V. The Transaction

SDG&E seeks to transfer to Nextel its ten 25 Kilohertz (KHz) wide channels in the 800 MHz spectrum with a total market value of approximately $5 million and related nine-year-old equipment with a total book value of approximately $5.7 million. The total value of SDG&E's radio frequencies and related equipment is approximately $10.7 million. SDG&E estimates that the retail replacement cost for its 800 MHz equipment is approximately $12 million.

In exchange for SDG&E's radio frequencies and equipment, Nextel will transfer to SDG&E 25 of its 12.5 KHz wide channels in the 900 MHz spectrum with a market value of approximately $5 million. Nextel Communications, Inc. will also pay Motorola, Inc. (Motorola) approximately $8.7 million for the replacement equipment SDG&E will need to operate its new 900 MHz frequencies. In addition, Nextel Communications, Inc. will pay a service provider up to $320,000 on SDG&E's behalf for mobile and portable radio installation and programming services.

SDG&E will pay Motorola approximately $1.6 million for the replacement equipment considered by SDG&E to be an upgrade from its nine year-old 800 MHz equipment.

The replacement equipment is set forth in a System Agreement entered into by SDG&E, Nextel, and Motorola, as set forth in Exhibit B to the application. Schedules A and B to the System Agreement were submitted under seal because they contain detailed technical specifications of the equipment and other proprietary information belonging to Motorola. Under the terms of the System Agreement, SDG&E is prohibited from disclosing such information to any other party other than the Commission. With no opposition to the submitting of Schedule A and B under seal and good cause given, these schedules should remain under seal.

SDG&E and Nextel consider the character and nature of the frequency licenses and related equipment to be like-kind. Accordingly, SDG&E and Nextel intend to treat the proposed transaction as a tax-free exchange under Section 1031 of the Internal Revenue Code.

Upon completion of the exchange, SDG&E will retire its existing 800 MHz channels and LMR equipment by removing their book value from rate base while simultaneously recording the new 900 MHz frequencies and replacement equipment in rate base at the equivalent net book value of the replaced system.

Nextel has the contractual right to terminate the Agreement if the Commission does not approve this proposed transaction by October 31, 2002. The details of this proposed transaction is set forth in the Asset Exchange Agreement attached to the application as Exhibit A.