Fitch Ratings Upgrades Nextel To 'BB-'.

Business Editors

CHICAGO--(BUSINESS WIRE)--July 18, 2003

Fitch Ratings has upgraded the ratings on Nextel Communications Inc.'s (Nextel) senior unsecured notes to 'BB-' from 'B+', Nextel's senior secured bank facility to 'BB+' from 'BB' and Nextel's preferred stock rating to 'B' from 'B-'. Additionally, Fitch has assigned a 'BB-' rating to Nextel's proposed $1 billion senior redeemable twelve-year note offering. Proceeds of the offering will be used to repurchase all of the outstanding 10.65% senior redeemable discount notes due 2007 and all of the outstanding shares of Nextel's 11.125% preferred stock redeemable in 2010. The Rating Outlook remains Positive.

The rating upgrade reflects Nextel's excellent progress in deleveraging its balance sheet through excess cash from operations, open market purchases and the issuance of equity thereby reducing its interest and preferred dividend obligations. Moreover, operational trends are positive, as Nextel has exceeded financial and operational targets set for 2003. Expectations are for Nextel to strengthen credit protection measures in 2003 to 3.0 times (x) debt to EBITDA or less, which surpasses original expectations of 3.4x or less. The improvement in cash generation should lead to at least $600 million in positive free cash flow based on management's outlook for 2003.

With a $5 billion shelf registration available and approximately two thirds of its debt callable, Fitch expects Nextel to pursue further improvements to its capital structure utilizing its free cash flow, excess liquidity cushion and opportunistic equity and debt issuances to refinance Nextel's highest cost debt. Reflecting this strategy, Nextel has announced a $1 billion offering to refinance its series E preferred stock and 10.65% senior redeemable discount notes. These improvements to the capital structure will extend maturities beyond 2010 while reducing medium-term maturity levels and lowering the average cost of debt. Despite Nextel's aggressive deleveraging efforts requiring approximately $1.9 billion of cash over the last six quarters, liquidity remains solid with approximately $2 billion of cash (accounting for the redemption of the series D preferred stock), $1.3 billion of availability on its bank facility and positive free cash flow generation.

Even though Fitch expects Nextel's positive operating trends to continue over the next year, challenges and risks remain which could moderate the pace of anticipated credit profile improvement. Shorter-term issues include the decision by the Federal Communications Commission (FCC) on the 800 MHz consensus plan, the weak economic environment and fundamentals supporting the wireless industry. From an intermediate to longer term perspective, the concerns include the competitive threats to Nextel's Direct Connect offering, wireless number portability, potential funding requirements of the 800 MHz consensus plan and technical viability of the iDEN platform.

Perhaps Nextel's greatest longer term challenge is the competitive push-to-talk (PTT) threat from other wireless operators. While CDMA competitors have indicated the potential for a PTT service in the marketplace during 2003, Fitch believes near-term concerns to Nextel have been exaggerated as competitive PTT services will clearly have their own hurdles to overcome. Potential PTT issues include PTT call setup latencies, lack of intercarrier operability, uncertainty regarding other technical issues and PTT handset functionality.

Moreover, Nextel operates from a firmly entrenched position and competitive PTT offerings will have to emphasize coverage, niche markets, new feature capabilities and price to compensate for any service limitations. Thus, Fitch believes competitive PTT offerings will have a negligible effect on Nextel in 2003 while possibly gaining some traction and dampening net subscriber growth in 2004. Nextel's individual users segment, which contains many business users who have applied for service under their own credit and constitutes approximately 30% of Nextel's subscriber base, is likely to be vulnerable. Additionally, PTT competition could affect Nextel's ability to attract existing subscribers on competing networks that desire PTT capabilities.

The Positive Outlook reflects the expectation that Nextel will continue to improve credit metrics and that qualitative issues surrounding the FCC consensus plan, competitive PTT challenges and wireless number portability will resolve themselves in a way that is not detrimental to Nextel's credit profile. This continued positive trend and issue resolution may result in Fitch considering additional upgrades of Nextel's rating.