereon or comparable terminology, or by discussions of 
strategy that involve risks and uncertainties. Such forward-looking 
statements include, but are not limited to: the Company's plans to build, 
acquire or develop networks and offer services in new areas, expand its 
current networks and explore the acquisition or licensing of additional 
enhanced communications services and other telecommunications service 
providers; the Company's development of a national strategy for end-to-end 
communications services; the Company's presence in the 

<PAGE>

marketplace and its ability to provide a single source solution for the 
telecommunications needs of its customers; the Company's anticipated 
development of new markets; its expected number of addressable business lines 
in markets where the Company operates and by the end of 2000; its plans to 
launch service in various cities; its plans to install additional switches by 
the end of 1998; its plans to implement use of LMDS spectrum; its expectation 
regarding incremental revenues, incremental operating expenses and 
contributions to cash flow; the Company's belief regarding its financial 
performance and traffic flow over its networks; its expectations regarding 
revenue from access lines as a percentage of total revenues; its requirements 
for capital investment; its use of proceeds from various financings; its 
anticipated capital expenditures; and other statements contained herein 
regarding matters that are not historical facts. Management wishes to caution 
the reader that these forward-looking statements are only predictions. These 
statements are based on a number of assumptions that ultimately could prove 
inaccurate and, therefore, no assurance can be given that the future results 
will be achieved. Actual events or results may differ materially as a result 
of a number of factors, including those identified in the Company's annual 
report on Form 10-KSB (File No. 333-04603). Factors that could affect 
performance include: the level of the Company's future negative cash flows 
and operating losses incurred by the Company until it establishes an adequate 
revenue base and generates substantial revenues from the provision of 
switched local and long distance services; successfully generating or raising 
on terms that the Company will consider acceptable sufficient capital to 
accommodate planned future expansion and expenditures; continued attraction 
and retention of qualified managerial, professional and technical personnel; 
timely installation of the required switches, fiber optic cable and 
associated electronics necessary to provide switched local service in a 
manner that will permit the resolution of technical problems; successfully 
negotiating new and, to the extent necessary, renegotiating existing 
interconnection agreements; successfully developing effective systems 
relating to ordering, provisioning and billing for telecommunications 
services; successfully offering, marketing and selling switched local 
services and other enhanced products and services in all of the Company's 
networks as quickly as practicable; sufficient access to the ILEC's networks 
and adequate cooperation therefrom to connect new customers to the Company's 
network on a timely basis; identifying, financing and completing suitable 
acquisitions; maintaining existing, and obtaining and maintaining new, 
franchises, permits and rights-of-way and any required governmental 
authorizations, franchises and permits on a timely basis; competition from 
incumbent providers and new entrants; the nature of regulatory, legislative 
and judicial developments; and rapid and significant changes in technology. 
These are representative of factors that could affect the outcome of the 
forward-looking statements. In addition, such statements could be affected by 
general industry and market conditions and economic conditions including 
interest rate fluctuations.
   
   
NEW ACCOUNTING STANDARD

   In April 1998, the AICPA released Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" (SOP 98-5). The new standard requires that all
entities expense costs of start-up activities as those costs are incurred. SOP
98-5 defines "start-up costs" as those costs directly related to pre-operating,
pre-opening, and organization activities. This standard must be adopted in
fiscal years beginning after December 15, 1998. The Company does not capitalize
start-up costs as defined by SOP 98-5; as such, adoption of SOP 98-5 will not
have a material impact the Company's financial position.


<PAGE>

PART II.       OTHER INFORMATION   

Item 1.        LEGAL PROCEEDINGS

               The Company is not currently a party to any legal proceedings, 
               other than regulatory and other proceedings that are in the 
               normal course of its business.

Item 2.        CHANGES IN SECURITIES AND USE OF PROCEEDS

               In June 1998, the Company issued 189,312 shares of Class B common
               stock to Questar Infocomm, Inc. (Questar) pursuant to an Exchange
               Agreement dated as of May 26, 1998 between the Company and 
               Questar. Such shares of Class B common stock were issued in 
               consideration for the acquisition of Questar's 10% membership 
               interest in NEXTLINK Utah, L.L.C, a majority-owned subsidiary of
               the Company. These shares of Class B common stock were issued in
               reliance upon an exemption from registration contained in Rule 
               506 of Regulation D of the Securities Act of 1993, as amended, 
               based upon Questar's representation that it was an accredited 
               investor, as defined under such regulation.
               
               The Company filed a registration statement on Form S-1 (File 
               No. 333-32001) which became effective on September 26, 1997, 
               whereby 15,200,000 shares of Class A common stock, $.02 par 
               value per share, were sold in an initial public offering (IPO) 
               at a price of $17 per share. Of the 15,200,000 shares of Class 
               A common stock sold, 12,000,000 were sold by the Company and 
               3,200,000 were sold by a selling shareholder. The Company did 
               not receive any of the proceeds from the sale of shares by the 
               selling shareholder. In addition, the underwriters of the IPO, 
               led by Salomon Brothers Inc, exercised an option to purchase 
               2,280,000 additional shares of Class A common stock at the 
               same price per share. Net proceeds to the Company from the 
               initial public offering totaled approximately $226.8 million, 
               after deducting underwriting discounts, advisory fees and 
               expenses aggregating approximately $16.0 million. The Company 
               intends to use substantially all of the net proceeds from the 
               initial public offering for expenditures relating to the 
               expansion of existing networks and services, the development 
               and acquisition of new networks and services and the funding 
               of operating losses and working capital. None of the proceeds 
               from this offering had been used as of June 30, 1998. 
               
               The Company filed a registration statement on Form S-1 (File 
               No. 333-32003) which became effective on September 26, 1997, 
               whereby the Company sold $400.0 million aggregate principal 
               amount of 9-5/8% Senior Notes. The offering was led by Salomon 
               Brothers Inc. Net proceeds from the sale of the 9-5/8% Senior 
               Notes totaled approximately $388.5 million, after deducting 
               issuance costs aggregating approximately $11.5 million, 
               relating to underwriting discounts, advisory fees and 
               expenses. The use of proceeds from the debt offering are 
               expected to be substantially the same as the Company's initial 
               public offering. Approximately $228.0 million of the proceeds 
               from this offering had been used as of June 30, 1998, $129.2 
               million of which was used for the purchase of property and  
               equipment, $20.5 million for the network lease agreement entered
               into in February 1998, and the remainder was used to fund the 
               Company's operations and working capital requirements.

Item 3.        DEFAULTS UPON SENIOR SECURITIES

               None.

Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               The Company held its annual meeting of shareholders on May 20, 
               1998. The following matters were voted upon at the meeting:
                    
                 Proposal 1: The following directors were elected:


<PAGE>

PART II.       OTHER INFORMATION   

<TABLE>
Caption

                                                                            Votes
                                                                ----------------------------
                                                                    For             Withheld
                                                                -----------         --------
               <S>                                              <C>                 <C>
               Steven W. Hooper. . . . . . . . . . . . . . . .  343,811,711         368,186
               Wayne M. Perry. . . . . . . . . . . . . . . . .  344,020,607         159,290
               James F. Voelker. . . . . . . . . . . . . . . .  344,020,607         159,290
               Craig O. McCaw. . . . . . . . . . . . . . . . .  343,811,711         368,186
               Dennis Weibling . . . . . . . . . . . . . . . .  343,810,961         368,936
               Scot Jarvis . . . . . . . . . . . . . . . . . .  343,810,961         368,936
               William A. Hoglund. . . . . . . . . . . . . . .  343,810,961         368,936
               Sharon L. Nelson. . . . . . . . . . . . . . . .  344,020,607         159,290
               Jeffrey S. Raikes . . . . . . . . . . . . . . .  344,020,607         159,290

</TABLE>
               Proposal 2: The amendment of the Company's Stock Option Plan to
               increase the number of available shares of Class A common stock
               by 5,441,336 was approved, with 331,642,009 votes for, 9,030,604
               votes against, 13,957 abstentions and 3,493,327 broker nonvotes.
               
               Proposal 3: The Company's Employee Stock Purchase Plan was
               approved, with 340,470,956 votes for, 196,550 votes against,
               19,124 abstentions and 3,493,267 broker nonvotes.

               Proposal 4: The change in the Company's state of incorporation
               from Washington to Delaware by a merger with and into a newly-
               formed, wholly-owned Delaware subsidiary was approved, with
               340,657,553 votes for, 19,175 votes against, 9,502 abstentions
               and 3,493,667 broker nonvotes.

               Proposal 5: The appointment of Arthur Andersen LLP as the
               independent public accountants of the Company for 1998 was
               approved, with 344,122,604 votes for, 50,264 votes against and
               7,029 abstentions.

Item 5.        OTHER INFORMATION

               None.

Item 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)  Exhibits

                    3.1  Certificate of Incorporation of NEXTLINK
                         Communications, Inc. (1)

                    3.2  By-laws of NEXTLINK Communications, Inc. (1)

                    3.3  Articles of Incorporation of NEXTLINK Capital, Inc. (2)

                    3.4  By-laws of NEXTLINK Capital, Inc. (2)

                    4.1  Form of Exchange Note Indenture, by and among NEXTLINK
                         Communications, Inc. and United States Trust Company of
                         New York, as Trustee, relating to the Exchange Notes,
                         including form of Exchange Notes. (3)

                    4.2  Certificate of Designations of the Powers, Preferences
                         and Relative, Participating, Optional and Other Special
                         Rights of 14% Senior Exchangeable 


<PAGE>

PART II.       OTHER INFORMATION   

                         Redeemable Preferred Shares and Qualifications, 
                         Limitations and Restrictions Thereof. (1)

                    4.3  Form of stock certificate of 14% Senior Exchangeable
                         Redeemable Preferred Shares. (3)

                    4.4  Indenture, dated as of April 25, 1996, by and among
                         NEXTLINK Communications, Inc., NEXTLINK Capital, Inc.
                         and United States Trust Company of New York, as
                         Trustee, relating to 12-1/2% Senior Notes due April 15,
                         2006, including form of global note. (2)

                    4.5  First Supplemental Indenture, dated as of January 31,
                         1997, by and among NEXTLINK Communications, Inc.,
                         NEXTLINK Communications, L.L.C., NEXTLINK Capital and
                         United States Trust Company of New York, as Trustee.
                         (3)

                    4.6  Form of Indenture between United States Trust Company,
                         as Trustee and NEXTLINK Communications, Inc., relating
                         to the 9-5/8% Senior Notes due 2007. (4)

                    4.7  Indenture, dated March 3, 1998, between United States
                         Trust Company, as Trustee and NEXTLINK Communications,
                         Inc., relating to the 9% Senior Notes due 2008. (5)

                    4.8  Certificate of Designations of the Powers, Preferences
                         and Relative, Participating, Optional and Other Special
                         Rights of 6-1/2% Cumulative Convertible Preferred Stock
                         and Qualifications, Limitations and Restrictions
                         Thereof. (1)

                    4.9  Indenture, dated April 1, 1998, between United States
                         Trust Company, as Trustee and NEXTLINK Communications,
                         Inc. relating to the 9.45% Senior Discount Notes due
                         2008. (6)

                    4.10 Second Supplemental Indenture, dated June 3, 1998,
                         amending Indenture dated April 25, 1996, by and among
                         NEXTLINK Communications, Inc., NEXTLINK Capital, Inc.
                         and United States Trust Company of New York, as
                         Trustee. (1)

                    4.11 First Supplemental Indenture, dated June 3, 1998,
                         amending Indenture dated September 25, 1997, by and
                         between NEXTLINK Communications, Inc. and United States
                         Trust Company of New York, as Trustee. (1)

                    4.12 First Supplemental Indenture, dated June 3, 1998,
                         amending Indenture dated March 3, 1998, by and between
                         NEXTLINK Communications, Inc. and United States Trust
                         Company of New York, as Trustee. (1)

                    4.13 First Supplemental Indenture, dated June 3, 1998,
                         amending Indenture dated April 1, 1998, by and between
                         NEXTLINK Communications, Inc. and United States Trust
                         Company of New York, as Trustee. (1)

                    10.1 Stock Option Plan of NEXTLINK Communications, Inc., as
                         amended. (1)

                    10.2 Employee Stock Purchase Plan of NEXTLINK
                         Communications, Inc. (1)


<PAGE>

PART II.       OTHER INFORMATION   

                    10.3 Registration Rights Agreement dated as of January 15,
                         1997, between the predecessor of NEXTLINK
                         Communications, Inc. and the signatories listed
                         therein. (3)

                    10.4 Preferred Exchange and Registration Rights Agreement,
                         dated as of January 31, 1997, by and among the
                         predecessor of NEXTLINK Communications, Inc. and the
                         Initial Purchasers. (3)

                    10.5 Fiber Lease and Innerduct Use Agreement, dated as of
                         February 23, 1998, by and between NEXTLINK
                         Communications, Inc. and Metromedia Fiber Network, Inc.
                         (5)

                    10.6 Amendment No. 1 to Fiber Lease and Innerduct Use
                         Agreement, dated as of March 4, 1998, by and between
                         NEXTLINK Communications, Inc. and Metromedia Fiber
                         Network, Inc. (5)

                    27   Financial Data Schedule  
                         
               ----------
               
               (1)  Incorporated herein by reference to the exhibit filed with 
                    the Registration Statement on Form S-4 of NEXTLINK
                    Communications, Inc. and NEXTLINK Capital, Inc. (Commission
                    File No. 333-53975).
               (2)  Incorporated herein by reference to the exhibit filed with
                    the Registration Statement on Form S-4 of NEXTLINK
                    Communications, L.L.C. (the predecessor of NEXTLINK
                    Communications, Inc.) and NEXTLINK Capital, Inc. (Commission
                    File No. 333-4603).
               (3)  Incorporated herein by reference to the exhibit filed with
                    the Annual Report on Form 10-KSB for the year ended December
                    31, 1996 of NEXTLINK Communications, Inc. and NEXTLINK
                    Capital, Inc. (Commission File Nos. 333-04603 and 
                    333-04603-01).
               (4)  Incorporated herein by reference to the exhibit filed with
                    the Registration Statement on Form S-1 of NEXTLINK
                    Communications, Inc. (Commission File No. 333-32003).
               (5)  Incorporated herein by reference to the exhibit filed with
                    the Annual Report on Form 10-KSB for the year ended December
                    31, 1997 of NEXTLINK Communications, Inc. and NEXTLINK
                    Capital, Inc. (Commission File Nos. 333-04603 and 
                    333-04603-01).
               (6)  Incorporated herein by reference to the exhibit filed with
                    the quarterly report on Form 10-Q for the quarterly period
                    ended March 31, 1998 of NEXTLINK Communications, Inc. and
                    NEXTLINK Capital, Inc. (Commission File No. 000-22939).

          (b)  Reports on Form 8-K

                    Current report on Form 8-K, filed April 14, 1998,
                    regarding the Company's sale of unregistered 6-1/2%
                    Cumulative Convertible Preferred Stock pursuant to
                    Regulation S and Rule 144A under the Securitites Act
                    and 9.45% Senior Discount Notes due 2008 pursuant to
                    Rule 144A.

                    Current report on Form 8-K, filed July 20, 1998,
                    regarding the announcement by James Voelker of his
                    resignation as President and a director of the Company
                    and the appointment of George Tronsrue as President of
                    the Company.
                    
                    Current report on Form 8-K, filed July 22, 1998,
                    regarding INTERNEXT L.L.C., of which each of the
                    Company and Eagle River Investments 


<PAGE>

PART II.       OTHER INFORMATION   

               L.L.C beneficially owns a one-half interest, entering 
               into a Cost Sharing and IRU Agreement with Level 3 
               Communications, L.L.C.


<PAGE>

                                      SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.

                                       NEXTLINK Communications, Inc.
     

Date: August 14, 1998                   By: /s/ Kathleen H. Iskra
                                        ---------------------------------------
                                        Kathleen H. Iskra
                                        Vice President, Chief Financial Officer
                                        and  Treasurer
                                        (Principal financial and accounting
                                        officer)


                                        NEXTLINK Capital, Inc.
     

Date: August 14, 1998                   By: /s/ Kathleen H. Iskra
                                        ---------------------------------------
                                        Kathleen H. Iskra
                                        Vice President, Chief Financial Officer
                                        and  Treasurer
                                        (Principal financial and accounting
                                        officer)

<PAGE>
                           NEXTLINK COMMUNICATIONS, INC.
                                   EXHIBIT INDEX
<TABLE>
<CAPTION>

Exhibit No.    Description
-----------    -----------
  <S>          <C>
   3.1         Certificate of Incorporation of NEXTLINK Communications, Inc. (1)

   3.2         By-laws of NEXTLINK Communications, Inc. (1)

   3.3         Articles of Incorporation of NEXTLINK Capital, Inc. (2)

   3.4         By-laws of NEXTLINK Capital, Inc. (2)

   4.1         Form of Exchange Note Indenture, by and among NEXTLINK Communications,
               Inc. and United States Trust Company of New York, as Trustee, relating
               to the Exchange Notes, including form of Exchange Notes. (3)

   4.2         Certificate of Designations of the Powers, Preferences and Relative,
               Participating, Optional and Other Special Rights of 14% Senior
               Exchangeable Redeemable Preferred Shares and Qualifications,
               Limitations and Restrictions Thereof. (1)

   4.3         Form of stock certificate of 14% Senior Exchangeable Redeemable
               Preferred Shares. (3)

   4.4         Indenture, dated as of April 25, 1996, by and among NEXTLINK
               Communications, Inc., NEXTLINK Capital, Inc. and United States Trust
               Company of New York, as Trustee, relating to 12-1/2% Senior Notes due
               April 15, 2006, including form of global note. (2)

   4.5         First Supplemental Indenture, dated as of January 31, 1997, by and
               among NEXTLINK Communications, Inc., NEXTLINK Communications, L.L.C.,
               NEXTLINK Capital and United States Trust Company of New York, as
               Trustee. (3)

   4.6         Form of Indenture between United States Trust Company, as Trustee and
               NEXTLINK Communications, Inc., relating to the 9-5/8% Senior Notes due
               2007. (4)

   4.7         Indenture, dated March 3, 1998, between United States Trust Company, as
               Trustee and NEXTLINK Communications, Inc., relating to the 9% Senior 
               Notes due 2008. (5)

   4.8         Certificate of Designations of the Powers, Preferences and Relative,
               Participating, Optional and Other Special Rights of 6-1/2% Cumulative
               Convertible Preferred Stock and Qualifications, Limitations and
               Restrictions Thereof. (1)

   4.9         Indenture, dated April 1, 1998, between United States Trust Company, as 
               Trustee and NEXTLINK Communications, Inc. relating to the 9.45% Senior 
               Discount Notes due 2008. (6)

   4.10        Second Supplemental Indenture, dated June 3, 1998, amending Indenture 
               dated April 25, 1996, by and among NEXTLINK Communications, Inc., 
               NEXTLINK Capital, Inc. and United States Trust Company of New York, as
               Trustee. (1)

   4.11        First Supplemental Indenture, dated June 3, 1998, amending Indenture 
               dated September 25, 1997, by and between NEXTLINK Communications, Inc.
               and United States Trust Company of New York, as Trustee. (1)

   4.12        First Supplemental Indenture, dated June 3, 1998, amending Indenture 
               dated March 3, 1998, by and between NEXTLINK Communications, Inc. and 
               United States Trust Company of New York, as Trustee. (1)

   4.13        First Supplemental Indenture, dated June 3, 1998, amending Indenture 
               dated April 1, 1998, by and between NEXTLINK Communications, Inc. and 
               United States Trust Company of New York, as Trustee. (1)

  10.1         Stock Option Plan of NEXTLINK Communications, Inc., as amended. (1)

  10.2         Employee Stock Purchase Plan of NEXTLINK Communications, Inc. (1)

  10.3         Registration Rights Agreement dated as of January 15, 1997, between
               the predecessor of NEXTLINK Communications, Inc. and the signatories
               listed therein. (3)

  10.4         Preferred Exchange and Registration Rights Agreement, dated as of
               January 31, 1997, by and among the predecessor of NEXTLINK Communications,
               Inc. and the Initial Purchasers. (3)
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.    Description
-----------    -----------
  <S>          <C>

  10.5         Fiber Lease and Innerduct Use Agreement, dated as of February 23,
               1998, by and between NEXTLINK Communications, Inc. and Metromedia
               Fiber Network, Inc. (5)

  10.6         Amendment No. 1 to Fiber Lease and Innerduct Use Agreement, dated as
               of March 4, 1998, by and between NEXTLINK Communications, Inc. and
               Metromedia Fiber Network, Inc. (5)

  27           Financial Data Schedule
</TABLE>

               ---------
          (1)  Incorporated herein by reference to the exhibit filed with
               the Registration Statement on Form S-4 of NEXTLINK
               Communications, Inc. and NEXTLINK Capital, Inc. (Commission
               File No. 333-53975).
          (2)  Incorporated herein by reference to the exhibit filed with the
               Registration Statement on Form S-4 of NEXTLINK Communications,
               L.L.C. (the predecessor of NEXTLINK Communications, Inc.) and 
               NEXTLINK Capital, Inc. (Commission File No. 333-4603).
          (3)  Incorporated herein by reference to the exhibit filed with
               the Annual Report on Form 10-KSB for the year ended December
               31, 1996 of NEXTLINK Communications, Inc. and NEXTLINK
               Capital, Inc. (Commission File Nos. 333-04603 and 
               333-04603-01).
          (4)  Incorporated herein by reference to the exhibit filed with
               the Registration Statement on Form S-1 of NEXTLINK
               Communications, Inc. (Commission File No. 333-32003).
          (5)  Incorporated herein by reference to the exhibit filed with
               the Annual Report on Form 10-KSB for the year ended December
               31, 1997 of NEXTLINK Communications, Inc. and NEXTLINK
               Capital, Inc. (Commission File Nos. 333-04603 and 
               333-04603-01).
          (6)  Incorporated herein by reference to the exhibit filed with the
               quarterly report on Form 10-Q for the quarterly period ended
               March 31, 1998 of NEXTLINK Communications, Inc. and NEXTLINK 
               Capital, Inc. (Commission File No. 000-22939).