Subject: [NEXTEL-1] Nextel Reports Record 2002 Results

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Date: Thu, 20 Feb 2003 07:27:48 -0500

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Press Release

Source:
Nextel Communications, Inc.

Nextel Reports Record 2002 Results
Thursday February 20, 7:04 am ET

RESTON, Va.--(BUSINESS WIRE)--Feb. 20, 2003--Nextel
Communications, Inc. (NASDAQ: NXTL - News)

- Income of $1.66 Billion, or $1.88 per share -
- Free Cash Flow of $122 Million; EBITDA of $3.13 Billion -
- Retires $3.2 Billion in Debt and Preferred Securities -
- 2002 Subscriber Additions of 1.96 Million, year-end Subscribers
10.61 Million -
- 2003 Guidance Provided -

Nextel Communications, Inc. (NASDAQ: NXTL - News), today announced record
financial results for 2002 including income available to common
stockholders of $1.66 billion, or $1.88 per share.

Revenue was $8.7 billion, a 24% increase over last year. Domestic
EBITDA (earnings before interest, taxes, depreciation and
amortization) was $3.13 billion in 2002, increasing by 67% over the
prior year. For the fourth quarter, revenue was $2.33 billion and
EBITDA was $886 million. Nextel retired approximately $3.2 billion in
debt and preferred stock during 2002, including $588 million during
the fourth quarter. Nextel added approximately 503,000 subscribers
during the fourth quarter, bringing total subscribers to 10.61 million
at year-end.

"2002 was a breakthrough year for Nextel as we grew revenues by
24%, fueled by strong customer demand of nearly 2 million new
subscribers for Nextel's differentiated wireless services," said Tim
Donahue, Nextel's president and CEO. "More importantly, Nextel
expanded its EBITDA by 67% to more than $3.1 billion and reduced
capital expenditures by 22% to $1.86 billion. During 2002, Nextel
produced positive earnings per share and positive free cash flow,
ahead of schedule and for the first time in Nextel's history. In 2003,
Nextel will continue our smart growth strategies and make Nationwide
Direct Connect(TM) a reality. We will also introduce an innovative
voice coding technology, which we expect will double our cellular
capacity and enhance voice quality - enabling Nextel to continue to
provide high-quality wireless services. We expect continued excellence
in 2003 and I am confident we will have another great year."

"There should be no doubt that Nextel is capturing an increasing
share of the best wireless subscribers in the highly competitive
wireless marketplace," said Tom Kelly, Nextel's executive vice
president and COO. "Nextel will continue to expand distribution
channels, improve network capabilities and scale operations to further
enhance our differentiation and maintain Nextel's industry leading
subscriber metrics. In 2003, customer lifecycle management will also
be a key priority in order to drive world class customer
satisfaction."

Nextel's average monthly service revenue per subscriber was
approximately $70 for the full year and $69 for the fourth quarter,
essentially flat with the same periods in 2001 and significantly
higher than other national wireless carriers. Customer churn was
approximately 2.1% for the fourth quarter of 2002 compared with 2.2%
in the fourth quarter of last year.

Nextel's net income available to common stockholders for the year
was $1.66 billion or $1.88 per share and includes gains from the
deconsolidation of NII Holdings and from balance sheet de-leveraging
activities and other items. Without these items, earnings per share
would have been $0.27 cents per share. (See attached reconciliation of
EPS data.)

During the fourth quarter, Nextel reported income available to
common stockholders of $1.46 billion, or $1.49 per share, including
gains related to the retirement of debt and preferred stock totaling
$35 million or $0.04 per share and a gain on the deconsolidation of
NII Holdings of $1.2 billion or $1.24 per share. Net of these items,
the fourth quarter net income was $209 million or $0.21 per share.

"Nextel achieved positive free cash flow of $122 million and
positive full year earnings in 2002 - ahead of schedule and in what
can only be described as a challenging environment," said Paul Saleh,
Nextel's executive vice president and CFO. "Nextel increased
stockholders' equity by $3.4 billion from a deficit to more than $2.8
billion and also significantly improved its financial flexibility in
2002 by retiring $3.2 billion in debt and preferred obligations.
Nextel's de-leveraging activities in 2002 will enable the company to
avoid payments of approximately $5.4 billion in principal, interest
and dividends over the life of these securities. Nextel plans to build
on this progress in 2003 by focusing on generating in excess of $500
million free cash flow while driving for even greater capital and
operating efficiencies."

For the quarter ended December 31, 2002, Nextel retired $588
million in principal amount of its outstanding debt and mandatorily
redeemable preferred stock in exchange for approximately 28 million
newly issued shares of class A common stock and approximately $154
million in cash. Nextel may from time to time as it deems appropriate
enter into similar transactions, which in the aggregate may be
material.

Capital expenditures for the full year of 2002 were $1.86 billion
- down 22% from 2001 capital expenditures of $2.38 billion. Total
minutes of use on the Nextel National Network grew by 41% in 2002 to
72.9 billion. Nextel added approximately 800 cell sites to its
network, bringing the total number of sites to approximately 16,300 at
year-end. During the fourth quarter, Nextel added approximately 200
cell sites and capital expenditures were $533 million, excluding
capitalized interest.

2003 Guidance

Nextel's 2003 Guidance is forward-looking and is based upon
management's current beliefs as well as a number of assumptions
concerning future events and as such, should be taken in the context
of the risks and uncertainties outlined in the Securities and Exchange
Commission filings of Nextel Communications Inc.

Free cash flow of $500 million or more
Earnings per share of at least 75 cents
EBITDA of $3.8 billion or more
Capital expenditures of $1.8 billion or less
Net subscriber additions of 1.7 million or more

About Nextel

Nextel Communications, a Fortune 300 company based in Reston, Va.,
is a leading provider of fully-integrated wireless voice and data
communications services including Nextel Direct Connect®--the
long-range digital walkie-talkie feature; high quality digital
cellular services; Nextel Online® wireless data content and business
solutions; and two-way messaging services. Nextel and Nextel Partners,
Inc. have built the largest guaranteed all-digital wireless network
covering 197 of the top 200 U.S. markets. Nextel's wireless voice and
packet data communications services are available today in areas of
the U.S. where approximately 240 million people live or work.

"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995. A number of the matters and subject areas
discussed in this press release that are not historical or current
facts deal with potential future circumstances and developments,
including our future expectations concerning our financial and
operating performance. The discussion of such matters and subject
areas is qualified by the inherent risks and uncertainties surrounding
future expectations generally, and also may materially differ from
Nextel's actual future experience involving any one or more of such
matters and subject areas. Nextel has attempted to identify, in
context, certain of the factors that they currently believe may cause
actual future experience and results to differ from Nextel current
expectations regarding the relevant matter or subject area. Such risks
and uncertainties include the economic conditions in our targeted
markets, performance of our technologies, timely development and
delivery of new technologies, including those associated with
nationwide Direct Connect and our planned upgrade to our voice coder
technology, competitive conditions, market acceptance of our services,
access to sufficient capital to meet operating and financing needs and
those that are described from time to time in Nextel reports filed
with the SEC, including Nextel's annual report on Form 10-K for the
year ended December 31, 2001 and in its Form 10-Qs for the first,
second and third quarters of 2002. This press release speaks only as
of its date, and Nextel disclaims any duty to update the information
herein.

----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (1)
(dollars in millions, except per share data)
Unaudited
----------------------------------------------------------------------
For the For the
three months year
ended ended
December 31, December 31,
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Operating revenues
Service revenues $ 2,184 $ 1,765 $ 8,186 $ 6,575
Handset and accessory revenues (2) 147 117 535 439
-------- -------- -------- --------
2,331 1,882 8,721 7,014
-------- -------- -------- --------
Operating expenses
Cost of service (exclusive of
depreciation included below) 369 345 1,469 1,324
Cost of handset and accessory
revenues 288 325 1,047 1,214
Selling and marketing 405 322 1,543 1,252
General and administrative 383 351 1,496 1,323
Restructuring and impairment
charges -- -- 35 22
Depreciation and amortization 396 415 1,595 1,512
-------- -------- -------- --------
Operating income 490 124 1,536 367
Interest expense (235) (277) (1,048) (1,139)
Interest income 13 52 58 230
Gain on retirement of Nextel senior
notes, net of debt conversion
expense of $26, $0, $160 and $0 7 -- 354 --
Gain on retirement of NII Holdings
senior notes -- -- -- 469
Gain on deconsolidation of NII
Holdings (1) 1,218 -- 1,218 --
Equity in losses of NII Holdings
- pre-bankruptcy emergence (1) -- (1,607) (226) (2,482)
Equity in earnings of NII Holdings
- post-bankruptcy emergence (1) 16 -- 16 --
Equity in losses of unconsolidated
affiliates (20) (26) (92) (95)
Change in fair value of investment 1 -- (37) --
Other, net (1) (6) (2) (8)
-------- -------- -------- --------
Income (loss) before income tax
(provision) benefit 1,489 (1,740) 1,777 (2,658)
Income tax (provision) benefit (18) 6 (391) 33
-------- -------- -------- --------
Net income (loss) 1,471 (1,734) 1,386 (2,625)
Gain on retirement of mandatorily
redeemable preferred stock 28 -- 485 --
Mandatorily redeemable preferred
stock dividends (36) (61) (211) (233)
-------- -------- -------- --------
Income (loss) available to common
stockholders $ 1,463 $(1,795) $ 1,660 $(2,858)
======== ======== ======== ========
Earnings (loss) per share
Basic $ 1.49 $ (2.25) $ 1.88 $ (3.67)
======== ======== ======== ========
Diluted $ 1.38 $ (2.25) $ 1.78 $ (3.67)
======== ======== ======== ========
Weighted average number of common
shares outstanding (in millions)

Basic 980 798 884 778
======== ======== ======== ========
Diluted 1,074 798 966 778
======== ======== ======== ========

----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
(dollars in millions, except per share data)
Unaudited
----------------------------------------------------------------------
Reconciliation of Earnings Per Share Data (1)
----------------------------------------------------------------------
For the For the
three months three months
ended ended
December 31, December 31,
2002 2001
----------------- -----------------
Basic Basic
EPS EPS
-------- --------
Income (loss) available to common
stockholders $ 1,463 $ 1.49 $(1,795) $ (2.25)
Gain on retirement of senior
notes, net (7) (0.01) -- --
Gain on retirement of mandatorily
redeemable preferred stock (28) (0.03) -- --
Gain on deconsolidation of NII
Holdings (1) (1,218) (1.24) -- --
Equity in losses of NII Holdings
- pre-bankruptcy emergence (1) -- -- 1,607 2.01
Change in fair value of
investment (1) -- -- --
-------- -------- -------- --------
Adjusted income (loss) available to
common stockholders $ 209 $ 0.21 $ (188) $ (0.24)
======== ======== ======== ========

For the For the
year ended year ended
December 31, December 31,
2002 2001
----------------- -----------------
Basic Basic
EPS EPS
-------- --------
Income (loss) available to common
stockholders $ 1,660 $ 1.88 $(2,858) $ (3.67)
Restructuring and impairment
charges 35 0.04 22 0.03
Gain on retirement of senior
notes, net (354) (0.40) (469) (0.61)
Gain on retirement of mandatorily
redeemable preferred stock (485) (0.55) -- --
Gain on deconsolidation of NII
Holdings (1) (1,218) (1.38) -- --
Equity in losses of NII Holdings
- pre-bankruptcy emergence (1) 226 0.26 2,482 3.19
SFAS No. 142 income tax provision
adjustment 335 0.38 -- --
Change in fair value of
investment 37 0.04 -- --
-------- -------- -------- --------
Adjusted income (loss) available to
common stockholders $ 236 $ 0.27 $ (823) $ (1.06)
======== ======== ======== ========

---------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
(dollars in millions, except in Other Domestic Data section)
Unaudited
----------------------------------------------------------------------
Selected Balance Sheet Data (1)
----------------------------------------------------------------------

December December
31, 31,
2002 2001
-------- --------
Cash, cash equivalents and short-term investments $ 2,686 $ 3,467
Accounts and notes receivable, net of allowance for
doubtful accounts of $127 and $143 1,110 1,012
Property, plant and equipment, net 8,918 8,924
Intangible assets, net 6,607 5,586
Total assets 21,484 20,831

Domestic long-term debt, including current portion 12,278 13,864
Capital lease and finance obligations, including
current portion (4) 272 1,001
Losses in excess of investment in NII Holdings (1) -- 1,210
Total liabilities 17,623 19,299

Mandatorily redeemable preferred stock 1,015 2,114
Stockholders' equity (deficit) (5) 2,846 (582)

----------------------------------------------------------------------
Other Domestic Data
----------------------------------------------------------------------
For the For the
year three months
ended ended
-------- -----------------
Dec. 31, Dec. 31, Sept.30,
2002 2002 2002
-------- -------- --------
Handsets in service, end of period
(in thousands) (6) 10,612 10,612 10,116
Net handset additions (in thousands) (6) 1,956 503 480
Average monthly billable minutes of use per
handset 630 640 650
Average monthly revenue per handset/unit
(ARPU) (7) $ 70 $ 69 $ 71
Cost per gross handset addition (CPGA) (8) $ 450 $ 440 $ 460
Operating cost per handset/unit (OCPU) (9) $ 26 $ 24 $ 25
Bad debt expense included in general and
administrative expense (in millions) $ 334 $ 74 $ 87
Bad debt expense as a percentage of
operating revenues 3.8% 3.2% 3.8%

----------------------------------------------------------------------
Domestic Capital Expenditures
----------------------------------------------------------------------
For the For the
year three months
ended ended
-----------------------------------
Dec. 31, Dec. 31, Sept.30, June 30, Mar. 31,
2002 2002 2002 2002 2002
-------- -------- -------- -------- --------
Cash paid for capital
expenditures, excluding
capitalized interest $ 1,815 $ 443 $ 356 $ 429 $ 587
Changes in capital
expenditures accrued or
unpaid 41 90 45 19 (113)
-------- -------- -------- -------- --------
Capital expenditures,
excluding capitalized
interest 1,856 533 401 448 474
Capitalized interest 48 12 11 13 12
-------- -------- -------- -------- --------
Total domestic capital
expenditures $ 1,904 $ 545 $ 412 $ 461 $ 486
======== ======== ======== ======== ========

----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
(dollars in millions)
Unaudited
----------------------------------------------------------------------
Condensed Consolidated Statements of Cash Flows
----------------------------------------------------------------------
For the
three For the
months year
ended ended
December December
31, 31,
2002 2002
-------- --------

Cash flows from operating activities
Net income $ 1,471 $ 1,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 396 1,595
Gain on deconsolidation of NII Holdings (1,218) (1,218)
Change in accrued interest on short-term
investments (2) (22)
Other 363 782
-------- --------
Net cash provided by operating
activities 1,010 2,523
-------- --------

Cash flows from investing activities
Cash paid for capital expenditures,
including capitalized interest (455) (1,863)
Payments for licenses, acquisitions and
other, net of cash acquired (125) (541)
Net proceeds from short-term investments
and other 356 168
-------- --------
Net cash used in investing activities (224) (2,236)
-------- --------

Cash flows from financing activities
Purchase and retirement of debt securities
and mandatorily redeemable preferred stock (154) (843)
Repayments under capital lease and finance
obligations (23) (100)
Repayments under long-term credit facilities (47) (47)
Borrowings under long-term credit facilities 47 47
Mandatorily redeemable preferred stock
dividends (19) (19)
Other 35 40
-------- --------
Net cash used in financing activities (161) (922)
-------- --------
Net increase (decrease) in cash and cash
equivalents 625 (635)
Cash and cash equivalents, beginning of
period 1,221 2,481
-------- --------
Cash and cash equivalents, end of period $ 1,846 $ 1,846
======== ========

----------------------------------------------------------------------
Free Cash Flow Schedule
----------------------------------------------------------------------
For the
three For the
months year
ended ended
December December
31, 31,
2002 2002
-------- --------

EBITDA (3) $ 886 $ 3,131
Capital expenditures, excluding capitalized
interest (533) (1,856)
Payments for licenses, acquisitions and
other (125) (541)
Changes in working capital and other 396 113
-------- --------
Unlevered free cash flow 624 847
Net interest paid, including capitalized
interest (192) (706)
Mandatorily redeemable preferred stock
dividends (19) (19)
-------- --------
Free cash flow (10) 413 122
Financing activities, excluding mandatorily
redeemable preferred stock dividends (142) (903)
-------- --------
Total change in cash, cash equivalents
and short-term investments $ 271 $ (781)
======== ========

----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Domestic Long-Term Debt and Mandatorily Redeemable Preferred Stock
Data
(dollars in millions)
Unaudited
----------------------------------------------------------------------

Accre-
tion of
Unamor-
Book tized
Value of Discount December
Sept.30, Retire- or Divi- 31,
2002 ments dends 2002
-------- -------- -------- --------
10.65% senior redeemable discount
notes due 2007, net of unamortized
discount of $0 and $0 $ 776 $ 20 $ -- $ 756
9.75% senior serial redeemable
discount notes due 2007, net of
unamortized discount of $8 and $0 1,093 15 8 1,086
4.75% convertible senior notes due
2007 284 -- -- 284
9.95% senior serial redeemable
discount notes due 2008, net of
unamortized discount of $50 and
$16 1,351 21 34 1,364
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 1,829 33 -- 1,796
5.25% convertible senior notes due
2010 724 102 -- 622
9.5% senior serial redeemable notes
due 2011, including a fair value
hedge adjustment of $56 at
September 30, 2002 and $58 at
December 31, 2002 982 36 2* 948
6% convertible senior notes due
2011 608 -- -- 608
Bank credit facility 4,500 -- -- 4,500
Other 18 1** -- 17
-------- -------- -------- --------
Total domestic long-term debt,
including current portion $12,462 228 $ 44 $12,278
======== ======== ======== ========

13% series D exchangeable preferred
stock mandatorily redeemable 2009 $ 581 110 $ -- $ 471
11.125% series E exchangeable
preferred stock mandatorily
redeemable 2010 690 253 17 454
Zero coupon convertible preferred
stock mandatorily redeemable 2013 87 -- 3 90
-------- -------- -------- --------
Total mandatorily redeemable
preferred stock $ 1,358 363 $ 20 $ 1,015
======== ======== ======== ========
Total retirements $ 591
========

* Represents the non-cash increase to the fair value hedge
adjustment during the quarter.
** Represents a scheduled principal payment.

Principal
Value of
Retire-
ments
for the
three
months
ended
December
31,
2002
--------

10.65% senior redeemable discount notes due
2007 $ 20
9.75% senior serial redeemable discount
notes due 2007 15
9.95% senior serial redeemable discount
notes due 2008 21
9.375% senior serial redeemable notes due
2009 33
5.25% convertible senior notes due 2010 102
9.5% senior serial redeemable notes due 2011 36
--------
Total senior notes retirements 227
--------
13% series D exchangeable preferred stock
mandatorily redeemable 2009 110
11.125% series E exchangeable preferred
stock mandatorily redeemable 2010 251
--------
Total mandatorily redeemable preferred
stock retirements 361
--------
Total principal value of retirements $ 588
========

----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Financial Data
(dollars in millions)
----------------------------------------------------------------------

(1) In May 2002, NII Holdings, Inc. filed a voluntary case to
restructure its obligations under Chapter 11 of the U.S.
Bankruptcy Code. As a result of its bankruptcy filing, we began
accounting for our investment in NII Holdings using the equity
method. In November 2002, NII Holdings successfully emerged from
bankruptcy. All previously outstanding equity interests in NII
Holdings were cancelled in the reorganization. As of December 31,
2002, we owned about 36% of the outstanding common stock of NII
Holdings and accounted for our new investment in NII Holdings
using the equity method. In accordance with generally accepted
accounting principles, our 2002 results include (a) the
pre-emergence results of NII Holdings through May 2002, (b) a
non-cash gain recorded when NII Holdings emerged from bankruptcy
consisting primarily of the reversal of equity in losses in excess
of our investment in NII Holdings, and (c) our share of the
post-emergence results of NII Holdings from November through
December. To better facilitate your understanding of our results
of operations, amounts for 2001 have been reclassified to conform
to the current period presentation of accounting for the results
of NII Holdings using the equity method. Consolidated financial
statements for 2001 to be reported in our Form 10-K for the year
ended December 31, 2002 will include NII Holdings results as
originally reported in 2001. Summarized 2001 consolidated results
of operations for Nextel Communications, Inc. are reported in our
periodic reports as shown below for the respective periods.

Inter-
company
NII Elimi- Consoli-
Domestic Holdings nations dated
-------- -------- -------- --------

For the three months ended December
31, 2001
Operating revenues $ 1,882 $ 194 $ (2) $ 2,074
Operating income (loss) 124 (1,665) -- (1,541)
Loss before income tax (133) (1,689) -- (1,822)
Net loss (127) (1,564) (43) (1,734)

For the year ended December 31,
2001
Operating revenues $ 7,014 $ 680 $ (5) $ 7,689
Operating income (loss) 367 (2,081) (1) (1,715)
Loss before income tax (645) (2,583) 468 (2,760)
Net loss (612) (2,497) 484 (2,625)

(2) In accordance with the Securities and Exchange Commission's Staff
Accounting Bulletin, or SAB, No. 101, "Revenue Recognition in
Financial Statements," we recognize handset sales as revenues on a
straight-line basis over 3.5 years, the estimated customer
relationship period. Costs of handset sales are recognized over
the same period in amounts equivalent to the revenues recognized
from the handset sales. The handset costs in excess of the
revenues (handset subsidies) generated from handset sales are
expensed immediately as these amounts exceed our minimum
contractual revenues. The following is a summary of handset and
accessory revenues.

For the For the
three months year
ended ended
December 31, (1) December 31, (1)
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Current period handset and
accessory sales $ 247 $ 132 $ 892 $ 484
Net effect of SAB No. 101 handset
deferrals (100) (15) (357) (45)
-------- -------- -------- --------

Handset and accessory revenues $ 147 $ 117 $ 535 $ 439
======== ======== ======== ========

(3) EBITDA, represents domestic operating income before depreciation
and amortization expense. EBITDA is not a measurement under
accounting principles generally accepted in the United States and
may not be similar to EBITDA measures of other companies. EBITDA
also is a measure commonly used by analysts, investors and other
interested parties in the telecommunications industry. We believe
EBITDA is a primary measure of operating performance and that
growth in EBITDA is an indicator of future profitability,
especially in a capital intensive industry, such as wireless
telecommunications.

For the For the
three months year
ended ended
December 31, December 31,
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------

Operating income (loss) (1) $ 490 $(1,541) $ 1,536 $(1,715)
Depreciation and amortization
(1) 396 415 1,595 1,512

NII Holdings operating loss -- 1,665 -- 2,081
Intercompany eliminations -- -- -- 1
-------- -------- -------- --------
Domestic EBITDA (1) $ 886 $ 539 $ 3,131 $ 1,879
======== ======== ======== ========

(4) In December 2002, we sold our equity investment in SpectraSite
Holdings, Inc., a tower provider for some of our cell sites. As a
result, our related sale leaseback transactions with SpectraSite,
previously accounted for by the financing method, are accounted
for as operating leases. Accordingly, our financing obligation has
been reduced by $655 million.

(5) The following table details the changes in stockholders' equity
(deficit) from December 31, 2001 to December 31, 2002.

Balance, December 31, 2001 $ (582)
Income available to common stockholders 1,660
Exchange of debt securities for common
stock 867
Exchange of mandatorily redeemable
preferred stock for common stock 601
Cumulative translation adjustment 228
Common stock issued under equity plans 49
Other 23
--------
Balance, December 31, 2002 $ 2,846
========

(6) Net handset additions represent gross handsets activated during
the period less handsets deactivated and does not include handsets
attributable to test markets, such as the Boost Mobile program.
These net handset additions reflect a customer churn rate of
approximately 2.1% for the fourth quarter of 2002. The customer
churn rate is an indicator of customer retention and represents
the monthly percentage of the customer base that disconnects from
service. Customer churn is calculated by dividing the number of
handsets disconnected from commercial service during the period by
the average number of handsets in commercial service during the
period. Churn is not a measurement under accounting principles
generally accepted in the United States and may not be similar to
churn calculations of other companies.

In the fourth quarter of 2002, we completed the analysis of our
subscriber records after the conversion of our billing system and
we identified non-revenue generating units that were incorrectly
introduced into the subscriber base prior to 2002. Therefore, in
2002 we reduced our subscriber base by about 10,500 subscribers,
including about 7,000 as of the beginning of the fourth quarter of
2002.

(7) Average monthly revenue per handset/unit in service, or ARPU, is
an industry term that measures service revenues per month from our
customers divided by the weighted average number of handsets in
commercial service during that month, excluding the impact of test
markets such as the Boost Mobile program. ARPU is not a
measurement under accounting principles generally accepted in the
United States and may not be similar to ARPU measures of other
companies.

(8) Cost per gross handset addition, or CPGA, is an industry term that
measures the cost of acquiring a new customer. CPGA represents
sales, marketing and advertising costs and handset subsidies
(which includes order fulfillment costs) divided by the total
number of handsets activated during the period. CPGA excludes the
effect of handsets activated for upgrade and customer retention
purposes as well as handsets activated in test markets such as the
Boost Mobile program. CPGA is not a measurement under accounting
principles generally accepted in the United States and may not be
similar to CPGA measures of other companies.

(9) Operating cost per handset/unit, or OCPU, represents cost of
service and general and administrative costs (excluding costs
related to test markets such as the Boost Mobile program) divided
by average handsets in commercial service during the period. OCPU
is not a measurement under accounting principles generally
accepted in the United States and may not be similar to OCPU
measures of other companies.

(10) Free cash flow can be reconciled to our condensed consolidated
statements of cash flows as follows:

For the
three For the
months year
ended ended
December December
31, 31,
2002 2002
-------- --------
Net cash provided by operating
activities $ 1,010 $ 2,523
Change in accrued interest on short-term
investments 2 22
Net cash used in investing activities (224) (2,236)
Net proceeds from short-term investments
and other (356) (168)
Mandatorily redeemable preferred stock
dividends (19) (19)
-------- --------
Free cash flow $ 413 $ 122
======== ========

Contact:

Nextel Communications, Inc.
Investors:
Paul Blalock, 703/433-4300
or
Media:
Audrey Schaefer, 240/876-1588

Source:
Nextel Communications, Inc.
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