NII HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in millions, except per share amounts, and unaudited) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Operating revenues Service and other revenues $1,175.8 $870.0 $430.3 $306.7 Digital handset and accessory revenues 57.4 47.0 22.0 18.7 1,233.2 917.0 452.3 325.4 Operating expenses Cost of service (exclusive of depreciation and amortization included below) 301.1 237.1 106.8 87.5 Cost of digital handset and accessory sales 178.2 150.6 67.6 52.1 Selling, general and administrative 406.9 285.5 149.8 104.9 Depreciation 85.2 62.1 32.1 21.5 Amortization 4.4 10.7 1.6 3.4 975.8 746.0 357.9 269.4 Operating income 257.4 171.0 94.4 56.0 Other income (expense) Interest expense (46.8) (38.4) (20.6) (11.5) Interest income 20.4 9.2 10.3 3.8 Debt conversion expense (8.9) - - - Loss on early extinguishment of debt, net - (79.3) - - Foreign currency transaction gains (losses), net 2.4 7.4 0.3 (0.8) Other expense, net (7.4) (0.2) (3.7) (1.9) (40.3) (101.3) (13.7) (10.4) Income before income tax provision and cumulative effect of change in accounting principle 217.1 69.7 80.7 45.6 Income tax provision (92.2) (70.1) (31.4) (23.0) Income (loss) before cumulative effect of change in accounting principle 124.9 (0.4) 49.3 22.6 Cumulative effect of change in accounting principle, net of income taxes - 1.0 - - Net income $124.9 $0.6 $49.3 $22.6 Income (loss) before cumulative effect of change in accounting principle per common share, basic $1.73 $ - $0.65 $0.32 Cumulative effect of change in accounting principle per common share, basic - 0.01 - - Net income per common share, basic $1.73 $0.01 $0.65 $0.32 Income (loss) before cumulative effect of change in accounting principle per common share, diluted $1.52 $ - $0.58 $0.30 Cumulative effect of change in accounting principle per common share, diluted - 0.01 - - Net income per common share, diluted $1.52 $0.01 $0.58 $0.30 Weighted average number of common shares outstanding, basic 72.3 69.5 75.6 69.7 Weighted average number of common shares outstanding, diluted 87.2 72.4 89.3 79.2 CONSOLIDATED BALANCE SHEET DATA (in millions and unaudited) September 30, December 31, 2005 2004 Cash, cash equivalents and short-term investments $897.4 $369.4 Accounts receivable, less allowance for doubtful accounts of $10.6 and $8.1 202.2 160.7 Property, plant and equipment, net 834.7 558.2 Intangible assets, net 78.4 68.0 Total assets 2,429.7 1,491.3 Long-term debt, including current portion 1,136.9 603.5 Total liabilities 1,710.3 1,069.3 Stockholders' equity 719.4 421.9 NII HOLDINGS, INC. AND SUBSIDIARIES OPERATING RESULTS AND METRICS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (UNAUDITED) NII Holdings, Inc. (subscribers in thousands) Three Months Ended September 30, 2005 2004 Total digital subscribers (as of September 30) 2,303.6 1,783.0 Net subscriber additions 183.2 118.7 Churn (%) 1.7% 1.7% Average monthly revenue per handset/unit in service (ARPU) (1) $59 $54 Cost per gross add (CPGA) (1) $335 $323 Nextel Mexico (dollars in millions, except ARPU and CPGA, and subscribers in thousands) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Operating revenues Service and other revenues $703.0 $541.4 $257.1 $187.6 Digital handset and accessory revenues 18.5 18.1 7.5 7.8 721.5 559.5 264.6 195.4 Operating expenses Cost of service (excluding depreciation and amortization included below) 125.9 99.4 46.0 36.3 Cost of digital handset and accessory sales 92.9 79.6 36.7 28.4 Selling, general and administrative 211.0 151.4 79.4 54.7 Depreciation and amortization 49.1 50.9 18.0 16.3 478.9 381.3 180.1 135.7 Operating income $242.6 $178.2 $84.5 $59.7 Total digital subscribers (as of September 30) 1,027.2 804.5 Net subscriber additions 90.1 51.4 Churn (%) 1.6% 1.7% ARPU (1) $81 $74 CPGA (1) $451 $458 Nextel Brazil (dollars in millions, except ARPU and CPGA, and subscribers in thousands) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Operating revenues Service and other revenues $211.7 $134.4 $78.8 $49.5 Digital handset and accessory revenues 19.1 14.6 7.7 5.7 230.8 149.0 86.5 55.2 Operating expenses Cost of service (excluding depreciation and amortization included below) 85.1 63.8 28.5 24.6 Cost of digital handset and accessory sales 41.9 38.4 15.7 13.4 Selling, general and administrative 75.8 38.9 28.0 16.6 Depreciation and amortization 21.2 9.3 8.7 3.8 224.0 150.4 80.9 58.4 Operating income (loss) $6.8 $(1.4) $5.6 $(3.2) Total digital subscribers (as of September 30) 580.3 454.7 Net subscriber additions 44.1 30.6 Churn (%) 1.9% 2.1% ARPU (1) $42 $34 CPGA (1) $258 $229 Nextel Argentina (dollars in millions, except ARPU and CPGA, and subscribers in thousands) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Operating revenues Service and other revenues $181.2 $124.9 $66.5 $46.0 Digital handset and accessory revenues 15.9 12.4 5.4 4.5 197.1 137.3 71.9 50.5 Operating expenses Cost of service (excluding depreciation and amortization included below) 63.6 47.5 23.3 17.9 Cost of digital handset and accessory sales 30.2 22.3 10.8 7.3 Selling, general and administrative 49.8 36.2 18.2 14.0 Depreciation and amortization 12.2 8.0 4.5 3.1 155.8 114.0 56.8 42.3 Operating income $41.3 $23.3 $15.1 $8.2 Total digital subscribers (as of September 30) 465.1 349.1 Net subscriber additions 32.8 26.6 Churn (%) 1.3% 1.1% ARPU (1) $43 $40 CPGA (1) $191 $168 Nextel Peru (dollars in millions, except ARPU and CPGA, and subscribers in thousands) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Operating revenues Service and other revenues $79.0 $68.6 $27.6 $23.3 Digital handset and accessory revenues 4.0 1.8 1.6 0.8 83.0 70.4 29.2 24.1 Operating expenses Cost of service (excluding depreciation and amortization included below) 25.8 25.5 8.9 8.3 Cost of digital handset and accessory sales 13.3 10.2 4.5 3.1 Selling, general and administrative 24.7 21.2 8.4 7.1 Depreciation and amortization 6.2 4.1 2.2 1.6 70.0 61.0 24.0 20.1 Operating income $13.0 $9.4 $5.2 $4.0 Total digital subscribers (as of September 30) 231.0 174.7 Net subscriber additions 16.2 10.1 Churn (%) 1.9% 1.9% ARPU (1) $39 $43 CPGA (1) $195 $227 (1) For information regarding ARPU and CPGA, see "Non-GAAP Reconciliations for the Nine and Three Months Ended September 30, 2005 and 2004" included in this release. NON-GAAP RECONCILIATIONS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (UNAUDITED) Operating Income Before Depreciation and Amortization Consolidated operating income before depreciation and amortization, or OIBDA, represents operating income before depreciation and amortization expense. Consolidated OIBDA is not a measurement under accounting principles generally accepted in the United States, may not be similar to consolidated OIBDA measures of other companies and should be considered in addition to, but not as a substitute for, the information contained in our statements of operations. We believe that consolidated OIBDA provides useful information to investors because it is an indicator of operating performance, especially in a capital intensive industry such as ours, since it excludes items that are not directly attributable to ongoing business operations. Our consolidated OIBDA calculations are commonly used as some of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. Consolidated OIBDA can be reconciled to our consolidated statements of operations as follows (in millions): NII Holdings, Inc. Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 Consolidated operating income $257.4 $171.0 $94.4 $56.0 Consolidated depreciation 85.2 62.1 32.1 21.5 Consolidated amortization 4.4 10.7 1.6 3.4 Consolidated operating income before depreciation and amortization $347.0 $243.8 $128.1 $80.9 NII Holdings, Inc. Guidance Estimate For the Year Ending December 31, 2005 Consolidated operating income $346.6 Consolidated depreciation 122.5 Consolidated amortization 5.9 Consolidated operating income before depreciation and amortization $475.0 Average Monthly Revenue Per Handset/Unit in Service (ARPU) Average monthly revenue per handset/unit in service, or ARPU, is an industry term that measures service revenues, which we refer to as subscriber revenues, per period from our customers divided by the weighted average number of handsets in commercial service during that period. ARPU is not a measurement under accounting principles generally accepted in the United States, may not be similar to ARPU measures of other companies and should be considered in addition, but not as a substitute for, the information contained in our statements of operations. We believe that ARPU provides useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high value customers. Other revenue includes revenues for such services as roaming, service and repair, cancellation fees, analog and other. ARPU can be calculated and reconciled to our consolidated statement of operations as follows (in millions, except ARPU): NII Holdings, Inc. Three Months Ended September 30, 2005 2004 Consolidated service and other revenues $430.3 $306.7 Less: consolidated analog revenues (2.3) (2.2) Less: consolidated other revenues (36.9) (25.0) Total consolidated subscriber revenues $391.1 $279.5 ARPU calculated with subscriber revenues $59 $54 ARPU calculated with service and other revenues $65 $60 Nextel Mexico Three Months Ended September 30, 2005 2004 Service and other revenues $ 257.1 $ 187.6 Less: analog revenues (1.2) (1.2) Less: other revenues (19.0) (14.0) Total subscriber revenues $ 236.9 $ 172.4 ARPU calculated with subscriber revenues $ 81 $ 74 ARPU calculated with service and other revenues $ 88 $ 81 Nextel Brazil Three Months Ended September 30, 2005 2004 Service and other revenues $ 78.8 $ 49.5 Less: analog revenues (0.7) (0.5) Less: other revenues (7.5) (4.1) Total subscriber revenues $ 70.6 $ 44.9 ARPU calculated with subscriber revenues $ 42 $ 34 ARPU calculated with service and other revenues $ 47 $ 38 Nextel Argentina Three Months Ended September 3 2005 2004 Service and other revenues $ 66.5 $ 46.0 Less: other revenues (8.7) (5.5) Total subscriber revenues $ 57.8 $ 40.5 ARPU calculated with subscriber revenues $ 43 $ 40 ARPU calculated with service and other revenues $ 50 $ 46 Nextel Peru Three Months Ended September 30, 2005 2004 Service and other revenues $ 27.6 $ 23.3 Less: other revenues (1.8) (1.5) Total subscriber revenues $ 25.8 $ 21.8 ARPU calculated with subscriber revenues $ 39 $ 43 ARPU calculated with service and other revenues $ 41 $ 46 Cost per Gross Add (CPGA) Cost per gross add, or CPGA, is an industry term that is calculated by dividing our selling, marketing and handset and accessory subsidy costs, excluding costs unrelated to initial customer acquisition, by our new subscribers during the period, or gross adds. CPGA is not a measurement under accounting principles generally accepted in the United States, may not be similar to CPGA measures of other companies and should be considered in addition, but not as a substitute for, the information contained in our statements of operations. We believe CPGA is a measure of the relative cost of customer acquisition. CPGA can be calculated and reconciled to our consolidated statements of operations as follows (in millions, except CPGA): NII Holdings, Inc. Three Months Ended September 30, 2005 2004 Consolidated digital handset and accessory revenues $ 22.0 $ 18.7 Less: consolidated cost of handset and accessory sales 67.6 52.1 Consolidated handset subsidy costs Handset subsidy costs 45.6 33.4 Consolidated selling and marketing Handset subsidy costs 63.8 42.5 Costs per statement of operations Handset subsidy costs 109.4 75.9 Less: consolidated costs unrelated to initial customer acquisition (11.1) (8.8) Customer acquisition costs $ 98.3 $ 67.1 Cost per Gross Add $ 335 $ 323 Nextel Mexico Three Months Ended September 30, 2005 2004 Digital handset and accessory revenues $7.5 $7.8 Less: cost of handset and accessory sales 36.7 28.4 Handset subsidy costs 9.2 20.6 Selling and marketing 41.3 26.9 Costs per statement of operations 70.5 47.5 Less: costs unrelated to initial customer acquisition (8.2) (5.5) Customer acquisition costs $62.3 $42.0 Cost per Gross Add $451 $458 Nextel Brazil Three Months Ended September 30, 2005 2004 Digital handset and accessory revenues $7.7 $5.7 Less: cost of handset and accessory sales 15.7 13.4 Handset subsidy costs 8.0 7.7 Selling and marketing 12.9 7.6 Costs per statement of operations Handset subsidy costs 20.9 15.3 Less: costs unrelated to initial customer acquisition (1.3) (2.0) Customer acquisition costs $19.6 $13.3 Cost per Gross Add $258 $229 Nextel Argentina Three Months Ended September 30, 2005 2004 Digital handset and accessory revenues $5.4 $4.5 Less: cost of handset and accessory sales 10.8 7.3 Handset subsidy costs 5.4 2.8 Selling and marketing 5.4 4.3 Costs per statement of operations 10.8 7.1 Less: costs unrelated to initial customer acquisition (1.1) (0.8) Customer acquisition costs $9.7 $6.3 Cost per Gross Add $191 $168 Nextel Peru Three Months Ended September 30, 2005 2004 Digital handset and accessory revenues $1.6 $0.8 Less: cost of handset and accessory sales 4.5 3.1 Handset subsidy costs 2.9 2.3 Selling and marketing 3.2 2.6 Costs per statement of operations 6.1 4.9 Less: costs unrelated to initial customer acquisition (0.5) (0.4) Customer acquisition costs $5.6 $4.5 Cost per Gross Add $195 $227 Net Debt Net debt represents total long-term debt less cash, cash equivalents and short-term investments. Net debt to consolidated operating income before depreciation and amortization represents net debt divided by consolidated operating income before depreciation and amortization. Net debt is not a measurement under accounting principles generally accepted in the United States, may not be similar to net debt measures of other companies and should be considered in addition to, but not as a substitute for, the information contained in our balance sheets. We believe that net debt and net debt to consolidated operating income before depreciation and amortization provide useful information concerning our liquidity and leverage. Net debt as of September 30, 2005 can be calculated as follows (in millions): Total long-term debt $1,124.3 Less: cash, cash equivalents and short-term investments (897.4) Net debt $226.9 Net debt to revised consolidated OIBDA guidance and net debt to revised consolidated operating income guidance for the year ending December 31, 2005 are as follows: Net debt to revised consolidated operating income before depreciation and amortization guidance 0.5 Net debt to revised consolidated operating income guidance 0.7 Cash, Cash Equivalents and Short-Term Investments Consolidated cash, cash equivalents and short-term investments represents total cash and cash equivalents plus short-term investments. Consolidated cash, cash equivalents and short-term investments is not a measurement under accounting principles generally accepted in the United States, may not be similar to consolidated cash, cash equivalents and short-term investment measures of other companies and should be considered in addition to, but not as a substitute for, the information contained in our balance sheets. We believe that consolidated cash, cash equivalents and short-term investments provides useful information concerning our liquidity. Consolidated cash, cash equivalents and short-term investments as of September 30, 2005 can be calculated as follows (in millions): Consolidated cash and cash equivalents $883.1 Plus: short-term investments 14.3 Consolidated cash, cash equivalents and short-term investments $897.4