Fitch Ratings Upgrades Nextel to 'BB'.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 12, 2004

Fitch Ratings has upgraded the ratings on Nextel Communications Inc.'s (Nextel) senior unsecured notes to 'BB' from 'BB-', and Nextel's preferred stock rating to 'BB-' from 'B'. The rating on Nextel Finance Company's senior secured bank facility at 'BB+' remains unchanged. The Rating Outlook is Stable.

The rating upgrade reflects Nextel's continued progress in improving its credit profile through its strong operating performance, which is driving greater cash flows, and on-going balance sheet reconstruction to reduce financial risk. Consequently, Nextel has materially reduced interest and preferred dividend obligations and extended maturities beyond 2010 while reducing medium-term maturity levels. The balance sheet improvements during the second half of 2003 include:

-- The retirement of $3.5 billion of higher yield debt and the

issuance of $2.5 billion of lower cost debt.

-- The redemption of the majority (approximately $750 million) of

its preferred stock obligation.

-- Increased financial flexibility through the amendment of the

terms to its secured credit facility and the repayment of

$2.775 in term loans from the proceeds of $2.2 billion in a

new term loan E and $575 million in cash.

-- The issuance of over $1 billion in equity including $500

million from its direct stock repurchase program.

Moreover, operational trends remain positive despite greater competitive threats from wireless number portability and push-to-talk offerings. Nextel strengthened credit protection measures in 2003 to 2.4 times (x) Debt to EBITDA, which surpassed Fitch's revised expectations of 2.9x or less. Free cash flow improved to approximately $1.3 billion for 2003 compared to Fitch's expectations of at least $700 million. Expectations for 2004 are encouraging, with Nextel management providing guidance of at least $1.6 billion in free cash flow. This performance is being driven by expected net additions in excess of 1.8 million and relatively stable ARPU due to the increased usage of wireless data services and nationwide direct connect mitigating pressure on voice pricing. With approximately $2.2 billion of additional debt becoming callable in 2004, Fitch expects Nextel to pursue further improvements to its capital structure by utilizing its excess cash, free cash flow and availability under its shelf registration. Nextel has $2 billion available on its $5 billion shelf registration including $1 billion designated for the direct stock purchase program. Despite Nextel's aggressive de-leveraging efforts, liquidity remains solid with $2 billion in cash and over $1 billion availability through its unused revolver at the end of 2003.

Significant uncertainty and event risk surrounds potential outcomes associated with the Federal Communications Commission's (FCC) review of the Consensus plan proposal. Fitch believes that given the healthy growth prospects underpinning free cash flow expectations and debt reduction plans in 2004, Nextel has significant flexibility within its current rating to offset event risk associated with the Consensus Plan proposal even if the FCC requires Nextel to increase its funding commitment in exchange for PCS spectrum. Clearly, the allocation of 10 MHz of PCS spectrum and contiguous spectrum at 800 MHz benefits the company and offers additional strategic alternatives for Nextel's long-term technology needs. Upon the FCC reaching a final resolution, Fitch will evaluate the decision to determine if any future positive rating actions are warranted.

Nextel has other options if a positive resolution is not reached with the FCC. Nextel has committed to spend approximately $200 million on acquiring a significant amount of spectrum at 2.1 GHz and 2.5 GHz covering 60 of the top 100 markets and could potentially deploy a wireless broadband data network utilizing this spectrum. However, it is worth noting that no other wireless operator has deployed a nationwide commercial network utilizing this spectrum, and the propagation characteristics of the MMDS spectrum would require significantly more cell sites to provide an equivalent level of coverage compared to a deployment in the 800 MHz spectrum band.

The notching between the unsecured and secured ratings was compressed to one notch to reflect the rapidly improving credit profile of Nextel. In addition, the notching between the unsecured and preferred stock rating was also compressed to one notch given the improving credit profile and the significant reduction in total preferred stock thereby improving recovery prospects for the preferred stockholders.