2nd Quarter Earnings Review

1

• 2nd Quarter Earnings Review
• July 31, 2001
• Fred Salerno

2
Agenda

• 2nd Quarter Results Review
• Consolidated Results
• Segment Results
• 2001 Guidance

3

2nd Quarter 2001 - Financial Highlights
(Adjusted Basis)

• Growth
• EPS
  0.77
  6.9
• Revenues 16.9B
  5.0
• Data Transport 24.5
• Wireless 15.6
• Operating Income 4.1B
  10.2
• EBITDA 7.5B
  9.5
• EBITDA Margins 44.2
  180 Basis Point
  
  
  Improvement
• Cash Expense 9.4B
  1.7
• Telecom Cash Expense 5.9B
  (3.5)

Strong Performance
4

2nd Quarter 2001 - Operational Highlights

• 
  
• 808,000 Net New Wireless Customers
• ARPU Accretion
• Digital Expansion
• 804,000 New Long Distance Customers
• 253,000 in Massachusetts in 2 months
• 120,000 Net New DSL Customers
• Excellent Process Improvement
• Increased Telecom Productivity
• Decrease in Telecom Overtime

Market Share Winner
5

2nd Quarter Consolidated Earnings

• Net
  Income (M) Per Share
• Adjusted Earnings
  2,101 0.77
• Adjustments
• FAS 115
  (2,926) (1.07)
• Gain/(Loss) on Marketable Securities
• FAS 133
  (37) (0.01)
• Mark to Market - Financial Instruments
• Merger Transition Costs/Other (159)
  (0.06)
• Reported Loss
  (1,021) (0.38)
• Totals for Diluted EPS do not add due to
  rounding in EPS calculations

6.9 Growth In Adjusted EPS
6
Consolidated Results - 2Q(Adjusted Basis)
Revenues
Cash Expense
16.9B
16.1B
9.44B
9.28B
5.0Growth
1.7Increase
2Q00
2Q01
2Q00
2Q01
Op. Income
EBITDA
7.5B
6.8B
4.07B
3.69B
10.2Growth
9.5Growth
2Q00
2Q01
2Q00
2Q01
Solid Results in Difficult Economy
7
Merger Integration

• Synergies
• Headcount - 16,000 Equivalent Reduction
• 8,000 Employee Reduction since 2Q00
• 8,000 Equivalent Headcount Reduction since 1/01
• Non-Wage
• Process
• Telecom - Created New On-Line Electronic Front
  Door for our Customers
• Bill View Pay, Ordering, Customer Service
  On-Line Marketing Channel
• VZ Wireless - Billing Systems Back Office
  Integration
• Info Services - Standardization for Production
  Distribution functions
• Service
• Telecom - Per American Customer Satisfaction
  Index Survey
• Business Office Response - Improves
• General Business Enterprise Business Service -
  Improves
• Customer Complaints - Decreases 20
• Verizon Wireless
• Wireless Customer Satisfaction - 1 in 9 out 10
  markets - J.D. Power Survey
• Supercarrier of the Year - Wireless Week
  Magazine - March, 2001

Process Improvements Realized
8
Domestic Telecom Highlights - 2Q
Revenues
Expenses
10.95B
10.91B
8.25B
8.27B
0.3Growth
0.3Decrease
2Q00
2Q01
2Q00
2Q01
Cash Expense
EBITDA
6.1B
5.9B
5.05B
4.80B
3.5Decrease
5.2Growth
2Q00
2Q01
2Q00
2Q01
Cost Initiatives Delivering
9
Telecom - Key Growth Drivers - 2Q
Data Transport Revenues M
1,575
1,265
24.5Growth
2Q00
2Q01
DSO Equivalents
VGEs
62.7M
125.2M
103.7M
41.0M
53Growth
20.7Growth
2Q00
2Q01
2Q01
2Q00
Solid Demand for Hi Cap Services
10
Telecom - Key Growth Drivers
Long Distance Customers
DSL Subscribers
840,000
6.0M
720,000
5.2M
2Q01
1Q01
1Q01
2Q01
2nd Quarter gross 150,000 new in service
adjusted for database reconciliation - 120,000
Net New
2nd Quarter - 804K Subscribers
Growth Initiatives Contributing
11
Domestic Wireless Highlights - 2Q
Total Revenues
Expenses
4.4B
3.8B
3.7B
3.3B
15.6Growth
11.4Increase
2Q01
2Q00
2Q00
2Q01
Op. Income
EBITDA
1.57B
1.33B
18.2 Growth
44.8 Growth
679M
469M
2Q00
2Q01
2Q00
2Q01
EBITDA Margins Expand
12
Wireless - Key Growth Drivers - 2Q
Subscribers
Digital Subscribers
27.9M
24.8M
17.9M
69Increase
12.7Growth
10.6M
2Q00
2Q01
2Q01
2Q00
Service ARPU
Churn
49.34
47.59
2.53
2.29
3.7 Growth
10 Decrease
2Q00
2Q01
2Q00
2Q01
Continued Strong Performance
13
Information Services Highlights - 2Q
Revenues
Expenses
1,056M
984M
6.8Decrease
495M
473M
4.4Decrease
2Q00
2Q01
2Q00
2Q01
EBITDA Margin
55
54
2Q01
2Q00
Publication Date Changes Impact Quarter
14
International Highlights - 2Q
Revenues
Equity Income
598M
471M
27.0Growth
266M
107.8Growth
128M
2Q00
2Q01
2Q00
2Q01
Proportionate Wireless Subs.
8.7M
6.5M
33.9Growth
2Q01
2Q00
Excellent Diversification of Growth Initiatives
15
2nd Quarter Summary

• Economic effects
• Outstanding expense controls
• Superb performance in long distance
• Strong wireless growth margins
• On track to meet CAPEX target

Solid Execution
16
2001 Guidance
17
2001 Guidance
Updated

• Revenue Growth 7
  5 - 6
• EPS
  3.13 - 3.17 3.07 - 3.12
• EPS Growth 8
  5.4 - 7.2
• LD Subscribers 6.4M -
  6.6M 6.7M - 6.9m
• DSL Subscribers 1.2M - 1.3M
  1.2M - 1.3M
• CAPEX
  17.5B 17.5B
• Adjusted for Wireless JV

18
2001 EPS Revision

• Revenue (0.15 - 0.16)
• Expense Offsets
  0.10
• Non Wage Decreases
• Equivalent Headcount Decreases
• Increase in Installation Repair Productivity
• Decrease in Installation Repair Rework
• EPS Impact vs. Original plan
  (0.05 - 0.06)

19
Revenue Impacts

• Economy
• Switched Access Line Demand
• Wholesale Demand

20
Expense Initiatives

• Accelerated Merger Synergies
• Capital Efficiency Focus

21
Revised Quarterly 2001 EPS

• EPS
  Growth
• 1st Q (actual ) 0.72
  4.3
• 2nd Q (actual) 0.77
  6.9
• 3rd Q (est.) 0.77 - 0.80
  5.4- 9.0
• 4th Q (est.) 0.81 - 0.83
  5.1- 7.7
• Full Year (Target) 3.07 - 3.12
  5.4- 7.2

22
2001 Outlook - Revised
Revenue Growth Targets Adjusted for Wireless JV
5 - 6
1.0- 1.5

43.3B 00 Actual
64.6B 00 Actual
4- 5
23 - 25
15.4B 00 Actual
2.0B 00 Actual
4.1B 00 Actual
Telecom
Consolidated
Wireless
Info Svcs
International
2001 targeted growth rate not available due to
quiet period restrictions
23
2001 Outlook
Expense Targets Adjusted for Wireless JV
3 - 4
(.5) to 1

50.1B 00 Actual
33.3B 00 Actual
(.5) to Flat
26 - 28
13.6B 00 Actual
1.7B 00 Actual
2.1B 00 Actual
Telecom
Wireless
Info Svcs
International
Consolidated
2001 targeted growth rate not available due to
quiet period restrictions
24
2001 Outlook
Operating Income Growth Targets Adjusted for
Wireless JV
9 - 10
5 - 6

8 - 9
14.5B 00 Actual
10.1B 00 Actual
6 - 7
2.0B 00 Actual
1.8B 00 Actual
.3B 00 Actual
Consolidated
International
Info Svcs
Telecom
Wireless
2001 targeted growth rate not available due to
quiet period restrictions
25
2001 Financial Outlook

• Excellent expense controls
• Solid merger integration process
• Focus on capital efficiency growth initiatives
• Exploring rural access line disposition
• Deliver on commitments

Solid Execution in a Slowing Economy
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Safe Harbor Statement

• This presentation contains statements about
  expected future events and financial results that
  are forward-looking and subject to risks and
  uncertainties. For those statements, we claim
  the protection of the safe harbor for
  forward-looking statements contained in the
  Private Securities Litigation Reform Act of 1995.
  The following important factors could affect
  future results and could cause those results to
  differ materially from those expressed in the
  forward-looking statements materially adverse
  changes in economic conditions in the markets
  served by us or by companies in which we have
  substantial investments material changes in
  available technology an adverse change in the
  ratings afforded our debt securities by
  nationally accredited ratings organizations the
  final outcome of federal, state, and local
  regulatory initiatives and proceedings, including
  arbitration proceedings, and judicial review of
  those initiatives and proceedings, pertaining to,
  among other matters, the terms of
  interconnection, access charges, universal
  service, and unbundled network element and resale
  rates the extent, timing, success, and overall
  effects of competition from others in the local
  telephone and toll service markets the timing
  and profitability of our entry into the in-region
  long distance market our ability to combine
  former Bell Atlantic and GTE operations, satisfy
  regulatory conditions and obtain revenue
  enhancements and cost savings the profitability
  of our entry into the broadband access market
  the ability of Verizon Wireless to combine
  operations and achieve revenue enhancements and
  cost savings, and obtain sufficient spectrum
  resources our ability to convert our ownership
  interest in Genuity Inc. into a controlling
  interest consistent with regulatory conditions,
  and Genuitys ensuing profitability and changes
  in our accounting assumptions that may be
  required by regulatory agencies, including the
  SEC, or that result from changes in the
  accounting rules or their application, which
  could result in an impact on earnings.