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UNITED STATES

FORM 10-Q

(Mark One)

NII HOLDINGS, INC.

      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.

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NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

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PART I — FINANCIAL INFORMATION.

Item 1.     Financial Statements — Unaudited.

NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

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NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

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NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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NII HOLDINGS, INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES

Note 1.  Basis of Presentation

      NII Holdings, Inc. is an indirect, substantially wholly owned subsidiary of Nextel Communications, Inc. Our unaudited condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission and in accordance with American Institute of Certified Public Accountants’ Statement of Position, or SOP 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” assuming that we will continue as a going concern. Our accompanying condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the results for interim periods. All adjustments made were normal recurring accruals.

      You should read the accompanying 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, 2001 and our quarterly report on Form 10-Q for the quarter ended March 31, 2002. You should not expect results of operations of interim periods to be an indication of the results for a full year.

      On May 24, 2002 we reached an agreement in principle with our main creditors, Motorola Credit Corporation, Nextel Communications and an ad hoc committee of noteholders for a restructuring of our outstanding debt. In connection with this agreement, on May 24, 2002, NII Holdings, Inc. and NII Holdings, Inc. (Delaware) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. None of our foreign subsidiaries have filed for Chapter 11 reorganization. While our U.S. companies that filed for Chapter 11 are operating as debtors-in-possession under the Bankruptcy Code, our foreign subsidiaries will continue operating in the ordinary course of business during the Chapter 11 process, providing continuous and uninterrupted wireless communication services to existing and new customers.

      We filed our original Joint Plan of Reorganization on June 14, 2002, our First Amended Plan of Reorganization on June 27, 2002, our Second Amended Plan of Reorganization on July 9, 2002 and our Third Amended Joint Plan of Reorganization, on July 26, 2002. We filed our Revised Third Amended Joint Plan of Reorganization on July 31, 2002. We filed our original Disclosure Statement on June 27, 2002, our First Amended Disclosure Statement on July 9, 2002, our Second Amended Disclosure Statement on July 26, 2002 and our Revised Second Amended Disclosure Statement on July 31, 2002. In addition, we filed our Schedules of Assets and Liabilities and our Statement of Financial Affairs on June 24, 2002.

      Among other things, our reorganization plan contemplates: (i) the cancellation of a substantial amount of our indebtedness in exchange for new common stock, (ii) the cancellation of existing equity interests, (iii) the reinstatement in full of all senior secured indebtedness owed or guaranteed by us to Motorola Credit Corporation, subject to deferrals of principal amortization and some structural modifications, (iv) the execution with Nextel Communications of a new spectrum use and build-out agreement and the staggered payment of $50.0 million to our reorganized company in connection therewith, and (v) a rights offering, under which some members of the ad hoc committee of noteholders will act as standby purchasers of up to $75.0 million of new senior notes to be issued by one of our holding company subsidiaries and additional common stock of our reorganized company, and Nextel Communications will act as standby purchaser of up to an additional $65.0 million of new senior notes to be issued by one of our holding company subsidiaries and additional common stock of our reorganized company, subject to some conditions. In addition, upon the successful completion of our reorganization, we will be required to pay our financial advisors a contingent fee of $6.0 million. We expect that the implementation of this reorganization plan will result in a significant deleveraging of our balance sheet to allow us and our operating companies to operate without the constraints that had threatened our long-term viability. On August 8, 2002, we began soliciting our existing creditors for approval of our reorganization plan.

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Notes To Condensed Consolidated Financial Statements — (Continued)

      We are permitted to continue to operate our businesses and manage our properties in the ordinary course without prior approval from the Bankruptcy Court. Transactions outside of the ordinary course of business, including certain types of capital expenditures, certain sales of assets and certain requests for additional financings, will require approval by the Bankruptcy Court. There can be no assurance that the Bankruptcy Court will grant any requests for such approvals. On May 30, 2002, the Bankruptcy Court issued an order permitting us to pay pre-petition salaries, wages and benefits to all of our employees. The Bankruptcy Court also authorized the payment of certain other pre-petition claims, in limited circumstances, as necessary to avoid undue disruption to our operations.

      Generally, actions to enforce or otherwise effect repayment of pre-petition liabilities of, as well as all pending litigation against, us are stayed while we continue to operate our business as debtors-in-possession. The ultimate amount and settlement terms for such liabilities will be subject to a plan of reorganization and, accordingly, are not presently determinable. Our trade creditors, including vendors, are expected to be paid their post-petition claims in the normal course of business.

      We are currently operating under the jurisdiction of Chapter 11 of the Bankruptcy Code and the Bankruptcy Court, and our continuation as a going concern is contingent upon, among other things, our ability to satisfy the conditions precedent to the effectiveness of our plan of reorganization or effect another plan of reorganization and generate sufficient cash from operations and financing sources to meet future obligations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from our inability to continue as a going concern. The amounts reported on the consolidated balance sheets could materially change because of changes in business strategies and the effects of our plan of reorganization.

      Accounting and Reporting Under SOP 90-7. Our accompanying condensed consolidated financial statements reflect the following accounting and reporting policies required by SOP 90-7:

      We have segregated and classified as liabilities subject to compromise in the accompanying consolidated balance sheets those liabilities and obligations whose treatment and satisfaction are dependent on the outcome of our reorganization. If there is uncertainty about whether a secured claim is undersecured or will be impaired under our plan of reorganization, we include the entire amount of the claim in liabilities subject to compromise. Generally, all actions to enforce or otherwise effect repayment of pre-petition liabilities, as well as all pending litigation against the companies in reorganization, are stayed while we continue our business operations as debtors-in-possession. The ultimate amount of and settlement terms for such liabilities are subject to the terms of our plan of reorganization. Only those liabilities that are obligations of or guaranteed by NII Holdings, Inc. or NII Holdings, Inc. (Delaware) are included in liabilities subject to compromise. Liabilities subject to compromise may vary significantly from the stated amounts of proofs of claim filed with the Bankruptcy Court. Obligations classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court action, further developments with respect to potential disputed claims, determination as to the value of any collateral securing claims, or other events. Further, additional claims may arise subsequent to our filing date resulting from the rejection of executory contracts, including some leases, and from a determination by the Bankruptcy Court, or agreed to by parties in interest, of allowed claims for contingencies and other disputed amounts.

      We classify in reorganization items in our accompanying condensed consolidated statements of operations all items of income, expense, gain or loss that are realized or incurred because we are in reorganization. We expense as incurred professional fees associated with and incurred during our reorganization and report them as reorganization items. We classify in reorganization items interest income earned by NII Holdings, Inc. or NII Holdings, Inc. (Delaware) that would not have been earned but for our Chapter 11 filing.

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Notes To Condensed Consolidated Financial Statements — (Continued)

      When debt subject to compromise becomes an allowed claim, we adjust its carrying value to the amount of the allowed claim. Adjustments to debt subject to compromise generally result in the write-off of debt discounts and debt financing costs. We report in reorganization items the loss from adjusting the carrying value of debt subject to compromise.

      We report interest expense incurred subsequent to our Chapter 11 filing only to the extent that it will be paid during the reorganization or that it is probable that it will be an allowed claim. Principal and interest payments may not be made on pre-petition debt subject to compromise without approval from the Bankruptcy Court or until a plan of reorganization defining the repayment terms has been confirmed. Further, the Bankruptcy Code generally disallows the payment of post-petition interest that accrues with respect to unsecured or undersecured claims. As a result, we are not accruing interest that we believe is not probable of being treated as an allowed claim. During the six and three months ended June 30, 2002, we did not accrue interest aggregating $28.8 million on our senior redeemable notes. We have continued to accrue interest expense related to our credit facilities with Motorola Credit Corporation, as our current plan of reorganization contemplates the reinstatement of these facilities.

      Consistent with SOP 90-7, upon emergence from reorganization, we plan to adopt accounting principles that will be required to be adopted in our financial statements within twelve months of that date.

      Cash and Cash Equivalents. We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. A portion of our cash and cash equivalents held by our Brazilian and Argentine operating companies is not available to fund any of the cash needs of NII Holdings, Inc. or any of our other subsidiaries due to debt covenants contained in agreements related to those operations. The portion of our cash and cash equivalents limited for use in our Brazilian and Argentine operating companies was $21.9 million as of June 30, 2002 and $22.3 million as of December 31, 2001.

      Restricted Cash. Restricted cash represents cash pledged as collateral and cash in escrow designated to fund some of our debt obligations. Restricted cash is not available to fund any of the other cash needs of NII Holdings, Inc. or any of our subsidiaries.

      Handsets Provided Under Operating Leases. Beginning in January 2002, our Argentine operating company began providing handsets to its customers under operating lease agreements requiring the return of the handset at the end of the lease term. At the inception of the lease term we expense the cost of the handset in excess of the minimum contractual revenues associated with the handset lease and the estimated residual value of the handset. The estimated residual value of the handset is based on the expected value of the handset at the end of the lease term and the likelihood, based on historical experience, that the handset will be recovered. We recognize ratably over the lease term revenue generated under the lease arrangement, which relates primarily to the up-front rental payment that we require at the inception of the lease term. We have classified in property, plant and equipment handsets under these operating leases as follows:

      Accumulated Other Comprehensive Loss. Accumulated other comprehensive loss represents a cumulative foreign currency translation adjustment of $181.3 million as of June 30, 2002 and $229.0 million as of December 31, 2001.

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Notes To Condensed Consolidated Financial Statements — (Continued)

Supplemental Cash Flow Information.

      Adoption of SFAS No. 142. In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that we no longer amortize goodwill and intangible assets with indefinite useful lives, but rather test them for impairment at least annually. It also requires that we continue to amortize intangible assets that have finite lives over their estimated useful lives and that we evaluate their estimated remaining useful lives and residual values each reporting period.

      Effective January 1, 2002, we applied the provisions of SFAS No. 142 to all goodwill and intangible assets recognized on our financial statements at that date. Since we wrote off the entire balance of our goodwill as of December 31, 2001 and determined that our licenses and customer lists have finite useful lives, we are not required to and did not perform an impairment test on our intangible assets. Further, we determined that the estimated remaining useful lives and residual values of our intangible assets did not require adjustments. As a result, the adoption of SFAS No. 142 on January 1, 2002 did not have a material impact on our financial position or results of operations.

      Our intangible assets as of June 30, 2002 and December 31, 2001 are as follows:

      As of December 31, 2001, we also had $35.1 million in net debt financing costs included in intangible assets and other. During the second quarter of 2002, we wrote off the remaining balance of these costs in accordance with SOP 90-7 (see note 5).

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Notes To Condensed Consolidated Financial Statements — (Continued)

      We recorded total amortization expense of $6.1 million for the six months ended June 30, 2002 and $35.0 million for the six months ended June 30, 2001, of which $4.4 million related to goodwill. Had we adopted SFAS No. 142 effective January 1, 2001, and accordingly not amortized goodwill for the six months ended June 30, 2001, our consolidated net loss attributable to common stockholders of $381.1 million would have been $376.7 million, and our basic and diluted consolidated loss per share attributable to common stockholders of $1.41 would have been $1.39.

      Based solely on the carrying amount of amortized intangible assets existing as of June 30, 2002 and current exchange rates, we estimate the amortization expense for each of the next five years ending December 31 to be as follows (in thousands):

      Actual amortization expense to be reported in future periods could differ from these estimates as a result of changes in exchange rates, license acquisitions and other relevant factors.

      New Accounting Pronouncements. In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143, which must be applied to fiscal years beginning after June 15, 2002, addresses financial accounting and reporting for obligations arising from the retirement of tangible long-lived assets and the associated asset retirement costs. We are evaluating the impact of adopting SFAS No. 143 on our financial position and results of operations.

      In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 requires us to classify gains and losses from extinguishments of debt as extraordinary items only if they meet the criteria for such classification in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” These provisions are effective January 1, 2003. Any gain or loss on extinguishment of debt classified as an extraordinary item in prior periods that does not meet the criteria for such classification must be reclassified to other income or expense. Additionally, SFAS No. 145 requires sale-leaseback accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions. We are evaluating the impact of adopting SFAS No. 145 on our financial position and results of operations.

      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. These provisions are effective for exit or disposal activities initiated after December 31, 2002. We are evaluating the impact of adopting SFAS No. 146 on our financial position and results of operations.

      Reclassifications and Other. We have reclassified some prior period amounts to conform to our current year presentation, including $11.2 million that we reclassified from accrued expenses and other to deferred revenues and other as of December 31, 2001.

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Notes To Condensed Consolidated Financial Statements — (Continued)

      As a result of our adoption of Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” we recognized revenues from digital handset sales and equal amounts of cost of revenues during the following periods that are attributable to handset sales previously reported in periods prior to 2000 as follows:

Note 2.  Debt

      On December 31, 2001, our Argentine operating company failed to make a scheduled principal payment of $8.3 million to the lenders under our Argentine credit facilities. This caused a cross default on $381.7 million in aggregate borrowings under our equipment financing facilities with Motorola Credit Corporation, which include our international Motorola equipment financing facility, our international Motorola incremental equipment financing facility and our Brazil Motorola equipment financing facility. On February 1, 2002, we did not make our scheduled $41.4 million interest payment due on our 12.75% senior serial redeemable notes due 2010, of which $650.0 million in aggregate principal amount is outstanding. Subsequently, on March 31, 2002, we did not make a $0.7 million scheduled interest payment due on our $56.7 million international Motorola incremental equipment financing facility. In addition, on March 31, 2002, our Argentine operating company failed to make a second scheduled principal payment of $8.3 million and a scheduled interest payment of $1.5 million to the lenders under our Argentine credit facilities.

      As a result of our default, the entire balance of unpaid principal under our 12.75% senior serial redeemable notes is subject to being declared immediately due and payable together with accrued interest. In addition, as a result of cross default provisions contained in our senior redeemable notes, the entire balance of unpaid principal under our 13.0% senior redeemable discount notes due 2007 and our 12.125% senior serial redeemable discount notes due 2008 are subject to being declared immediately due and payable, together with accrued interest, thirty days after an acceleration has been declared under any of our other significant indebtedness, all of which is currently in default. No such acceleration has been declared. As a result of these events of default and cross default provisions contained in our debt agreements, our entire debt balance is

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Notes To Condensed Consolidated Financial Statements — (Continued)

subject to being declared immediately due and payable. We have not made, nor do we intend to make, additional principal and interest payments on any of our outstanding debt while we are in reorganization.

      In February 2002, the creditors under our Argentine credit facilities seized the full cash balance of $7.9 million that was held in a cash collateral account designated for future equity contributions to our Argentine operating company under a capital subscription agreement. About $0.4 million of this amount was used to cover legal costs incurred by the creditor and the remainder was applied to the outstanding principal balance under our Argentine credit facilities. We are currently negotiating the settlement of these facilities with the creditors.

      As of June 30, 2002, our parent company, Nextel Communications, held about $856.7 million of our senior redeemable notes.

Note 3.     Liabilities Subject to Compromise

      The components of liabilities subject to compromise are as follows:

      We classified the entire balance of our senior redeemable notes, our international Motorola equipment financing facility, our international Motorola incremental equipment financing facility and our Brazil Motorola equipment financing facility in liabilities subject to compromise as of June 30, 2002 in accordance with SOP 90-7 since these are all debts that are either obligations of or guaranteed by NII Holdings, Inc.

Note 4.     Impairment, Restructuring and Other Charges

      During the first quarter of 2002, our Argentine operating company, our Brazilian operating company and our corporate headquarters further restructured their operations, which included workforce reductions. We recorded a $1.9 million restructuring charge in the first quarter of 2002 related to these actions and $3.3 million in other charges that were incurred and paid to third parties assisting us with our debt restructuring efforts.

      During the second quarter of 2002, we incurred $1.7 million in charges to third parties assisting us with our debt restructuring efforts. In addition, our Argentine operating company recorded a $7.9 million impairment charge to further write-down the carrying values of its long-lived assets to their estimated fair values as a result of the continued economic decline in Argentina. Further, both our Brazilian and Argentine operating companies implemented additional workforce reductions and incurred restructuring charges of $0.3 million. As of June 30, 2002 we had $0.1 million of accrued restructuring charges.

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Notes To Condensed Consolidated Financial Statements — (Continued)

Note 5.     Reorganization Items

      We recognized the following items as reorganization items in our statements of operations during the second quarter of 2002 (in thousands):

      During the second quarter of 2002, we adjusted the carrying value of our senior redeemable notes to their face values by writing off the remaining unamortized discounts totaling $92.2 million. In addition, we wrote off the entire remaining balance of our debt financing costs of $31.2 million.

Note 6.     Argentina Foreign Currency Losses

      In January 2002, the Argentine government devalued the Argentine peso from its previous one-to-one peg with the U.S. dollar. Subsequently, the peso-to-dollar exchange rate has significantly weakened in value. Since our Argentine operating company holds significant U.S. dollar-denominated liabilities, primarily its credit facilities, fluctuations in exchange rates can cause foreign exchange transaction losses. During the six and three months ended June 30, 2002, as a result of the devaluation and subsequent decline in value of the Argentine peso, our Argentine operating company recorded $134.4 million and $57.2 million in foreign currency transaction losses.

Note 7.     Contingencies

      Brazilian Tax Contingencies. Our Brazilian operating company has received tax assessment notices from state and federal Brazilian tax authorities asserting deficiencies in tax payments related primarily to value added taxes, import duties and matters surrounding the definition and classification of equipment and services. Our Brazilian operating company has filed various petitions disputing these assessments. In some cases we have received favorable decisions, which are currently being appealed by the respective governmental authority. In other cases our petitions have been denied and we are currently appealing those decisions. Additionally, our Brazilian operating company has filed a lawsuit against the Brazilian government disputing the legality of an increase in certain social contribution tax rates. Based on our estimates of the likelihood of unfavorable decisions related to these matters, we have recorded accrued liabilities for probable losses totaling $15.1 million as of June 30, 2002 and $11.1 million as of December 31, 2001. From time to time, we may also receive additional tax assessment notices of a similar nature relating to periods not yet reviewed by the tax authorities. Although we cannot currently reasonably estimate a range of possible losses relating to these unasserted assessments, we continue to evaluate the likelihood of possible losses, if any.

      Legal Proceedings. As a result of our Chapter 11 filing, an automatic stay has been imposed against the commencement or continuation of legal proceedings against NII Holdings outside of the Bankruptcy Court. The automatic stay will not apply, however, to governmental authorities exercising their police or regulatory powers, including the application of environmental laws. The automatic stay also does not apply to our subsidiaries that did not file for Chapter 11 protection, including all of our foreign operating companies. Claimants against NII Holdings may assert their claims in the Chapter 11 cases by filing a timely proof of claim, to which we may object and seek a determination from the Bankruptcy Court as to the allowability of the claim. Claimants who desire to liquidate their claims in legal proceedings outside of the Bankruptcy Court will be required to obtain relief from the automatic stay by order of the Bankruptcy Court. If such relief is

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Notes To Condensed Consolidated Financial Statements — (Continued)

granted, the automatic stay will remain in effect with respect to the collection of liquidated claim amounts. As a general rule, all claims against NII Holdings that seek a recovery from assets of our estates will be addressed in the Chapter 11 cases and paid only under the terms of a confirmed plan of reorganization.

Note 8.  Segment Reporting

      We operate in four reportable segments: (1) Mexico, (2) Brazil, (3) Argentina and (4) Peru. The operations of all other businesses that fall below the reporting thresholds are included in the Corporate and other segment below. The Corporate and other segment includes our Philippine operating company, our Chilean operating companies and our corporate headquarters operations in the U.S. We evaluate the performance of these segments and allocate resources to them based on cash generation potential, return on invested capital, growth opportunities and capital investment requirements. We define segment earnings (losses) as income (loss) before interest, taxes, depreciation and amortization and other charges determined to be non-recurring in nature, such as reorganization items and impairment, restructuring and other charges.