Nii (NIHD) 10-Q 2000 Q1 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from    to
Commission file number 333-26649

NEXTEL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Washington (State or other jurisdiction of incorporation or organization)	91-1671412 (I.R.S. Employer Identification No.)
10700 Parkridge Boulevard, Suite 600, Reston, Virginia (Address of principal executive offices)	20191 (Zip Code)
Registrant’s telephone number, including area code: (703) 390-5100

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

      Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

	Number of Shares Outstanding
Title of Class	on May 1, 2000
Common Stock, no par value		36,839,255

TABLE OF CONTENTS

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

			Page No.
Part  I	Financial Information.
	Item 1.	Financial Statements — Unaudited.
		Condensed Consolidated Balance Sheets — As of March 31, 2000 and December 31, 1999		3
		Condensed Consolidated Statements of Operations — For the Three Months Ended March 31, 2000 and 1999		4
		Condensed Consolidated Statement of Changes in Stockholders’ Deficit — For the Three Months Ended March 31, 2000		5
		Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2000 and 1999		6
		Notes to Condensed Consolidated Financial Statements		7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Part  II	Other Information.
	Item 1.	Legal Proceedings		23
	Item 6.	Exhibits and Reports on Form 8-K		23

PART I

Item 1.  Financial Statements — Unaudited.

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2000 and December 31, 1999

(in thousands)

Unaudited

			2000			1999
ASSETS
Current assets
	Cash and cash equivalents, of which $22,436 and $6,179 is restricted		$	73,518		$	100,028
	Accounts receivable, less allowance for doubtful accounts of $12,818 and $8,815			26,725			23,041
	Subscriber unit and accessory inventory			16,893			16,185
	Prepaid expenses and other			35,911			21,868
		Total current assets		153,047			161,122
Property, plant and equipment, net of accumulated depreciation of $118,386 and $95,449				641,475			539,455
Investments in unconsolidated subsidiaries, at cost less equity in net losses of $53,242 and $46,129				119,866			141,120
Intangible assets, net of accumulated amortization of $69,050 and $61,105				459,429			454,657
Investment and other assets				448,506			385,438
			$	1,822,323		$	1,681,792
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
	Accounts payable		$	99,382		$	59,988
	Accrued expenses and other			85,442			61,448
	Accrued interest			20,456			15,423
	Due to parent			5,983			8,847
	Current portion of long-term debt			34,061			33,739
		Total current liabilities		245,324			179,445
Long-term debt				1,623,603			1,514,757
Deferred income taxes				162,629			141,943
		Total liabilities		2,031,556			1,836,145
Contingencies (Note 4)
Minority interest				25,150			25,237
Stockholders’ deficit
	Series A exchangeable redeemable preferred stock, 3  shares issued and outstanding, accreted liquidation preference of $349,372 and $337,737			298,886			298,886
	Common stock, 36,741 and 36,723 shares issued and outstanding			399,583			399,401
	Accumulated deficit			(970,863	)		(859,970	)
	Accumulated other comprehensive income (loss)			38,011			(17,907	)
		Total stockholders’ deficit		(234,383	)		(179,590	)
			$	1,822,323		$	1,681,792

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

3

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2000 and 1999

(in thousands, except per share amounts)

Unaudited

		2000			1999
Operating revenues		$	47,175		$	19,861
Operating expenses
	Cost of revenues		13,962			8,966
	Selling, general and administrative		67,260			56,885
	Depreciation and amortization		32,501			23,414
			113,723			89,265
Operating loss			(66,548	)		(69,404	)
Other income (expense)
	Interest expense		(52,715	)		(38,694	)
	Interest income		348			1,538
	Equity in losses of unconsolidated affiliates		(7,113	)		(4,651	)
	Foreign currency transaction gains (losses), net		12,537			(66,697	)
	Minority interest in losses of subsidiaries		2,750			12,041
	Other, net		(364	)		864
			(44,557	)		(95,599	)
Loss before income tax benefit (provision)			(111,105	)		(165,003	)
Income tax benefit (provision)			212			(279	)
Net loss		$	(110,893	)	$	(165,282	)
Net loss per common share, basic and diluted		$	(3.02	)	$	(4.53	)
Weighted average number of common shares outstanding			36,725			36,524

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

4

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three Months Ended March 31, 2000

(in thousands)

Unaudited

															Accumulated Other
															Comprehensive
															Income (Loss)
				Series A
				Preferred Stock				Common Stock							Unrealized		Cumulative
												Accumulated			Gain on		Translation
				Shares		Amount		Shares		Amount		Deficit			Investments		Adjustment			Total
Balance, January 1, 2000					3	$	298,886		36,723	$	399,401	$	(859,970	)	$	119,682	$	(137,589	)	$	(179,590	)
	Net loss												(110,893	)							(110,893	)
		Unrealized gain on available-for-sale securities, net of income tax														37,080					37,080
		Foreign currency translation adjustment																18,838			18,838
			Total comprehensive loss																		(54,975	)
	Issuance of common stock upon exercise of stock options								18		182										182
Balance, March 31, 2000					3	$	298,886		36,741	$	399,583	$	(970,863	)	$	156,762	$	(118,751	)	$	(234,383	)

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

5

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2000 and 1999

(in thousands)

Unaudited

					2000			1999
Cash flows from operating activities
	Net loss				$	(110,893	)	$	(165,282	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Amortization of deferred financing costs and accretion of senior redeemable discount notes				37,522			31,786
		Depreciation and amortization				32,501			23,414
		Net foreign currency transaction (gains) losses				(12,537	)		66,697
		Equity in losses of unconsolidated affiliates				7,113			4,651
		Provision for losses on accounts receivable				3,789			7,411
		Minority interest in losses of subsidiaries				(2,750	)		(12,041	)
		Other				743			—
		Change in assets and liabilities:
			Accounts receivable			(7,473	)		(3,880	)
			Subscriber unit and accessory inventory			(708	)		10,590
			Prepaid expenses and other			(544	)		4,121
			Accounts payable, accrued expenses and other			37,526			(19,558	)
				Net cash used in operating activities		(15,711	)		(52,091	)
Cash flows from investing activities
	Capital expenditures					(70,690	)		(43,326	)
	Investments in and advances to affiliates and other					(1,058	)		(11,040	)
				Net cash used in investing activities		(71,748	)		(54,366	)
Cash flows from financing activities
	Borrowings under long-term credit facilities					59,550			107,924
	Repayments of long-term debt					(348	)		(7,623	)
	Capital contributions from minority stockholders					3,249			4,349
	Repayments to parent, net					(2,864	)		—
	Exercise of stock options					182			99
				Net cash provided by financing activities		59,769			104,749
Effect of exchange rate changes on cash and cash equivalents						1,180			(10,379	)
Net decrease in cash and cash equivalents						(26,510	)		(12,087	)
Cash and cash equivalents, beginning of period						100,028			121,116
Cash and cash equivalents, end of period					$	73,518		$	109,029
Supplemental disclosure of cash flow information
	Cash paid for interest				$	10,160		$	1,789

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

6

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1  Basis of Presentation.

      As used in these condensed consolidated financial statements, references to “Nextel International,” “we,” “our” or “us” are intended to include Nextel International, Inc. and its consolidated subsidiaries. Nextel International is an indirect, substantially wholly owned subsidiary of Nextel Communications, Inc. Unless the context requires otherwise, references to Nextel Communications refer to Nextel Communications, Inc. and its consolidated subsidiaries.

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

      You should read the condensed consolidated financial statements in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 1999. You should not expect results of operations of interim periods to be an indication of the results for a full year.

      Restricted Cash and Cash Equivalents. Some of our subsidiaries held cash and cash equivalents of $22.4 million as of March 31, 2000 and $6.2 million as of December 31, 1999, that were not available to fund any of the cash needs of Nextel International, Inc. or any of its other subsidiaries due to restrictions contained in some of our debt agreements.

      Supplemental Cash Flow Information.

		Three Months Ended
		March 31,
		2000		1999
		(in thousands)
Capital expenditures
	Cash paid for capital expenditures	$	70,690	$	43,326
	Increase in capital expenditures accrued and unpaid or financed		44,868		5,301
		$	115,558	$	48,627
Interest costs
	Interest expense	$	52,715	$	38,694
	Interest capitalized		908		2,075
		$	53,623	$	40,769

7

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Digital Subscriber Unit and Accessory Sales and Related Costs. The loss generated from the sale of subscriber units used in our digital enhanced specialized mobile radio, referred to as ESMR, networks primarily results from our subsidy of digital subscriber units and accessories and represents marketing costs. Consolidated digital subscriber unit and accessory sales and the related cost of sales, including current period order fulfillment and installation related expenses, and write downs of digital subscriber unit inventory and related accessories for shrinkage and obsolescence, are classified within selling, general and administrative expenses as follows (in thousands):

	Three Months Ended
	March 31,
	2000			1999
Subscriber unit and accessory sales	$	6,609		$	6,159
Cost of subscriber unit and accessory sales		19,303			12,308
	$	(12,694	)	$	(6,149	)

      New Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments, including some derivatives embedded in other contracts, and for hedging activities, by requiring that all derivatives be recognized on the balance sheet and measured at fair value. In June 1999, the FASB issued SFAS 137, “Deferral of the Effective Date of FASB Statement No. 133 — an Amendment of FASB Statement No. 133,” which deferred the effective date for us until January 1, 2001. We are in the process of evaluating the potential impact of this standard on our financial position and results of operations.

      Reclassifications. Certain prior period amounts have been reclassified to conform to our current year presentation.

Note 2  Significant Transactions and Developments.

      Japan. Effective March 23, 2000, as a consequence of capital contributions made to Nexnet Co. Ltd., an entity organized under the laws of Japan, by certain of its shareholders to supply funds that Nichimen Corporation was required but declined to contribute, Nichimen transferred a portion of its shares of Nexnet stock to the contributing shareholders, including Nextel International. Additionally, on March 30, 2000, we executed a stock purchase and option agreement with Nichimen, whereby we purchased additional shares of stock in Nexnet, for a purchase price of $0.4 million. We were also granted an option, exercisable at any time prior to March 31, 2001, to purchase any or all of the remaining Nexnet shares of stock owned by Nichimen. The exercise price of this option will be determined based on the per share paid-in capital valuation at the time of the purchase. As a result of the additional shares we acquired, our equity ownership interest in Nexnet has increased from about 21% to about 32%.

      Purchase of Motorola International’s Common Equity Shares in Companies in Brazil, Peru and Chile. On March 31, 2000, we entered into a term sheet agreement with Motorola International Development Corporation regarding the terms and conditions under which we would purchase, for about $77.6 million in cash, all of Motorola International’s shares in the following companies:

•  Nextel del Peru, S.A., referred to as Nextel Peru;

•  Nextel S.A. (Brazil); and

•  three analog specialized mobile radio, referred to as SMR, companies wholly owned by Motorola International and operating in Chile.

8

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Consummation of the transactions contemplated by this term sheet agreement is subject to various conditions, including receipt of all necessary governmental and regulatory approvals. If we complete these transactions, we will increase our equity ownership interest in Nextel Peru from about 64% to about 95% and in Nextel Telecomunicações, Ltda., referred to as Nextel Brazil, through Nextel S.A., from about 88% to about 92%. We cannot predict whether or when we and Motorola International will enter into any definitive agreements for the purchase of these shares or whether or when consummation of any of those contemplated purchases might occur.

Note 3  Long-Term Debt.

	March 31,			December 31,
	2000			1999
	(in thousands)
13.0% Senior Redeemable Discount Notes due 2007, net of unamortized discount of $229,576 and $252,323	$	721,887		$	699,140
12.125% Senior Serial Redeemable Discount Notes due 2008 , net of unamortized discount of $219,539 and $234,280		510,461			495,720
International Motorola Financing Facility		151,625			139,146
International Motorola Incremental Facility		56,650			—
Brazil Motorola Financing Facility		103,757			103,757
Argentina Credit Facility		100,000			100,000
Motorola Argentina Incremental Facility		11,230			8,330
Other		2,054			2,403
		1,657,664			1,548,496
Less current portion		(34,061	)		(33,739	)
	$	1,623,603		$	1,514,757

      International Motorola Incremental Facility. On December 16, 1999, along with Nextel Communications, we entered into an agreement with Motorola Credit Corporation, under which Motorola Credit committed to provide up to $56.6 million in incremental term loans to us for working capital purposes. Loans under this facility mature December 31, 2001 and bear interest payable semiannually at variable rates based upon either the U.S. prime rate or the London Interbank Offered Rate, referred to as LIBOR. Loans under this facility are secured by a pledge of all of our shares of stock of Clearnet Communications, Inc, a publicly traded Canadian wireless communications company. On January 6, 2000, we borrowed the full $56.6 million available under this facility.

Note 4  Contingencies.

      See Item 2.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations — C.  Post First Quarter Transactions and Developments” and Part II, Item 1.  “Legal Proceedings” for a discussion of certain lawsuits and other legal matters.

Note 5  Segment Reporting.

      We operate in four reportable segments 1) Brazil, 2) Argentina, 3) Mexico and 4) Peru. The operations of our corporate entities, which hold equity investments in the Philippines and Japan, are included in the Corporate and Other segment below.

      Our segments reflect our geographic focus and are defined as separately reportable operating segments immediately after we obtain a controlling interest in the entity. We evaluate performance of these segments

9

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and allocate resources to them based on losses before interest, taxes, depreciation and amortization and other non-recurring charges, referred to as EBITDA. Intercompany eliminations have been included in Corporate and Other.

													Corporate
	Brazil			Argentina			Mexico			Peru			and Other			Consolidated
	(in thousands)
For the Three Months Ended March 31, 2000
Operating revenues	$	14,837		$	14,236		$	15,181		$	2,921		$	—		$	47,175
EBITDA	$	(13,329	)	$	(2,919	)	$	(7,517	)	$	(3,847	)	$	(6,435	)	$	(34,047	)
Depreciation and amortization		10,330			11,502			7,241			1,989			1,439			32,501
Interest expense		(4,513	)		(3,760	)		—			(387	)		(44,055	)		(52,715	)
Interest income		41			28			66			50			163			348
Equity in losses of unconsolidated affiliates		—			—			—			—			(7,113	)		(7,113	)
Foreign currency transaction gains (losses)		11,943			—			503			98			(7	)		12,537
Minority interest in losses of subsidiaries		817			—			—			1,933			—			2,750
Other, net		47			(341	)		61			196			(327	)		(364	)
Loss before income tax benefit	$	(15,324	)	$	(18,494	)	$	(14,128	)	$	(3,946	)	$	(59,213	)	$	(111,105	)
Capital expenditures	$	51,226		$	21,785		$	27,959		$	14,172		$	416		$	115,558
As of March 31, 2000
Property, plant and equipment, net	$	267,944		$	138,001		$	156,011		$	67,225		$	12,294		$	641,475
Identifiable assets	$	480,405		$	253,227		$	428,790		$	93,190		$	566,711		$	1,822,323
For the Three Months Ended March 31, 1999
Operating revenues	$	8,552		$	7,010		$	3,841		$	458		$	—		$	19,861
EBITDA	$	(21,064	)	$	(10,217	)	$	(8,438	)	$	(3,134	)	$	(3,137	)	$	(45,990	)
Depreciation and amortization		8,684			6,422			5,947			597			1,764			23,414
Interest expense		(1,679	)		(1,989	)		(319	)		—			(34,707	)		(38,694	)
Interest income		419			35			62			57			965			1,538
Equity in losses of unconsolidated affiliates		—			—			—			—			(4,651	)		(4,651	)
Foreign currency transaction losses		(63,615	)		—			(841	)		(600	)		(1,641	)		(66,697	)
Minority interest in losses of subsidiaries		10,888			—			—			1,153			—			12,041
Other, net		10			280			673			68			(167	)		864
Loss before income tax benefit	$	(83,725	)	$	(18,313	)	$	(14,810	)	$	(3,053	)	$	(45,102	)	$	(165,003	)
Capital expenditures	$	13,151		$	17,760		$	12,303		$	4,503		$	910		$	48,627
As of December 31, 1999
Property, plant and equipment, net	$	200,216		$	130,428		$	131,320		$	54,956		$	22,535		$	539,455
Identifiable assets	$	403,291		$	248,959		$	410,510		$	80,444		$	538,588		$	1,681,792

10

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6  Subsequent Events.

      Shanghai, Peoples Republic of China Negotiations. On March 17, 2000, Shanghai CCT-McCaw Telecommunications Systems Co., Ltd., a joint venture in which we own a 30.0% interest, signed an agreement with China United Telecommunications Corporation, referred to as Unicom, terminating our cooperation agreement. On April 1, 2000, in connection with the termination, Shanghai CCT McCaw received about $61.3 million based on the exchange rate in effect on April 1, 2000, and warrants to purchase shares of Unicom common stock. The warrants have an independently assessed value on April 1, 2000 of $3.0 million, exercisable during the period commencing 181 days after the initial public offering of Unicom common stock and ending on the one year anniversary of the initial public offering. We are currently working with the other shareholders of the joint venture to arrange repayment of existing shareholder loans, reimbursement of expenses incurred by the shareholders related to their investments in Shanghai CCT McCaw and final liquidation of the joint venture. Any funds remaining after payment of existing obligations will be distributed among the shareholders of Shanghai CCT McCaw. The carrying value of our minority interest in Shanghai CCT McCaw was about $15.0 million as of March 31, 2000, which we expect to fully recover through a cash distribution from Shanghai CCT McCaw based on the terms of the agreement. This investment has been reclassified to prepaid expenses and other as of March 31, 2000, from investments in unconsolidated subsidiaries.

      Transactions with Parent. On April 4, 2000, we received an advance of $77.6 million from a wholly owned subsidiary of Nextel Communications in connection with the anticipated purchase of Motorola International’s common equity shares in companies in Brazil, Peru and Chile (See Note 2). Additionally, on April 7, 2000, we issued 1,500 shares of our series A exchangeable redeemable preferred stock to a wholly owned subsidiary of Nextel Communications in exchange for cash proceeds of $150.0 million.

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

A.  Overview.

      The following discussion of our condensed consolidated financial condition and results of operations for the three-month periods ended March 31, 2000 and 1999, and significant factors that could affect our prospective financial condition and results of operations, should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in Part I of this report and our 1999 Annual Report on Form 10-K.

      Through our operating subsidiaries and affiliates, we provide wireless communications services under the “Nextel™” brand name in five of the largest cities in Latin America. In addition, as of March 31, 2000, through our ownership arrangements with Nexnet, Nextel Communications Philippines, Inc. and Shanghai CCT McCaw, we provided wireless services in three of the largest cities in Asia. We are the largest SMR service provider in Brazil and Mexico, and we hold the largest SMR channel position in Argentina.

      Our primary business strategy is to serve the mobile wireless communications needs of business customers in various emerging international markets, with a particular emphasis on Latin America. We own controlling interests in wireless communications companies in Brazil, Argentina, Mexico and Peru. We also own equity interests in, and actively participate in the management of, wireless communications services companies in the Philippines and Japan. In addition, we own about 14.5% of the equity interest in Clearnet Communications, Inc. We do not actively participate in the day-to-day management or in the formulation of the business plans or policies of Clearnet. Until March 17, 2000, we also had a contractual right through a Chinese joint venture formed to construct and operate a Global System for Mobile Communications, referred as GSM, cellular network in Shanghai, Peoples Republic of China, referred to as the Shanghai GSM System, to receive 12.1% of the profits generated by the Shanghai GSM System. However, at the request of the

11

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

Chinese government, we terminated our participation in the Shanghai GSM System on April 1, 2000. The wireless communications services companies that we own or have interests in are referred to collectively as the Operating Companies.

      To execute our strategy, we are using our strong SMR channel position, particularly in Latin America, as well as Nextel Communications’ marketing expertise, product development skills and purchasing power, to provide integrated digital wireless services to our growing subscriber base of business customers and to expand our digital ESMR networks in our markets. We use “iDEN®,” or integrated Digital Enhanced Network technology, developed by Motorola, Inc., to provide our digital ESMR services.

      A subscriber unit is the handset device through which we deliver our services to our customers. At March 31, 2000, our Operating Companies had a total of about 1,474,400 digital subscriber units in service, and our share, based on our proportionate ownership interests in our Operating Companies, was 497,200. We currently are pursuing a number of transactions that would impact our ownership interests in our Operating Companies in Brazil, Peru and China. See “B.  First Quarter Transactions and Developments” and “C.  Post First Quarter Transactions and Developments.” If these transactions all had occurred as of March 31, 2000, our Operating Companies would have had a total of about 1,054,300 digital subscriber units in service, on a proforma basis, and our share, based on our proforma proportionate ownership interest, would have been 462,100 subscriber units in service. Assuming that the transactions that we currently are pursuing are consummated during the second quarter, we intend to report our digital subscriber unit net additions during the second quarter using the proforma first quarter ending digital subscriber units in service as the starting reference point.

B.  First Quarter Transactions and Developments.

      Management Changes. On March 24, 2000, Steven M. Shindler was appointed our Chief Executive Officer. Mr. Shindler has been a director on our board since May 1997. Mr. Shindler is also Executive Vice President and Chief Financial Officer of Nextel Communications, a position he has held since May 1996. Mr. Shindler succeeded Steven P. Dussek, who had served as our Chief Executive Officer since September 1999. On March 24, 2000, Mr. Dussek was appointed Chief Operating Officer of Nextel Communications. He continues to serve as a director on our board.

      Japan. Effective March 23, 2000, as a consequence of capital contributions made to Nexnet Co. Ltd. by certain of its shareholders to supply funds that Nichimen Corporation was required but declined to contribute, Nichimen transferred a portion of its shares of Nexnet stock to the contributing shareholders, including Nextel International. Additionally, on March 30, 2000, we executed a stock purchase and option agreement with Nichimen, whereby we purchased additional shares of stock in Nexnet, for a purchase price of $0.4 million. We were also granted an option, exercisable at any time prior to March 31, 2001, to purchase any or all of the remaining Nexnet shares of stock owned by Nichimen. The exercise price of this option will be determined based on the per share paid-in capital valuation at the time of the purchase. As a result of the additional shares we acquired, our equity ownership interest in Nexnet has increased from about 21% to about 32%.

      Purchase of Motorola International’s Common Equity Shares in Companies in Brazil, Peru and Chile. On March 31, 2000, we entered into a term sheet agreement with Motorola International Development Corporation regarding the terms and conditions under which we would purchase, for about $77.6 million in cash, all of Motorola International’s shares in the following companies:

•  Nextel Peru;

•  Nextel S.A. (Brazil); and

•  three analog SMR companies wholly owned by Motorola International and operating in Chile.

12

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

      Consummation of the transactions contemplated by this term sheet agreement is subject to various conditions, including receipt of all necessary governmental and regulatory approvals. If we complete these transactions, we will acquire 190 SMR channels in Chile and increase our equity ownership interest in Nextel Peru from about 64% to about 95% and in Nextel Brazil, through Nextel S.A., from about 88% to about 92%. We cannot predict whether or when we and Motorola International will enter into any definitive agreements for the purchase of these shares or whether or when consummation of any of those contemplated purchases might occur.

C.  Post First Quarter Transactions and Developments.

      Shanghai, Peoples Republic of China Negotiations. On March 17, 2000, Shanghai CCT-McCaw Telecommunications Systems Co., Ltd., a joint venture in which we own a 30.0% interest, signed an agreement with Unicom terminating our cooperation agreement. On April 1, 2000, in connection with the termination, Shanghai CCT McCaw received about $61.3 million based on the exchange rate in effect on April 1, 2000, and warrants to purchase shares of Unicom common stock. The warrants have an independently assessed value on April 1, 2000 of $3.0 million, exercisable during the period commencing 181 days after the initial public offering of Unicom common stock and ending on the one year anniversary of the initial public offering. We are currently working with the other shareholders of the joint venture to arrange repayment of existing shareholder loans, reimbursement of expenses incurred by the shareholders related to their investments in Shanghai CCT McCaw and final liquidation of the joint venture. Any funds remaining after payment of existing obligations will be distributed among the shareholders of Shanghai CCT McCaw. The carrying value of our minority interest in Shanghai CCT McCaw was about $15.0 million as of March 31, 2000, which we expect to fully recover through a cash distribution from Shanghai CCT McCaw based on the terms of the agreement. This investment has been reclassified to prepaid expenses and other as of March 31, 2000, from investments in unconsolidated subsidiaries.

      Transactions with Parent. On April 4, 2000, we received an advance of $77.6 million from a wholly owned subsidiary of Nextel Communications in connection with the anticipated purchase of Motorola International’s common equity shares in companies in Brazil, Peru and Chile. See “B.  First Quarter Transactions and Developments.” Additionally, on April 7, 2000, we issued 1,500 shares of our series A exchangeable redeemable preferred stock to a wholly owned subsidiary of Nextel Communications in exchange for cash proceeds of $150.0 million.

      Brazil Regulatory Development. On April 14, 2000, Brazil’s telecommunications regulatory agency, Agencia Nacional de Telecomunicações, referred to as Anatel, amended its regulations relating to SMR services in Brazil. As a result, Brazil has opened its doors wider to competition in the telecommunications industry and particularly in the mobile wireless segment where we operate. The former regulations, set forth under Norma 14/97, imposed various restrictions that significantly limited the ability of Nextel Brazil and its affiliated companies to provide ESMR services to all potential customer groups and to be fully responsive to its customers’ demands and needs for mobile wireless communications services. In its current form, Norma 14/97 has been revised to define SMR services, including our digital ESMR services, as “telecommunication mobile services of collective interest that utilizes radiocommunication systems to provide dispatch, interconnection and any other forms of telecommunications.” This new definition produces a significant positive impact for our Brazilian ESMR operations principally by:

•  lifting restrictions on interconnection which previously required that our ESMR service be provided only to legal entities or groups of legal entities, that our ESMR service not be provided to individuals, and that all of our ESMR subscriber units must be capable of providing dispatch service;

•  lifting restrictions on the volume of interconnect traffic which previously required that the volume of traffic interconnected with the public switched telecommunications network, referred to as PSTN,

13

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

	could not exceed one-third of the sum of intra-network traffic volume and outgoing calls interconnected to the PSTN;
•	allowing ESMR companies to provide their users with other features such as internet access;
•	confirming that ESMR networks can interconnect among themselves for dispatch services, which is the basis for long distance dispatch; and
•	granting the right to provide Calling Party Pays, referred to as CPP services.

      However, as to the right to offer CPP services, Anatel is reviewing the relevant implementing regulations and will create a numbering plan and a tariff for SMR companies. We expect the new CPP regulation to become official by September 30, 2000, and we also expect to be able to collect fees from other carriers under the CPP system for the use of our network by their customers sometime in the beginning of 2001.

      McCaw Brazil. On April 24, 2000, Telcom Ventures, LLC filed a separate complaint in chancery in the Circuit Court for the City of Alexandria, Virginia, against Nextel International, Inc. and McCaw International (Brazil), Ltd., referred to as McCaw Brazil. The suit seeks:

•  dissolution of McCaw Brazil because of alleged “oppression” of McCaw Brazil’s minority shareholders by Nextel International;

•  rescission of the issuance of some of our shares in McCaw Brazil;

•  an injunction preventing action by McCaw Brazil’s board of directors without the participation of a director appointed by, among others, Telcom Ventures and restoration of this director to the board of directors;

•  declaration of a constructive trust as to some of the McCaw Brazil shares issued to us; and

•  an accounting and other declaratory and injunctive relief.

      Although we cannot predict the outcome of this proceeding, we believe the claims against us are without merit and are largely derivative of the matters already alleged by Telcom Ventures in their answer and counterclaim to our original complaint filed in that same court seeking entry of a declaratory judgment against Telcom Ventures, and we intend to vigorously defend against them.

D.  Results of Operations.

      The following discussion compares our condensed consolidated financial condition and results of operations for the three-month periods ended March 31, 2000 and 1999, and describes significant factors that could affect our prospective financial condition and results of operations.

      Historical results may not indicate future performance. See “G. Our Forward Looking Statements are Subject to a Variety of Factors that Could Cause Actual Results to Differ Materially From Current Beliefs.”

14

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

      1.  Operating Revenues.

      Operating revenues include service revenues, which consist primarily of charges for airtime usage and monthly network access fees from providing mobile wireless services.

					% of					% of			Increase from
					Consolidated					Consolidated			Previous Year
			March 31,		Operating			March 31,		Operating
			2000		Revenues			1999		Revenues			Dollars		Percent
			(dollars in thousands)
Operating revenues			$	47,175		100.0	%	$	19,861		100.0	%	$	27,314		137.5	%
	Brazil			14,837		31.4	%		8,552		43.1	%		6,285		73.5	%
	Argentina			14,236		30.2	%		7,010		35.3	%		7,226		103.1	%
	Mexico			15,181		32.2	%		3,841		19.3	%		11,340		295.2	%
	Peru			2,921		6.2	%		458		2.3	%		2,463		NM
		NM-Not Meaningful

      Operating revenues increased primarily due to growth in the number of our digital subscriber units in service and higher average monthly revenue per digital subscriber unit. The growth in the number of digital subscribers units in service of our consolidated subsidiaries from about 134,600 at March 31, 1999 to about 359,400 at March 31, 2000 is the result of a number of factors, principally:

•  the introduction of new products and services;

•  the increased number of indirect distribution channels;

•  the expansion of coverage in existing markets;

•  a continued emphasis on increasing brand awareness, primarily through increased advertising; and

•  the launch of digital interconnect ESMR service in Peru during June 1999. Prior to June 1999, only two-way radio digital dispatch service was available from Nextel Peru, and the potential customer base expanded significantly with the addition of interconnect service.

      The higher average monthly revenue per digital subscriber unit is the result of a number of factors, principally:

•  the establishment of the calling party pays program in Argentina, resulting in additional revenue via fees paid by non-subscribers placing calls to our subscribers in Argentina;

•  the introduction of digital interconnect ESMR service in Peru during June 1999, which has generated higher revenues per digital subscriber unit than the two-way radio digital dispatch service previously available; and

•  a shift in our customer use patterns away from use of digital two-way radio only to full use of our integrated services, with a corresponding increase in number of minutes of use of our digital services.

15

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

      2.  Cost of Revenues.

      Cost of revenues consists primarily of network operating costs, including site rent and utilities, and interconnection fees assessed by local exchange carriers.

					% of					% of			Increase from
					Consolidated					Consolidated			Previous Year
			March 31,		Operating			March 31,		Operating
			2000		Revenues			1999		Revenues			Dollars		Percent
			(dollars in thousands)
Cost of revenues			$	13,962		29.6	%	$	8,966		45.1	%	$	4,996		55.7	%
	Brazil			4,549		9.6	%		3,328		16.7	%		1,221		36.7	%
	Argentina			4,039		8.6	%		2,964		14.9	%		1,075		36.3	%
	Mexico			4,369		9.3	%		2,515		12.7	%		1,854		73.7	%
	Peru			1,005		2.1	%		159		0.8	%		846		NM
		NM-Not Meaningful

      The increase in cost of revenues is primarily attributable to interconnect costs on higher minutes of use and increased site lease costs and utilities that we incurred due to about a 57.4% increase in the number of cell sites we placed in service from March 31, 1999 to March 31, 2000.

      3.  Selling, General and Administrative Expenses.

												Increase/
				% of					% of			(Decrease) from
				Consolidated					Consolidated			Previous Year
		March 31,		Operating			March 31,		Operating
		2000		Revenues			1999		Revenues			Dollars			Percent
		(dollars in thousands)
Selling, general and administrative		$	67,260		142.6	%	$	56,885		286.5	%	$	10,375			18.2	%
	Selling and marketing		40,007		84.8	%		24,142		121.6	%		15,865			65.7	%
	General and administrative		27,253		57.8	%		32,743		164.9	%		(5,490	)		(16.8	)%

      The increase in selling and marketing expenses primarily reflects increased costs incurred in connection with higher consolidated sales of digital subscriber units across all of our reportable segments during the three months ended March 31, 2000, including:

•  $8.2 million of additional advertising costs;

•  $6.5 million of increased losses (subsidy) generated from increased sales of digital subscriber units and related accessories; and

•  $1.2 million of increased commissions earned by employees, indirect dealers and distributors as a result of increased digital subscriber unit sales.

      The decrease in general and administrative expenses during the three months ended March 31, 2000 is due primarily to a reduction of bad debt expense due to increased focus on collection activities.

      4.  Depreciation and Amortization.

												Increase
				% of					% of			(Decrease) from
				Consolidated					Consolidated			Previous Year
		March 31,		Operating			March 31,		Operating
		2000		Revenues			1999		Revenues			Dollars			Percent
		(dollars in thousands)
Depreciation and amortization		$	32,501		68.9	%	$	23,414		117.9	%	$	9,087			38.8%
	Depreciation		26,110		55.4	%		16,788		84.5	%		9,322			55.5%
	Amortization		6,391		13.5	%		6,626		33.4	%		(235	)		(3.5	)%

16

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

      Depreciation and amortization increased primarily due to increased depreciation as a result of placing additional cell sites into service in existing markets to improve and enhance coverage of our digital ESMR networks. System assets relating to the development and expansion of our digital ESMR networks represent the largest portion of our capital expenditures during the period. Depreciation begins when system assets are placed into service in the relevant markets.

      5.  Segment Losses, Interest Expense, Interest Income and Other.

													Increase/
				% of						% of			(Decrease) from
				Consolidated						Consolidated			Previous Year
		March 31,		Operating			March 31,			Operating
		2000		Revenues			1999			Revenues			Dollars			Percent
		(dollars in thousands)
Segment losses		$	34,047		72.2	%	$	45,990			231.6	%	$	(11,943	)		(26.0	)%
	Brazil		13,329		28.3	%		21,064			106.1	%		(7,735	)		(36.7	)%
	Argentina		2,919		6.2	%		10,217			51.4	%		(7,298	)		(71.4	)%
	Mexico		7,517		15.9	%		8,438			42.5	%		(921	)		(10.9	)%
	Peru		3,847		8.2	%		3,134			15.8	%		713			22.8	%
	Corporate and other		6,435		13.6	%		3,137			15.8	%		3,298			105.1	%
Interest expense			52,715		111.7	%		38,694			194.8	%		14,021			36.2	%
Interest income			348		0.7	%		1,538			7.7	%		(1,190	)		(77.4	)%
Equity in losses of unconsolidated affiliates			7,113		15.1	%		4,651			23.4	%		2,462			52.9	%
Foreign currency transaction gains (losses)			12,537		26.6	%		(66,697	)		(335.8	)%		79,234			118.8	%
Minority interest in losses of subsidiaries			2,750		5.8	%		12,041			60.6	%		(9,291	)		(77.2	)%
Net loss			110,893		235.1	%		165,282			832.2	%		(54,389	)		(32.9	)%

      We define segment losses as earnings before interest, taxes, depreciation and amortization and other non-recurring charges. We incurred segment losses across all of our consolidated subsidiaries during the three months ended March 31, 2000 and 1999. We expect these segment losses to continue for the next several years while we expand our digital ESMR networks and business activities, grow our subscriber base and strengthen the support systems necessary to service our growing number of subscribers.

      The increase in interest expense resulted from higher levels of outstanding debt drawn primarily to finance our current expansion and improvement of digital ESMR network coverage in our Latin American markets.

      The decrease in interest income is primarily due to lower average outstanding cash balances.

      The increase in equity in losses of unconsolidated affiliates is attributable to increased operating losses incurred by Nextel Communications Philippines, Inc. and Nexnet.

      The increase in foreign currency transaction gains (losses) is attributable primarily to the strengthening of the Brazilian real since its devaluation during the first quarter of 1999.

      The decrease in minority interest in losses of subsidiaries is attributable primarily to a reduction in the minority shareholders’ percentage share of decreasing operating losses recorded in Nextel Brazil, offset by an increase of operating losses of Nextel Peru.

E.  Liquidity and Capital Resources

      We incurred net losses of $110.9 million during the first quarter of 2000 and $165.3 million during the first quarter of 1999. The operating expenses and capital expenditures associated with developing, enhancing

17

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

and operating our digital ESMR networks have more than offset our operating revenues. Our operating expenses, debt service obligations and anticipated capital expenditures are expected to continue to more than offset operating revenues for the next several years. We have consistently used external sources of funds, primarily from debt incurrences and from the issuance of our series A exchangeable redeemable preferred stock to a wholly-owned subsidiary of Nextel Communications, to fund operations, capital expenditures, acquisitions and other nonoperating needs. For the remainder of 2000, we anticipate that our funding needs will be met by utilization of a similar variety of financing sources, including vendor and bank financing, potential issuance of public or private securities, and, if necessary and available, potential debt or equity financing from Nextel Communications.

      Cash Flows

      Net cash used in operating activities of $15.7 million for the three months ended March 31, 2000 decreased by $36.4 million compared to net cash used in operating activities of $52.1 million for the three months ended March 31, 1999. The decrease from the same period in 1999 is due primarily to purchase agreements executed with Motorola during the second quarter of 1999, which provide that we may make deferred cash payments, subject to certain aggregate and per country deferred payment limit amounts, for subscriber units. Additionally, during the first quarter of 1999, current liabilities were reduced by cash proceeds from draws under the International Motorola Financing Facility.

      Capital expenditures to fund the continued expansion and enhancement of our digital ESMR networks continue to represent the largest use of our funds for investing activities. Cash payments for capital expenditures increased $27.4 million from $43.3 million for the three months ended March 31, 1999 to $70.7 million for the three months ended March 31, 2000. The increase in capital expenditures is part of our strategy to focus on aggressive expansion and improvement of digital ESMR network coverage in our Latin American markets. Investments in and advances to affiliates and other have decreased from $11.0 million for the three months ended March 31, 1999 to $1.1 million for the three months ended March 31, 2000, primarily reflecting reduced investment activity in the Philippines.

      Net cash provided by financing activities for the three months ended March 31, 2000 consists primarily of $59.6 million from borrowings under vendor credit facilities, plus $3.2 million in contributions from minority stockholders of our majority owned consolidated subsidiaries, offset by net repayments of $2.9 million to our parent company, a wholly owned subsidiary of Nextel Communications.

F.  Future Capital Needs and Resources.

      Our strategy is focused on aggressive expansion and improvement of digital ESMR coverage in our Latin American markets, expansion into new markets and continued support as appropriate in light of perceived future prospects of our investments in Asia. Our business plan, which has been developed based on this strategy, is designed to improve subscriber unit growth, revenues and other key financial performance measurements. We have already begun to take the actions necessary to achieve the business plan. These actions include:

•  improving digital ESMR network coverage within our existing markets;

•  expanding our digital ESMR network service to reach new areas;

•  improving brand awareness;

•  introducing innovative pricing plans;

•  working closely with industry associations and local government offices to eliminate anti-competitive and anti-consumer regulations;

18

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

•  developing new and strengthening existing distribution channels; and

•  introducing new products and services.

      Our 2000 operating plan has been developed in anticipation of the continuing acceleration of the growth, and continuing improvements in the financial and operating performance, of our digital ESMR networks. Accordingly, we expect that anticipated cash expenditures during the remainder of 2000 will be focused on the following items:

•  capital expenditures to expand and improve digital ESMR network coverage in existing or targeted future markets, primarily in Latin America;

•  acquisition of additional spectrum to support entry into new digital ESMR network markets and/or to support increased network capacity and reduce future network construction expenditures in our existing digital ESMR markets;

•  debt service requirements;

•  capital contributions to support and develop our minority investment positions in Asia as appropriate in light of perceived future prospects;  and

•  working capital requirements associated with our expanding operations in our existing and targeted future markets.

      Taking into consideration our planned cash needs based on our business plan, we believe that we will be able to fully fund operations through the remainder of calendar year 2000. In making this assessment we have considered the increase in our cash needs attributable to the pending transactions with Motorola International, including the future reductions in capital contributions from Motorola as a minority owner in our consolidated subsidiaries in Peru and Brazil, and the anticipated receipt of cash representing return of our investment in the Shanghai GSM System. See “B. First Quarter Transactions and Developments” and “C. Post First Quarter Transactions and Developments.” This conclusion is premised on the anticipated availability of funds from the following sources as of March 31, 2000 and thereafter:

•  consolidated cash and cash equivalents on hand of about $73.5 million;

•  unused borrowings of up to the full $73.4 million remaining under the agreement with Motorola Credit to provide $225.0 million of secured term loan financing;

•  unused borrowings of up to the full $21.2 million remaining under the $125.0  million equipment financing agreement between McCaw Brazil and Motorola Credit;

•  unused borrowings of up to the full $38.8 million remaining under the incremental financing facility entered into between Nextel Argentina S.R.L. and Motorola Credit;

•  continuation for the balance of 2000 of arrangements providing extended financing terms for purchases of subscriber units under agreements with Motorola;

•  potential private and/or public issuance of securities, or sales of marketable securities, by us or our subsidiaries; and

•  potential issuance of additional preferred stock or other equity or debt securities, to a wholly owned subsidiary of Nextel Communications.

      We have had and may in the future have discussions with third parties regarding potential acquisitions of and/or equity investments in those third parties or wireless communications businesses or assets owned by them. Consideration of these potential acquisitions and/or investments is part of our proactive approach to expanding coverage in our principal target markets in Latin America and also could represent financially attractive or strategically desirable investment opportunities elsewhere. At this time, other than the existing

19

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

arrangements that have been consummated and/or are disclosed in this quarterly report, we have no legally binding commitments or understandings with any third parties that would require us to purchase an interest in or otherwise make any investment in or financial commitment to any new ventures. Our current expectation of cash needs and anticipated availability of related required funding during the year 2000 do not reflect the impact of any potential acquisitions or investments that may occur other than those set forth above. Any potential acquisitions or investments could involve significant additional funding needs in excess of those sources that we currently anticipate to be available, and thus could require us to raise additional equity or debt funding to successfully pursue, consummate and realize the potential benefits of those potential acquisitions or investments.

      If our business plans change, if economic conditions in any of our markets or competitive practices in the mobile wireless telecommunications industry, especially in Latin America, change materially from those currently prevailing or from those now anticipated to exist during the year 2000, or if other presently unexpected circumstances are encountered that have a material effect on the cash flow and/or profitability of our mobile wireless business, our anticipated cash needs as well as our conclusions as to the adequacy of our available sources could change significantly. We have been and will continue to be sensitive to abrupt changes in the financial markets and the business environments in those countries where we have operations, and will attempt to adjust our operating and financing plans accordingly.

      The availability of borrowings under our financing agreements is subject to specified conditions and limitations, and we cannot provide assurance that those conditions will be met at the times that we need to access borrowings under the relevant facilities. The terms of our financing agreements also require us at specified times to maintain compliance with various operating and financial covenants or ratios, which may become more stringent over time. Any failure to meet these covenants or ratios could have adverse effects on us and our ability to implement our current business plan, such as making future borrowings under those agreements unavailable or requiring repayment of amounts previously borrowed under those agreements in advance of their currently scheduled maturities. In addition, our capital needs and our ability to adequately address those needs through existing or any future potential debt or equity funding sources are subject to a variety of factors that cannot presently be predicted with certainty, including, for example, the commercial success of our digital ESMR networks, the amount and timing of our capital expenditures and operating losses and the volatility and demand of the debt and equity markets.

      Although we have received $150.0 million in additional equity funding from a wholly owned subsidiary of Nextel Communications on April 7, 2000, and we anticipate that we will be able to call upon Nextel Communications to provide us with significant additional financial support during 2000, if we are unable to obtain necessary funding from other sources, there can be no assurance that any specific amount or type of financing will be provided. Nextel Communications has no legal obligation to make any additional equity investments or to otherwise advance any other funds to us. In addition to the absence of any legal obligation of Nextel Communications to provide funding to us, some of the agreements to which Nextel Communications currently is a party restrict the amount available to Nextel Communications and its relevant subsidiaries for specified purposes, including investments in and advances to us. To the extent we are unable, for any reason, to obtain sufficient funding from Nextel Communications, we cannot provide assurance whether or on what terms adequate replacement funding might be available from any other source. If we are unable to obtain additional capital, or to obtain it on acceptable terms and in a timely manner, we would attempt to take appropriate responsive actions to tailor our activities to our available financing, including making revisions to our business plan to accommodate the reduced funding. See “G. Our Forward Looking Statements Are Subject to a Variety of Factors that Could Cause Actual Results to Differ Materially From Current Beliefs.”

20

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

G. Our Forward Looking Statements Are Subject to a Variety of Factors that Could Cause Actual Results to Differ Materially from Current Beliefs.

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

•  general economic conditions in Latin America and Asia and in the market segments that we are targeting for our digital ESMR network;

•  the availability of adequate quantities of system network and subscriber equipment and components to meet our service deployment and marketing plans and customer demand;

•  potential currency devaluations in countries in which our Operating Companies conduct business;

•  the accuracy of our estimates of the impact of foreign exchange volatility in our markets as compared to the U.S. dollar;

•  substantive terms of any international financial aid package that may be made available to any country in which our Operating Companies conduct business;

•  future legislation or regulatory actions relating to SMR or ESMR services, other wireless communication services or telecommunications generally;

•  the impact that economic conditions in Latin America and Asia, as well as other market conditions may have on the volatility and availability of equity and debt financing in domestic and international capital markets;

•  the success of efforts to improve and satisfactorily address any issues relating to our digital ESMR network performance;

•  the continued successful performance of the technology being deployed in our various market areas;

•  market acceptance of our new service offerings, including Nextel Worldwide;

•  the ability to achieve and maintain market penetration and average subscriber revenue levels sufficient to provide financial viability to our digital ESMR network business;

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

•  access to sufficient debt or equity capital to meet our operating and financial needs;

21

NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES

(A Substantially Wholly Owned Subsidiary of Nextel Communications, Inc.)

•  the quality and price of similar or comparable wireless communications services offered or to be offered by our competitors, including providers of cellular and PCS services; and

•  other risks and uncertainties described from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

      We finance a portion of our operations through senior discount notes and bank and vendor credit facilities. These financial instruments expose us to market risks, including interest rate risk and foreign currency exchange risk. Our U.S. dollar denominated borrowings and vendor equipment financing account for about 90% of our cross currency exposure. The tenor of available hedging products is generally short-term and does not match our long-term capital flows. We are also exposed to interest rate risk due to fluctuations in the U.S. prime rate and LIBOR. These rates are used to determine the variable rates of interest that are applicable to borrowings under our bank and vendor credit facilities.

      Our debt is denominated in U.S. dollars, while our operating revenues are denominated in foreign currencies. Fluctuations in exchange rates relative to the U.S. dollar, primarily those related to the Brazilian real, Mexican peso and Argentine peso, expose us to significant foreign exchange risk. We attempt to protect our revenues and earnings from foreign currency exchange risks by periodically adjusting prices in local currencies.

      We hold an available-for-sale investment in the common stock of Clearnet, a publicly traded company, which had a fair value of $344.9 million at March 31, 2000. We report our investment at its market value in our financial statements. Negative fluctuations in the stock price of Clearnet expose us to equity price risks. A 10% decline in the stock price would result in a $34.5 million decrease in the fair value of our investment in Clearnet.

      The table below summarizes our sensitivity to market risks associated with fluctuations in foreign currency exchange and interest rates. The table presents principal cash flows by year of maturity for our fixed and variable rate debt obligations. Fair values are determined based on quoted market prices for senior discount notes and carrying value for the bank and vendor credit facilities at March 31, 2000.

      Descriptions of our senior discount notes and bank and vendor credit facilities are contained in Note 7 to the consolidated financial statements in our 1999 Annual Report on Form 10-K and should be read in conjunction with the following table. The change in the total and fair values of our long-term debt as compared to December 31, 1999 reflects additional borrowings under the existing bank and vendor credit facilities and the changes in the applicable market conditions.

		Year of Maturity
		2000			2001			2002			2003			2004			Thereafter			Total			Fair value
		(U.S. dollars in thousands)
Long-Term Debt:
	Fixed Rate	$	713		$	951		$	502		$	—		$	—		$	1,681,463		$	1,683,629		$	1,118,296
	Average Interest Rate		14.5	%		14.5	%		14.5	%		—			—			12.6	%		12.6	%
	Variable Rate		33,111			140,026			93,752			93,752			62,622			—			423,263			423,263
	Average Interest Rate		10.8	%		11.3	%		10.9	%		10.9	%		11.2	%		—			11.1	%

22

PART II

Item 1.  Legal Proceedings.

      We and/or our Operating Companies are involved in certain legal proceedings that are described in our 1999 Annual Report on Form 10-K. During the three months ended March 31, 2000, there were no material changes in the status of or developments regarding such legal proceedings.

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

      (a)  List of Exhibits.

Exhibit
Number	Exhibit Description
27*	Financial Data Schedule.

*  Submitted only with the electronic filing of this document with the Securities and Exchange Commission pursuant to Regulation S-T under the Securities Act.

      (b)  Reports on Form 8-K.

           We did not file a Current Report on Form 8-K during the quarter ended March 31, 2000.

23

SIGNATURE

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

NEXTEL INTERNATIONAL, INC.

By:  /s/ BYRON R. SILIEZAR

Date: May 15, 2000

Byron R. Siliezar

Vice President and Chief Financial Officer

24

Exhibit Index

Exhibit
Number	Exhibit Description
27*	Financial Data Schedule.

*  Submitted only with the electronic filing of this document with the Securities and Commission pursuant to Regulation S-T under the Securities Act.

25