UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q/A

     (Mark one)

        [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2002

                                       OR

        [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to


                          Commission file number 1-8606


                           VERIZON COMMUNICATIONS INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



               DELAWARE                                      23-2259884
       (STATE OF INCORPORATION)                           (I.R.S. EMPLOYER
                                                         IDENTIFICATION NO.)

      1095 AVENUE OF THE AMERICAS                               10036
          NEW YORK, NEW YORK                                  (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                  REGISTRANT'S TELEPHONE NUMBER (212) 395-2121


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 [ ]

At March 31, 2002, 2,723,017,584 shares of the registrant's Common Stock were
outstanding, after deducting 28,632,900 shares held in treasury.





                                TABLE OF CONTENTS




ITEM NO.                                                                                                    PAGE
                                                                                                            ----
                                                                                                         
PART I. FINANCIAL INFORMATION

1.   FINANCIAL STATEMENTS (UNAUDITED)

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
      For the three months ended March 31, 2002 and 2001                                                       1

      CONDENSED CONSOLIDATED BALANCE SHEETS
      March 31, 2002 and December 31, 2001                                                                     2

      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
      For the three months ended March 31, 2002 and 2001                                                       3

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                     4

2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS                                                                                    14

3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                               29

PART II. OTHER INFORMATION

6.   EXHIBITS AND REPORTS ON FORM 8-K                                                                         29






PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  Verizon Communications Inc. and Subsidiaries




(Dollars in Millions, Except Per Share Amounts) (Unaudited)                                     THREE MONTHS ENDED MARCH 31,
                                                                                                     2002               2001
                                                                                               ----------         ----------
                                                                                                            
OPERATING REVENUES                                                                             $   16,375         $   16,266

Operations and support expense (exclusive of items shown below)                                     9,764              9,299
Depreciation and amortization                                                                       3,320              3,360
Sales of assets, net                                                                                 (220)                --
                                                                                               ----------         ----------

OPERATING INCOME                                                                                    3,511              3,607
Income (loss) from unconsolidated businesses                                                       (1,543)               216
Other income and (expense), net                                                                        65                 70
Interest expense                                                                                     (814)              (921)
Minority interest                                                                                    (243)               (98)
Mark-to-market adjustment - financial instruments                                                      (3)              (116)
                                                                                               ----------         ----------
Income before provision for income taxes, extraordinary item and cumulative effect of
   accounting change                                                                                  973              2,758
Provision for income taxes                                                                            969              1,004
                                                                                               ----------         ----------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE                             4              1,754
Extraordinary item, net of tax                                                                         (9)                --
Cumulative effect of accounting change, net of tax                                                   (496)              (182)
                                                                                               ----------         ----------
NET INCOME (LOSS)                                                                              $     (501)        $    1,572
                                                                                               ==========         ==========
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income before extraordinary item and cumulative effect of accounting change                    $       --         $      .65
Extraordinary item, net of tax                                                                         --                 --
Cumulative effect of accounting change, net of tax                                                   (.18)              (.07)
                                                                                               ----------         ----------
NET INCOME (LOSS)                                                                              $     (.18)        $      .58
                                                                                               ==========         ==========
Weighted-average shares outstanding (in millions)                                                   2,719              2,704
                                                                                               ----------         ----------
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income before extraordinary item and cumulative effect of accounting change                    $       --         $      .65
Extraordinary item, net of tax                                                                         --                 --
Cumulative effect of accounting change, net of tax                                                   (.18)              (.07)
                                                                                               ----------         ----------
NET INCOME (LOSS)                                                                              $     (.18)        $      .58
                                                                                               ==========         ==========
Weighted-average shares outstanding - diluted (in millions)                                         2,732              2,725
                                                                                               ----------         ----------
Dividends declared per common share                                                            $     .385         $     .385
                                                                                               ==========         ==========



See Notes to Condensed Consolidated Financial Statements



                                       1


                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  Verizon Communications Inc. and Subsidiaries




(Dollars in Millions, Except Per Share Amounts) (Unaudited)                                MARCH 31,         DECEMBER 31,
                                                                                                2002                 2001
                                                                                        ------------         ------------
                                                                                                       
ASSETS
Current assets
  Cash and cash equivalents                                                             $      1,015         $        979
  Short-term investments                                                                       1,364                1,991
  Accounts receivable, net of allowances of $2,113 and $2,153                                 15,412               14,254
  Inventories                                                                                  1,770                1,968
  Net assets held for sale                                                                     1,232                1,199
  Prepaid expenses and other                                                                   3,379                2,796
                                                                                        ------------         ------------
Total current assets                                                                          24,172               23,187
                                                                                        ------------         ------------
Plant, property and equipment                                                                173,189              169,586
  Less accumulated depreciation                                                               98,868               95,167
                                                                                        ------------         ------------
                                                                                              74,321               74,419
                                                                                        ------------         ------------
Investments in unconsolidated businesses                                                       7,615               10,202
Intangible assets, net                                                                        45,127               44,262
Other assets                                                                                  20,090               18,725
                                                                                        ------------         ------------
Total assets                                                                            $    171,325         $    170,795
                                                                                        ============         ============
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
   Debt maturing within one year                                                        $     16,344         $     18,669
   Accounts payable and accrued liabilities                                                   13,120               13,947
   Other                                                                                       5,646                5,404
                                                                                        ------------         ------------
Total current liabilities                                                                     35,110               38,020
                                                                                        ------------         ------------

Long-term debt                                                                                46,580               45,657
Employee benefit obligations                                                                  13,454               11,898
Deferred income taxes                                                                         18,375               16,543
Other liabilities                                                                              4,273                3,989

Minority interest                                                                             22,526               22,149

Shareowners' investment
   Series preferred stock ($.10 par value; none issued)                                           --                   --
   Common stock ($.10 par value; 2,751,650,484 shares issued in both periods)                    275                  275
   Contributed capital                                                                        24,685               24,676
   Reinvested earnings                                                                         9,065               10,704
   Accumulated other comprehensive loss                                                       (1,455)              (1,187)
                                                                                        ------------         ------------
                                                                                              32,570               34,468
   Less common stock in treasury, at cost                                                        867                1,182
   Less deferred compensation - employee stock ownership plans and other                         696                  747
                                                                                        ------------         ------------
Total shareowners' investment                                                                 31,007               32,539
                                                                                        ------------         ------------
Total liabilities and shareowners' investment                                           $    171,325         $    170,795
                                                                                        ============         ============




See Notes to Condensed Consolidated Financial Statements



                                       2


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Verizon Communications Inc. and Subsidiaries




(Dollars in Millions) (Unaudited)                                                           THREE MONTHS ENDED MARCH 31,
                                                                                                  2002                 2001
                                                                                          ------------         ------------
                                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES
Income before extraordinary item and cumulative effect of accounting change               $          4         $      1,754
Adjustments to reconcile income before extraordinary item and cumulative effect of
   accounting change to net cash provided by operating activities:
     Depreciation and amortization                                                               3,320                3,360
     Sales of assets, net                                                                         (220)                  --
     Mark-to-market adjustment - financial instruments                                               3                  116
     Employee retirement benefits                                                                 (405)                (476)
     Deferred income taxes                                                                         369                  416
     Provision for uncollectible accounts                                                          602                  364
     (Income) loss from unconsolidated businesses                                                1,543                 (216)
     Changes in current assets and liabilities, net of effects from
       acquisition/disposition of businesses                                                      (886)              (2,170)
     Other, net                                                                                    148                  (46)
                                                                                          ------------         ------------
Net cash provided by operating activities                                                        4,478                3,102
                                                                                          ------------         ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                                                            (2,374)              (4,478)
Acquisitions, net of cash acquired, and investments                                               (930)              (2,099)
Proceeds from disposition of businesses                                                            728                   --
Net change in short-term investments                                                               532                  577
Other, net                                                                                          24                 (454)
                                                                                          ------------         ------------
Net cash used in investing activities                                                           (2,020)              (6,454)
                                                                                          ------------         ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings                                                               2,980                2,941
Repayments of long-term borrowings and capital lease obligations                                (2,224)                (798)
Increase (decrease) in short-term obligations, excluding current maturities                     (2,385)               2,205
Dividends paid                                                                                  (1,051)              (1,040)
Proceeds from sale of common stock                                                                 222                   77
Other, net                                                                                          36                 (101)
                                                                                          ------------         ------------
Net cash provided by (used in) financing activities                                             (2,422)               3,284
                                                                                          ------------         ------------
Increase (decrease) in cash and cash equivalents                                                    36                  (68)
Cash and cash equivalents, beginning of period                                                     979                  757
                                                                                          ------------         ------------
Cash and cash equivalents, end of period                                                  $      1,015         $        689
                                                                                          ============         ============




See Notes to Condensed Consolidated Financial Statements



                                       3


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  Verizon Communications Inc. and Subsidiaries
                                   (Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared based upon Securities and Exchange Commission (SEC) rules that permit
reduced disclosure for interim periods. These financial statements reflect all
adjustments that are necessary for a fair presentation of results of operations
and financial condition for the interim periods shown including normal recurring
accruals and other items. The results for the interim periods are not
necessarily indicative of results for the full year. For a more complete
discussion of significant accounting policies and certain other information, you
should refer to the financial statements included in the Verizon Communications
Inc. (Verizon) Annual Report on Form 10-K for the year ended December 31, 2001,
as amended by Annual Report on Form 10-K/A for the year ended December 31, 2001.

We have reclassified certain amounts from prior year's data to conform to the
2002 presentation.

2. MERGER CHARGES AND OTHER STRATEGIC ACTIONS

In connection with the Bell Atlantic Corporation-GTE Corporation merger on June
30, 2000, we incurred charges associated with employee severance of $584 million
($371 million after-tax). These costs, as recorded under Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits," represent the benefit costs for the separation of approximately 5,500
management employees who were entitled to benefits under pre-existing separation
plans, as well as an accrual of ongoing SFAS No. 112 obligations for GTE
employees. The remaining severance liability as of March 31, 2002 is $116
million.

During the fourth quarter of 2001, we recorded a special charge of $765 million
($477 million after-tax), as recorded under SFAS No. 112, for the voluntary and
involuntary separation of approximately 10,000 employees. The remaining
severance liability under this program as of March 31, 2002 is $605 million.

We expect to incur a total of approximately $2 billion of transition costs
related to the merger and the formation of the wireless joint venture. These
costs are incurred to integrate systems, consolidate real estate and relocate
employees. They also include approximately $500 million for advertising and
other costs to establish the Verizon brand. Transition costs incurred through
the first quarter of 2002 total $1,829 million. Transition costs for the
quarters ended March 31, 2002 and 2001 were $96 million ($52 million after taxes
and minority interest) and $163 million ($88 million after taxes and minority
interest), respectively.

3. SALES OF ASSETS, NET

During the first quarter of 2002, we recorded a net pretax gain of $220 million
($116 million after-tax), primarily resulting from a pretax gain on the sale of
TSI Telecommunication Services Inc. (TSI) of $466 million ($275 million
after-tax), partially offset by an impairment charge in connection with our exit
from the video business and other charges of $246 million ($159 million
after-tax).

4. EXTRAORDINARY ITEM

During the first quarter of 2002, we retired $1,536 million of debt prior to the
stated maturity date, resulting in a pretax extraordinary charge of $15 million
($9 million after-tax).

5. NET ASSETS HELD FOR SALE

In December 2001, we agreed to sell TSI, for approximately $800 million. The
transaction closed on February 14, 2002. See Note 3 above.

In October 2001, we agreed to sell all 675,000 of our switched access lines in
Alabama and Missouri to CenturyTel Inc. (CenturyTel) for $2.2 billion. The
Alabama Public Service Commission (PSC) approved the sale in December 2001. The
U.S. Department of Justice (DOJ) approved the sales in both Alabama and Missouri
during the first quarter of 2002. The Alabama sale remains subject to approval
by the Federal Communications Commission (FCC). The Missouri sale remains
subject to approval by the Missouri PSC and the FCC. We expect to close the
transactions in the second half of 2002.

Also in October 2001, we agreed to sell approximately 600,000 switched access
lines in Kentucky to ALLTEL Corporation (ALLTEL) for $1.9 billion. The sale has
been approved by the Kentucky PSC and the DOJ, and remains subject to approval
by the FCC. We expect to close the transaction in the second half of 2002.



                                       4


6. INVESTMENTS

Marketable Securities

We have investments in marketable securities, primarily common stocks, which are
considered "available-for-sale" under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." These investments have been included
in our condensed consolidated balance sheets in Investments in Unconsolidated
Businesses and Other Assets.

Under SFAS No. 115, available-for-sale securities are required to be carried at
their fair value, with unrealized gains and losses (net of income taxes) that
are considered temporary in nature recorded in Accumulated Other Comprehensive
Loss. The fair values of our investments in marketable securities are determined
based on market quotations.

The following table shows certain summarized information related to our
investments in marketable securities:



(Dollars in Millions)                                                 GROSS           GROSS
                                                                 UNREALIZED      UNREALIZED
                                                        COST          GAINS          LOSSES      FAIR VALUE
                                                  ----------     ----------      ----------      ----------
                                                                                     
AT MARCH 31, 2002
Investments in unconsolidated businesses          $    1,118     $      506      $     (238)     $    1,386
Other assets                                             226             29              --             255
                                                  ----------     ----------      ----------      ----------
                                                  $    1,344     $      535      $     (238)     $    1,641
                                                  ==========     ==========      ==========      ==========
AT DECEMBER 31, 2001
Investments in unconsolidated businesses          $    1,337     $      578      $      (80)     $    1,835
Other assets                                             243             26              --             269
                                                  ----------     ----------      ----------      ----------
                                                  $    1,580     $      604      $      (80)     $    2,104
                                                  ==========     ==========      ==========      ==========


We continually evaluate our investments in marketable securities for impairment
due to declines in market value considered to be other than temporary. That
evaluation includes, in addition to persistent, declining stock prices, general
economic and company-specific evaluations. In the event of a determination that
a decline in market value is other than temporary, a charge to earnings is
recorded for all or a portion of the unrealized loss, and a new cost basis in
the investment is established.

Investment Ownership Changes

On January 25, 2002, Verizon exercised its option to purchase an additional 12%
of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) common stock, from the
government of Puerto Rico. We now hold 52% of TELPRI stock, up from 40% at
December 31, 2001. As a result of gaining control of TELPRI, Verizon changed the
accounting for its investment in TELPRI from the equity method to full
consolidation, effective January 1, 2002.

On March 28, 2002, Verizon transferred 5.5 million of its shares in CTI Holdings
S.A. (CTI), our wireless investment in Argentina, to a newly created trust for
CTI employees. This decreased our ownership percentage from 65% to 48%. We also
reduced our representation on CTI's Board of Directors from five of nine members
to four of nine. As a result of these actions that surrender control of CTI, we
changed the method of accounting for our investment in CTI from consolidation to
the equity method.

Investment-Related Charges

During the first quarter of 2002, we recorded a pretax loss of $1,400 million
($1,400 million after-tax) due to the other than temporary decline in the market
value of our investment in Compania Anonima Nacional Telefonos de Venezuela
(CANTV). As a result of the recent political and economic instability in
Venezuela, including the devaluation of the Venezuelan bolivar, and the related
impact on CANTV's future economic prospects, we no longer expect that the future
undiscounted cash flows applicable to CANTV will be sufficient to recover our
investment. Accordingly, we wrote our investment down to market value as of
March 31, 2002.

During the first quarter of 2002, we recorded a pretax loss of $516 million
($436 million after-tax) to market value due primarily to the other than
temporary decline in the market value of our investment in Metromedia Fiber
Network, Inc. (MFN). During 2001, we wrote down our investment in MFN due to the
declining market value of its stock. We wrote off our remaining investment and
other financial statement exposure related to MFN this quarter primarily as a
result of their deteriorating financial condition and related defaults. In
addition, we delivered to MFN a notice of termination of our fiber optic
capacity agreement.

During the first quarter of 2002, we recorded a pretax loss of $230 million
($190 million after-tax) to fair value due to the other than temporary decline
in the fair value of our remaining investment in CTI. In 2001, we recorded an
estimated loss of $637 million ($637 million after-tax) to reflect the impact of
the deteriorating Argentinean



                                       5


economy and devaluation of the Argentinean peso on CTI's financial position. As
a result of the 2002 and 2001 charges, our financial exposure related to our
equity investment in CTI has been eliminated.

Other Securities

Prior to the merger of Bell Atlantic and GTE, we owned and consolidated Genuity
Inc. (Genuity). In June 2000, as a condition of the merger, 90.5% of the voting
equity of Genuity was issued in an initial public offering. We currently own
8.2% of the voting equity of Genuity, which contains a contingent conversion
feature. The conversion rights are dependent on the percentage of certain of
Verizon's access lines that are compliant with Section 271 of the
Telecommunications Act of 1996. Currently, approximately 57% of such access
lines are Section 271 compliant.

In the fourth quarter of 2001, we recorded a charge related to a decline in fair
value of our investment in the equity of Genuity to $1,264 million. In addition,
our investment in Genuity includes debt of $1,150 million.

Genuity's results of operations are not included in our results after June 30,
2000, consistent with the cost method of accounting. For the quarter ended March
31, 2002, Genuity's revenues and net losses were $282 million and $258 million,
respectively. For the quarter ended March 31, 2001, Genuity's revenues and net
losses were $299 million and $292 million, respectively.

7. ACCOUNTING CHANGE - GOODWILL AND OTHER INTANGIBLE ASSETS

Accounting Change

Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 no longer permits the amortization of goodwill
and indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under various conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The goodwill impairment test under SFAS No. 142
requires a two-step approach, which is performed at the reporting unit level, as
defined in SFAS No. 142. Step one identifies potential impairments by comparing
the fair value of the reporting unit to its carrying amount. Step two, which is
only performed if there is a potential impairment, compares the carrying amount
of the reporting unit's goodwill to its implied value, as defined in SFAS No.
142. If the carrying amount of the reporting unit's goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized for an amount
equal to that excess. The amortization of goodwill included in our investments
in equity investees is no longer recorded in accordance with the new rules.
Intangible assets that do not have indefinite lives are amortized over their
useful lives and reviewed for impairment in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."

The initial impact of adoption on our consolidated financial statements was
recorded as a cumulative effect of an accounting change resulting in a charge of
$496 million, net of tax. This charge is comprised of $204 million ($203 million
after-tax) for goodwill, $294 million ($293 million after-tax) for wireless
licenses and goodwill of equity method investments and for other intangible
assets. In accordance with SFAS No. 142, we ceased amortizing existing goodwill
(including goodwill recorded on our equity investments), acquired workforce
intangible assets and wireless licenses which we determined have an indefinite
life (see discussion below).

Wireless Licenses

In conjunction with the adoption of SFAS No. 142, we have reassessed the useful
lives of previously recognized intangible assets. A significant portion of our
intangible assets are licenses, including licenses associated with equity method
investments, that provide our wireless operations with the exclusive right to
utilize certain radio frequency spectrum to provide cellular communication
services. While licenses are issued for only a fixed time, generally ten years,
such licenses are subject to renewal by the FCC. Renewals of licenses have
occurred routinely and at nominal cost. Moreover, we have determined that there
are currently no legal, regulatory, contractual, competitive, economic or other
factors that limit the useful life of our wireless licenses. As a result, the
wireless licenses will be treated as an indefinite-lived intangible asset under
the provisions of SFAS No. 142 and will not be amortized but rather will be
tested for impairment. We will reevaluate the useful life determination for
wireless licenses each reporting period to determine whether events and
circumstances continue to support an indefinite useful life.

Previous wireless business combinations have been for the purpose of acquiring
existing licenses and related infrastructure to enable us to build out our
existing nationwide wireless network. The primary asset acquired in such
combinations has been wireless licenses. In the allocation of the purchase price
of these previous acquisitions, amounts classified as goodwill have related
predominately to the expected synergies of placing the acquired licenses in our
national footprint. Further, in purchase accounting, the values assigned to both
wireless licenses and goodwill



                                       6


were principally determined based on an allocation of the excess of the purchase
price over the other acquired net assets. We believe that the nature of our
wireless licenses and related goodwill are fundamentally indistinguishable.

In light of these considerations, on January 1, 2002, amounts previously
classified as goodwill, approximately $7.9 billion for the year ended December
31, 2001, were reclassified into wireless licenses. Also, assembled workforce,
previously included in other intangible assets, will no longer be recognized
separately from wireless licenses. Amounts for 2001 have been reclassified to
conform to the presentation adopted on January 1, 2002. In conjunction with this
reclassification, and in accordance with the provisions of SFAS No. 109,
"Accounting for Income Taxes," we have recognized a deferred tax liability of
approximately $1.6 billion related to the difference in the tax basis versus
book basis of the wireless licenses. This reclassification, including the
related impact on deferred taxes, had no impact on our results of operations.
This reclassification and the methodology to be subsequently used to test
wireless licenses for impairment under SFAS No. 142 as described in the next
paragraph have been reviewed with the staff of the SEC.

When testing the carrying value of the wireless licenses for impairment, we will
determine the fair value of the aggregated wireless licenses by subtracting from
wireless operations' discounted cash flows the fair value of all of the other
net tangible and intangible assets of our wireless operations. If the fair value
of the aggregated wireless licenses as determined above is less than the
aggregated carrying amount of the licenses, an impairment will be recognized.
Upon adoption of SFAS No. 142, a test for impairment of wireless licenses was
performed with no impairment recognized. Future tests for impairment will be
performed at least annually and more often if events or circumstances warrant.

Impact of SFAS No. 142

The following tables present the impact of SFAS No. 142 on reported income
before extraordinary item and cumulative effect of accounting change, reported
net income (loss) and earnings (loss) per share had the standard been in effect
for the first quarter of 2001:



(Dollars in Millions)                                                     THREE MONTHS ENDED MARCH 31,
                                                                                 2002            2001
                                                                           ----------      ----------
                                                                                     
REPORTED INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
   EFFECT OF ACCOUNTING CHANGE                                             $        4      $    1,754
   Goodwill amortization                                                           --               9
   Wireless licenses amortization                                                  --              85
                                                                           ----------      ----------
ADJUSTED NET INCOME                                                        $        4      $    1,848
                                                                           ==========      ==========




                                                                          THREE MONTHS ENDED MARCH 31,
                                                                                 2002            2001
                                                                           ----------      ----------
                                                                                     
BASIC AND DILUTED EARNINGS PER SHARE                                       $       --      $      .65
   Goodwill amortization                                                           --              --
   Wireless licenses amortization                                                  --             .03
                                                                           ----------      ----------
ADJUSTED EARNINGS PER SHARE - BASIC AND DILUTED                            $       --      $      .68
                                                                           ==========      ==========




(Dollars in Millions)                                                     THREE MONTHS ENDED MARCH 31,
                                                                                 2002            2001
                                                                           ----------      ----------
                                                                                     
REPORTED NET INCOME (LOSS)                                                 $     (501)     $    1,572
   Goodwill amortization                                                           --               9
   Wireless licenses amortization                                                  --              85
                                                                           ----------      ----------
ADJUSTED NET INCOME (LOSS)                                                 $     (501)     $    1,666
                                                                           ==========      ==========




                                                                          THREE MONTHS ENDED MARCH 31,
                                                                                 2002            2001
                                                                           ----------      ----------
                                                                                     
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                                $     (.18)     $      .58
   Goodwill amortization                                                           --              --
   Wireless licenses amortization                                                  --             .03
                                                                           ----------      ----------
ADJUSTED EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED                     $     (.18)     $      .61
                                                                           ==========      ==========


The preceding tables exclude $18 million, or $.01 per share in the first quarter
of 2001 related to amortization of goodwill and other intangible assets with
indefinite lives of equity method investments.



                                       7


Goodwill

Changes in the carrying amount of goodwill, net of accumulated amortization for
the quarter ended March 31, 2002 are as follows:



                                            DOMESTIC       DOMESTIC                    INFORMATION    CORPORATE &
(Dollars in Millions)                        TELECOM       WIRELESS   INTERNATIONAL       SERVICES          OTHER          TOTAL
                                        ------------   ------------  --------------   ------------   ------------   ------------
                                                                                                  
BALANCE AS OF DECEMBER 31, 2001         $        401   $         --  $          627   $        558   $        112   $      1,698
   Goodwill reclassifications                     --             --             461             16             --            477
   Goodwill acquired during the period            --             --              51             --             --             51
   CTI Goodwill in impairment charge              --             --            (220)            --             --           (220)
   Goodwill impairment losses under
     SFAS No. 142                                (90)            --              --             (2)          (112)          (204)
                                        ------------   ------------  --------------   ------------   ------------   ------------
BALANCE AS OF MARCH 31, 2002            $        311   $         --  $          919   $        572   $         --   $      1,802
                                        ============   ============  ==============   ============   ============   ============


Other Intangible Assets

The major components and average useful lives of our other acquired intangible
assets follows:



(Dollars in Millions)                          AS OF MARCH 31, 2002       AS OF DECEMBER 31, 2001
                                               GROSS                         GROSS
                                            CARRYING    ACCUMULATED       CARRYING    ACCUMULATED
                                              AMOUNT   AMORTIZATION         AMOUNT   AMORTIZATION
                                        ------------   ------------   ------------   ------------
                                                                         
Wireless licenses                       $     41,272   $      2,649   $     40,723   $      2,668
Customer lists (4 to 6 years)                  3,372          1,431          3,349          1,279
Non-network software (3 to 7 years)            3,675            942          3,187            793
Other (2 to 30 years)                             62             34             74             29
                                        ------------   ------------   ------------   ------------
Total                                   $     48,381   $      5,056   $     47,333   $      4,769
                                        ============   ============   ============   ============


Intangible assets amortization expense was $285 million for the quarter ended
March 31, 2002. It is estimated to be $981 million for the remainder of 2002,
$1,060 million in 2003, $919 million in 2004, $866 million in 2005 and $389
million in 2006, primarily related to customer lists and non-network software.

8. FINANCIAL INSTRUMENTS

Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." The initial impact of
adoption on our consolidated financial statements was recorded as a cumulative
effect of an accounting change resulting in a charge of $182 million to current
earnings and income of $110 million to other comprehensive income (loss). The
recognition of assets and liabilities was immaterial to our financial position.

The ongoing effect of SFAS No. 133 on our consolidated financial statements is
determined each quarter by several factors, including the specific hedging
instruments in place and their relationships to hedged items, as well as market
conditions at the end of each period. For the three months ended March 31, 2002,
we recorded a charge to current earnings of $3 million and a loss of $3 million
to other comprehensive income (loss). The charge to current earnings relates
primarily to the mark-to-market adjustments on our long-term call options and
the loss in other comprehensive income (loss) relates to our cash flow hedges on
foreign exchange risk. For the three months ended March 31, 2001, we recorded a
charge to current earnings of $116 million and a loss of $12 million to other
comprehensive income (loss). The charge to current earnings in 2001 related
primarily to the mark-to-market adjustment on the conversion option on our MFN
debt securities and the loss in other comprehensive income (loss) related to our
cash flow hedges on foreign exchange risk.

9. DEBT

Exchangeable Notes

Previously, Verizon Global Funding issued two series of notes that are
exchangeable for shares of Telecom Corporation of New Zealand Limited (TCNZ) and
for Cable & Wireless plc (C&W) and NTL Incorporated (NTL) shares.

The exchangeable notes are indexed to the fair market value of the common stock
into which they are exchangeable. If the price of the shares exceeds the
exchange price established at the offering date, a mark-to-market adjustment is
recorded, recognizing an increase in the carrying value of the debt obligation
and a charge to income. If the price of the shares subsequently declines, the
debt obligation is reduced (but not to less than the amortized carrying value of
the notes).



                                       8


At March 31, 2002 and 2001, the exchange prices of the notes exchangeable into
TCNZ and into C&W and NTL shares exceeded the fair market value of the common
stocks into which they are exchangeable. Consequently, the notes were recorded
at their amortized carrying value with no mark-to-market adjustments recorded in
the first quarters of 2002 and 2001. As of March 31, 2002, $8,000 in principal
amount of TCNZ notes has been delivered for exchange.

Support Agreements

All of Verizon Global Funding's debt has the benefit of Support Agreements
between us and Verizon Global Funding, which guarantee payment of interest,
premium (if any) and principal outstanding should Verizon Global Funding fail to
pay. The holders of Verizon Global Funding debt do not have recourse to the
stock or assets of most of our telephone operations or TCNZ; however, they do
have recourse to dividends paid to us by any of our consolidated subsidiaries as
well as assets not covered by the exclusion. Verizon Global Funding's long-term
debt, including current portion, aggregated $19,104 million at March 31, 2002.
The carrying value of the available assets reflected in our condensed
consolidated financial statements was approximately $63.5 billion at March 31,
2002.

Debt Issuances

In January 2002, Verizon New Jersey Inc., a wholly owned subsidiary of Verizon,
issued $1 billion of 5.875% Series A debentures due 2012 at a discount,
resulting in gross proceeds of approximately $987 million.

In February 2002, Verizon Maryland Inc., a wholly owned subsidiary of Verizon,
issued $500 million of 6.125% Series A debentures due 2012 at a discount,
resulting in gross proceeds of approximately $497 million.

In March 2002, Verizon New York Inc., a wholly owned subsidiary of Verizon,
issued $1 billion of 6.875% Series A debentures due 2012 and $500 million of
7.375% Series B debentures due 2032 at discounts, resulting in gross proceeds of
approximately $990 million and $489 million, respectively.

10. COMPREHENSIVE INCOME

Comprehensive income consists of net income and other gains and losses affecting
shareowners' investment that, under generally accepted accounting principles,
are excluded from net income.

Changes in the components of other comprehensive income (loss) are as follows:



(Dollars in Millions)                                                    THREE MONTHS ENDED MARCH 31,
---------------------                                                 -------------------------------
                                                                              2002               2001
                                                                      ------------       ------------
                                                                                   
NET INCOME (LOSS)                                                     $       (501)      $      1,572
                                                                      ------------       ------------
OTHER COMPREHENSIVE INCOME (LOSS), net of taxes
Foreign currency translation adjustments                                       (40)               248
                                                                      ------------       ------------
Unrealized losses on marketable securities
Unrealized losses, net of taxes                                               (185)              (907)
  Add: reclassification of earnings due to accounting change for
  derivatives                                                                   --                112
                                                                      ------------       ------------
Net unrealized losses on marketable securities                                (185)              (795)

Unrealized derivative losses on cash flow hedges                                (3)               (14)
Minimum pension liability adjustment                                           (40)                --
                                                                      ------------       ------------
                                                                              (268)              (561)
                                                                      ------------       ------------
TOTAL COMPREHENSIVE INCOME (LOSS)                                     $       (769)      $      1,011
                                                                      ============       ============


The net unrealized losses on marketable securities in 2002 primarily relate to
our investment in C&W. The minimum pension liability was increased in 2002 to
include the minimum pension liability of TELPRI (see Note 6). The net unrealized
losses on marketable securities in 2001 primarily relate to our investments in
C&W and MFN.

The components of accumulated other comprehensive loss are as follows:



(Dollars in Millions)                                AT MARCH 31, 2002   AT DECEMBER 31, 2001
---------------------                                -----------------   --------------------
                                                                   
Foreign currency translation adjustments             $          (1,488)  $             (1,448)
Unrealized gains on marketable securities                          142                    327
Unrealized derivative losses on cash flow hedges                   (48)                   (45)
Minimum pension liability adjustment                               (61)                   (21)
                                                     -----------------   --------------------
Accumulated other comprehensive loss                 $          (1,455)  $             (1,187)
                                                     =================   ====================




                                       9


11. EARNINGS (LOSS) PER SHARE

The following table is a reconciliation of the share amounts used in computing
earnings per share.



(Dollars and Shares in Millions, Except Per Share Amounts)               THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------               ----------------------------
                                                                                2002             2001
                                                                         -----------       ----------
                                                                                     
NET INCOME (LOSS)
Income before extraordinary item and cumulative effect of accounting
   change                                                                 $        4       $    1,754
Extraordinary item, net of tax                                                    (9)              --
Cumulative effect of accounting change, net of tax                              (496)            (182)
                                                                          ----------       ----------
Net income (loss)                                                         $     (501)      $    1,572
                                                                          ==========       ==========

BASIC EARNINGS (LOSS) PER COMMON SHARE
Weighted-average shares outstanding                                            2,719            2,704
                                                                          ----------       ----------
Income before extraordinary item and cumulative effect of accounting
   change                                                                 $       --       $      .65
Extraordinary item, net of tax                                                    --               --
Cumulative effect of accounting change, net of tax                              (.18)            (.07)
                                                                          ----------       ----------
Net income (loss)                                                         $     (.18)      $      .58
                                                                          ==========       ==========

DILUTED EARNINGS (LOSS) PER COMMON SHARE
Weighted-average shares outstanding                                            2,719            2,704
Effect of dilutive securities                                                     13               21
                                                                          ----------       ----------
Weighted-average shares outstanding - diluted                                  2,732            2,725
                                                                          ----------       ----------
Income before extraordinary item and cumulative effect of accounting
   change                                                                 $       --       $      .65
Extraordinary item, net of tax                                                    --               --
Cumulative effect of accounting change, net of tax                              (.18)            (.07)
                                                                          ----------       ----------
Net income (loss)                                                         $     (.18)      $      .58
                                                                          ==========       ==========


Stock options for 148.1 million shares for the three months ended March 31, 2002
and 117.6 million shares for the three months ended March 31, 2001 were not
included in the computation of diluted earnings per share because the exercise
price of stock options was greater than the average market price of the common
stock.

12. SEGMENT INFORMATION

We have four reportable segments, which we operate and manage as strategic
business units and organize by products and services. Our segments include a
Domestic Telecom group which provides domestic wireline communications services;
a Domestic Wireless group which provides domestic wireless communications
services; an International group which includes our foreign wireline and
wireless communications investments; and an Information Services group which is
responsible for our domestic and international publishing businesses and
electronic commerce services.

We measure and evaluate our reportable segments based on segment income. This
segment income excludes unallocated corporate expenses and other adjustments
arising during each period. The other adjustments include transactions that the
chief operating decision makers exclude in assessing business unit performance
due primarily to their nonrecurring and/or non-operational nature. Although such
transactions are excluded from the business segment results, they are included
in reported consolidated earnings. Gains and losses that are not individually
significant are included in all segment results, since these items are included
in the chief operating decision makers' assessment of unit performance. These
are mostly contained in International and Information Services since they
actively manage investment portfolios.



                                       10


REPORTABLE SEGMENTS

The following table provides operating financial information for our four
reportable segments and a reconciliation of segment results to consolidated
results:



(Dollars in Millions)                               THREE MONTHS ENDED MARCH 31,
                                                           2002             2001
                                                     ----------       ----------
                                                                
EXTERNAL OPERATING REVENUES
Domestic Telecom                                     $   10,325       $   10,784
Domestic Wireless                                         4,364            4,038
International                                               724              525
Information Services                                        803              784
                                                     ----------       ----------
Total segments                                           16,216           16,131
Reconciling items                                           159              135
                                                     ----------       ----------
Total consolidated - reported                        $   16,375       $   16,266
                                                     ==========       ==========

INTERSEGMENT REVENUES
Domestic Telecom                                     $      149       $      136
Domestic Wireless                                            10                8
International                                                27                2
Information Services                                         --                5
                                                     ----------       ----------
Total segments                                              186              151
Reconciling items                                          (186)            (151)
                                                     ----------       ----------
Total consolidated - reported                        $       --       $       --
                                                     ==========       ==========

TOTAL OPERATING REVENUES
Domestic Telecom                                     $   10,474       $   10,920
Domestic Wireless                                         4,374            4,046
International                                               751              527
Information Services                                        803              789
                                                     ----------       ----------
Total segments                                           16,402           16,282
Reconciling items                                           (27)             (16)
                                                     ----------       ----------
Total consolidated - reported                        $   16,375       $   16,266
                                                     ==========       ==========

SEGMENT INCOME (LOSS)
Domestic Telecom                                     $    1,266       $    1,350
Domestic Wireless                                           197               98
International                                               211              210
Information Services                                        213              212
                                                     ----------       ----------
Total segment income                                      1,887            1,870
Reconciling items                                        (2,388)            (298)
                                                     ----------       ----------
Total consolidated net income (loss) - reported      $     (501)      $    1,572
                                                     ==========       ==========




(Dollars in Millions)           MARCH 31, 2002   DECEMBER 31, 2001
---------------------           --------------   -----------------
                                           
ASSETS
Domestic Telecom                $       82,435   $          82,635
Domestic Wireless                       62,269              60,262
International                           12,652              14,324
Information Services                     4,239               4,160
                                --------------   -----------------
Total segments                         161,595             161,381
Reconciling items                        9,730               9,414
                                --------------   -----------------
Total consolidated              $      171,325   $         170,795
                                ==============   =================




                                       11


Major reconciling items between the segments and the consolidated results are as
follows:



(Dollars in Millions)                                                  THREE MONTHS ENDED MARCH 31,
                                                                            2002               2001
                                                                    ------------       ------------
                                                                                 
TOTAL REVENUES
Corporate, eliminations and other                                   $        (27)      $        (16)
                                                                    ============       ============

NET INCOME (LOSS)
Mark-to-market adjustment - financial instruments (see Note 8)      $         (3)      $       (114)
Sales of assets, net (see Note 3)                                            116                 --
Transition costs (see Note 2)                                                (52)               (88)
Cumulative effect of accounting change (see Note 7 and Note 8)              (496)              (182)
Investment-related charges  (see Note 6)                                  (2,026)                --
Extraordinary item (see Note 4)                                               (9)                --
Corporate, eliminations and other                                             82                 86
                                                                    ------------       ------------
                                                                    $     (2,388)      $       (298)
                                                                    ============       ============


Corporate, eliminations and other includes unallocated corporate expenses,
intersegment eliminations recorded in consolidation and the results of other
businesses such as lease financing. We generally account for intersegment sales
of products and services and asset transfers at current market prices. We are
not dependent on any single customer.


13. RECENT ACCOUNTING PRONOUNCEMENT

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." This standard provides the
accounting for the cost of legal obligations associated with the retirement of
long-lived assets. SFAS No. 143 requires that companies recognize the fair value
of a liability for asset retirement obligations in the period in which the
obligations are incurred and capitalize that amount as a part of the book value
of the long-lived asset. That cost is then depreciated over the remaining life
of the underlying long-lived asset. We are required to adopt SFAS No. 143
effective January 1, 2003. We are currently evaluating the impact this new
standard will have on our future results of operations or financial position.

14. COMMITMENTS AND CONTINGENCIES

Several state and federal regulatory proceedings may require our telephone
operations to refund to customers a portion of the revenues collected in the
current and prior periods. There are also various legal actions pending to which
we are a party and claims which, if asserted, may lead to other legal actions.
We have established reserves for specific liabilities in connection with
regulatory and legal actions, including environmental matters, that we currently
deem to be probable and estimable. We do not expect that the ultimate resolution
of pending regulatory and legal matters in future periods will have a material
effect on our financial condition, but it could have a material effect on our
results of operations.

On January 29, 2001, the bidding phase of the FCC reauction of 1.9 GHz C and F
block broadband Personal Communications Services spectrum licenses, which began
December 12, 2000, officially ended. Verizon Wireless was the winning bidder for
113 licenses. The total price of these licenses was $8,781 million, $1,822
million of which had been paid. Most of the licenses that were reauctioned
relate to spectrum that was previously licensed to NextWave Personal
Communications Inc. and NextWave Power Partners Inc. (collectively NextWave),
which have appealed to the federal courts the FCC's action canceling NextWave's
licenses and reclaiming the spectrum.

In a decision on June 22, 2001, the U.S. Court of Appeals for the D.C. Circuit
ruled that the FCC's cancellation and repossession of NextWave's licenses was
unlawful. The FCC sought a stay of the court's decision which was denied. The
FCC subsequently reinstated NextWave's licenses but it did not return Verizon
Wireless's payment on the NextWave licenses nor did it acknowledge that the
court's decision extinguished Verizon Wireless's obligation to purchase the
licenses. On October 19, 2001, the FCC filed a petition asking the U.S. Supreme
Court to consider reversing the U.S. Court of Appeals for the D.C. Circuit's
decision. On March 4, 2002, the U.S. Supreme Court granted the FCC's petition
and agreed to hear the appeal.

In April 2002, Verizon Wireless filed a petition with the U.S. Court of Appeals
for the District of Columbia seeking a declaration that the auction is void and
a return of its entire payment as well as interest. At that time, Verizon
Wireless also filed a complaint in the U.S. Court of Federal Claims against the
United States government seeking both a declaration that Verizon Wireless has no
further performance obligations with respect to the re-auction and money
damages. Both of these matters are pending. Subsequently, the FCC returned
$1,479 million of Verizon Wireless's $1,822 million license payment without
acknowledging that Verizon Wireless is no longer obligated to



                                       12


purchase the licenses. As of March 31, 2002, we reported $1,479 million of the
payment in Accounts Receivable, reclassified from Intangible Assets, Net, in the
condensed consolidated balance sheets.

In December 2001, Verizon Wireless and Price Communications Corp. (Price)
announced that an agreement had been reached combining Price's wireless business
with a portion of Verizon Wireless in a transaction valued at approximately $1.7
billion, including $550 million of net debt. The resulting limited partnership
will be controlled and managed by Verizon Wireless. Price's partnership interest
will be exchangeable into Verizon Wireless or Verizon stock, subject to several
conditions. We expect the transaction to close early during the third quarter of
2002, subject to Price shareholder approval and other customary closing
conditions.

In 2001, we agreed to provide up to $2.0 billion in financing to Genuity with a
maturity in 2005. As of March 31, 2002, $1,150 million of that commitment had
been loaned to Genuity, and is reported in Other Assets in the condensed
consolidated balance sheets.

In addition, under the terms of an investment agreement, Vodafone Group plc
(Vodafone) may require us or Verizon Wireless to purchase up to $20 billion
worth of its interest in Verizon Wireless between 2003 and 2007 at its then fair
market value. The purchase of up to $10 billion, in cash or stock at our option,
may be required during July 2003 or July 2004 and the remainder during the
following years.



                                       13


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Verizon Communications Inc. is one of the world's leading providers of
communications services. Verizon companies are the largest providers of wireline
and wireless communications in the United States, with 133.8 million access line
equivalents and 29.6 million wireless customers. Verizon is also the largest
directory publisher in the world. With more than $67 billion in annual revenues
and approximately 248,000 employees, Verizon's global presence extends to more
than 40 countries in the Americas, Europe, Asia and the Pacific.

We have four reportable segments, which we operate and manage as strategic
business units: Domestic Telecom, Domestic Wireless, International and
Information Services. Domestic Telecom includes local, long distance and other
telecommunication services. Domestic Wireless products and services include
wireless voice and data services, paging services and equipment sales.
International operations include wireline and wireless communications operations
and investments in the Americas, Europe, Asia and the Pacific. Information
Services publishes domestic and international print and electronic directories
and Internet-based shopping guides, as well as includes website creation and
other electronic commerce services.

CONSOLIDATED RESULTS OF OPERATIONS

In this section, we discuss our overall reported results and highlight special
and nonrecurring items. In the following section, we review the performance of
our segments. We exclude from the segments' reported results the effects of
these items, which management does not consider in assessing segment performance
due primarily to their nonrecurring and/or non-operational nature. We believe
that this presentation will assist readers in better understanding operating
results and trends from period to period.

Reported consolidated revenues and operating expenses were $16,375 million and
$12,864 million, respectively, for the quarter ended March 31, 2002, compared to
$16,266 million and $12,659 million, respectively, for the similar period of the
prior year. Prior year reported consolidated revenues and operating expenses
were not adjusted to reflect the deconsolidation of CTI Holdings, S.A. (CTI) to
the equity method and the consolidation of Telecomunicaciones de Puerto Rico,
Inc. (TELPRI). See "Segment Results of Operations - International" for
additional discussion of the CTI and TELPRI transactions. We reported a net loss
of $501 million, or $.18 per share for the quarter ended March 31, 2002,
compared to net income of $1,572 million, or $.58 per share for the quarter
ended March 31, 2001.

Reported consolidated revenues grew by $109 million, or .7% in the first quarter
of 2002, compared to the first quarter of 2001, and first quarter 2002 reported
consolidated operating expenses were $205 million, or 1.6% higher than the first
quarter of 2001. Higher Domestic Wireless and International revenues and
expenses were partially offset by lower Domestic Telecom revenues and expenses
(see summary below and "Segment Results of Operations"). In addition, a portion
of investment-related charges in the current quarter was partially offset by
lower transition costs and a net gain on sales of assets in the current quarter,
compared to the first quarter of 2001 (see summary below and "Special Items").
The significant items impacting net income are also described in the "Special
Items" section.

CONSOLIDATED REVENUES

Domestic Wireless revenues grew by $328 million, or 8.1%, in the first quarter
of 2002 compared to the same period in 2001. This increase was primarily due to
the 9% increase in subscribers, partially offset by lower average service
revenue per subscriber of 0.8% to $46.

Revenues earned by our International segment grew by $224 million, or 42.5%, in
the first quarter of 2002 as compared to the same period in 2001. This growth is
primarily due to the consolidation of TELPRI and the deconsolidation of CTI in
2002. Adjusting the 2001 quarter to be comparable with 2002, revenues grew by
$24 million, or 3.3%.

The decline in Domestic Telecom's local service revenues of $385 million, or
6.9% was largely due to lower demand and usage of our basic local wireline
services and mandated intrastate price reductions. Our network access revenues
grew $165 million, or 5.0%, in first quarter of 2002, mainly attributable to
higher customer demand, primarily for special access services and DSL. Long
distance service revenues increased $17 million, or 2.2%, in the first quarter
of 2002, primarily as a result of revenue growth from our interLATA long
distance services offered throughout the region. Revenues from other services
declined $243 million, or 19.5%, in the first three months of 2002. This decline
was substantially due to lower sales of customer premises equipment to some
major customers, a decline in public telephone revenues as more customers
substituted wireless communications for pay telephone services, and lower
billing and collection revenues reflecting the take-back of these services by
interexchange carriers.



                                       14


CONSOLIDATED OPERATING EXPENSES

Domestic Wireless's operations and support expenses increased by $182 million,
or 6.9%, in the first quarter of 2002 primarily as a result of increased salary
and wage expense, advertising and billing and data processing charges, offset by
reduced selling expenses related to a decrease in gross subscriber additions in
the first quarter of 2002 compared to the first quarter of 2001 and lower
roaming costs. Domestic Wireless's depreciation and amortization expense
decreased by $138 million, or 15.0%, in the first quarter of 2002 compared to
the same period in 2001 primarily related to the adoption of Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets," effective January 1, 2002, which requires that goodwill and
indefinite-lived intangible assets no longer be amortized. This decrease was
offset by increased depreciation expense related to increased asset base.

International's operating expenses increased $145 million, or 29.7% in the first
quarter of 2002 as compared to the same period in 2001, primarily due to the
consolidation of TELPRI and the deconsolidation of CTI in 2002. Adjusting the
2001 quarter to be comparable with 2002, operations and support expenses
increased $43 million, or 9.5%, in the first quarter of 2002 as compared to the
same period in 2001. The higher costs were driven primarily by a full quarter of
GSI operations and customer acquisition costs associated with wireless customer
growth. Adjusting the 2001 quarter to be comparable with 2002, depreciation and
amortization expense decreased $3 million, or 2.2%, in the first quarter of 2002
as compared to the same period in 2001.

Domestic Telecom's operations and support expenses decreased by $379 million, or
6.4% in the first quarter of 2002 principally due to lower costs at our domestic
telephone operations. These reductions were attributable to lower overtime for
repair and maintenance activity principally as a result of reduced volumes at
our dispatch and call centers and lower employee costs associated with declining
workforce levels. Operating costs have also decreased due to business
integration activities and achievement of merger synergies. These cost
reductions were partially offset by higher costs associated with our growth
businesses such as data and long distance services. Increased costs associated
with higher uncollectible accounts receivable and salary and wage increases for
employees further offset cost reductions in 2002. Domestic Telecom's
depreciation and amortization expense increased by $82 million, or 3.6%, in the
first quarter of 2002. This expense increase was principally due to growth and a
change in the mix of depreciable telephone plant and increased software
amortization costs. These factors were partially offset by the effect of lower
rates of depreciation.

Consolidated operating expenses in 2002 also include $227 million related to
investment-related charges, more than offset by lower transition costs for the
quarter ended March 31, 2002 of $96 million compared to $163 million in 2001 and
a net pretax gain of $220 million primarily resulting from the sale of a
business and exit activities.

CONSOLIDATED NET INCOME (LOSS)

Consolidated net loss was $501 million ($.18 per diluted share) in the first
quarter of 2002 compared to consolidated net income of $1,572 million ($.58 per
diluted share) in the first quarter of 2001. Our reported results for both
quarters were affected by special items. These special items, described in
detail on pages 21 to 22, impacted net income (loss) by $2,470 million ($.90 per
diluted share) in the first quarter of 2002 and by $384 million ($.14 per
diluted share) in the first quarter of 2001. These special items included
mark-to-market adjustments on derivative financial instruments,
investment-related charges and the cumulative effect of an accounting change. In
addition, net income (loss) was impacted by lower interest expense, partially
offset by higher minority interest.

SEGMENT RESULTS OF OPERATIONS

We have four reportable segments, which we operate and manage as strategic
business units and organize by products and services. Our segments are Domestic
Telecom, Domestic Wireless, International and Information Services. You can find
additional information about our segments in Note 12 to the condensed
consolidated financial statements.

We measure and evaluate our reportable segments based on segment income. This
segment income excludes unallocated corporate expenses and other adjustments
arising during each period. The other adjustments include transactions that the
chief operating decision makers exclude in assessing business unit performance
due primarily to their nonrecurring and/or non-operational nature. Although such
transactions are excluded from business segment results, they are included in
reported consolidated earnings. We previously highlighted the more significant
of these transactions in the "Consolidated Results of Operations" section. Gains
and losses that are not individually significant are included in all segment
results, since these items are included in the chief operating decision makers'
assessment of unit performance. These are mostly contained in International and
Information Services since they actively manage investment portfolios.



                                       15


DOMESTIC TELECOM

Domestic Telecom provides local telephone services, including voice and data
transport, enhanced and custom calling features, network access, directory
assistance, private lines and public telephones in 32 states and the District of
Columbia. This segment also provides long distance services, customer premises
equipment distribution, data solutions and systems integration, billing and
collections, Internet access services and inventory management services.


OPERATING REVENUES



(Dollars in Millions)     THREE MONTHS ENDED MARCH 31,
                              2002                2001    % Change
                          --------            --------    --------
                                                 
Local services            $  5,235            $  5,620        (6.9)%
Network access services      3,457               3,292         5.0
Long distance services         779                 762         2.2
Other services               1,003               1,246       (19.5)
                          --------            --------
                          $ 10,474            $ 10,920        (4.1)
                          ========            ========


Local Services

Local service revenues are earned by our telephone operations from the provision
of local exchange, local private line, wire maintenance, voice messaging and
value-added services. Value-added services are a family of services that expand
the utilization of the network, including products such as Caller ID, Call
Waiting and Return Call. The provision of local exchange services not only
includes retail revenue but also includes local wholesale revenues from
unbundled network elements (UNEs), interconnection revenues from competitive
local exchange carriers (CLECs), wireless interconnection revenues and some data
transport revenues.

The decline in local service revenues of $385 million, or 6.9% was largely due
to lower demand and usage of our basic local wireline services and mandated
intrastate price reductions. Our switched access lines in service declined 2.7%
from March 31, 2001, primarily reflecting the impact of the economic slowdown
and competition for some local services. Technology substitution has also
affected local service revenue growth, as indicated by lower demand for access
lines. The primary contributor to the decline in residential access lines is
negative growth in additional lines, with second line penetration at 19% at
March 31, 2002, compared to 20% at the same period last year.

These factors were partially offset by higher payments received from CLECs and
wireless carriers for interconnection of their networks with our network and by
increased sales of packaged wireline services. Sales of packages of wireline
services increased by nearly 1.7 million year-over-year, with over half of our
new lines installed with packages. Premium packages were introduced in our
western states in the first quarter of 2002. Furthermore, we have expanded our
new ONE-BILL service, which bundles Verizon wireline and wireless charges on a
single monthly bill. This service was expanded to New Jersey and Connecticut in
the first quarter of 2002, after successful launches in New York and
Massachusetts.

Network Access Services

Network access services revenues are earned from end-user subscribers and long
distance and other competing carriers who use our local exchange facilities to
provide usage services to their customers. Switched access revenues are derived
from fixed and usage-based charges paid by carriers for access to our local
network. Special access revenues originate from carriers and end-users that buy
dedicated local exchange capacity to support their private networks. End-user
access revenues are earned from our customers and from resellers who purchase
dial-tone services.

Our network access revenues grew $165 million, or 5.0%, in the first quarter of
2002. This growth was mainly attributable to higher customer demand, primarily
for special access services and DSL that grew 23% in the first three months of
2002. Special access revenue growth reflects strong demand in the business
market for high-capacity, high-speed digital services. We added 150,000 new DSL
lines in the first quarter of 2002, for a total of 1.35 million lines at March
31, 2002, an 88% year-over-year increase. Currently, 55% of our total access
lines qualify for DSL service. At the same time, customer service levels
continue to show improvement through a reduction in the DSL order provisioning
interval from eight to five days and we have reached a 99% self installation
rate by our customers.



                                       16


Volume-related growth was partially offset by price reductions of approximately
$50 million associated with federal and state price cap filings and other
regulatory decisions. Revenue growth in the first quarter of 2002 was also
affected by the slowing economy, as reflected by a 7.5% decline in minutes of
use from carriers and CLECs and a 2.7% reduction in switched access lines in
service.

Long Distance Services

Long distance service revenues include both intraLATA toll services and
interLATA long distance voice and data services.

Long distance service revenues increased $17 million, or 2.2%, in the first
quarter of 2002, primarily as a result of revenue growth from our interLATA long
distance services offered throughout the region, including substantial customer
win-backs in the states where interLATA long distance has been introduced. We
now offer long distance service in 42 states. More than 45% of our long distance
customers come from states where service was most recently introduced - New
York, Massachusetts, Pennsylvania, Connecticut and Rhode Island. We added more
than 800,000 new long distance customers in the first quarter of 2002, for a
total of 8.2 million customers nationwide at March 31, 2002. This represents an
increase of 3.0 million long distance customers year-over-year, or nearly 60%.
We received FCC approval to sell long distance in Vermont on April 17, 2002 and
began offering service in that state on April 30, 2002. We currently have
applications at the FCC for New Jersey and Maine, and the FCC must decide on
those applications during the second quarter of 2002. We are targeting
completion of the FCC filing process in all former Bell Atlantic jurisdictions
by year-end.

This growth was partially offset by the effects of competition and toll calling
discount packages and product bundling offers of our intraLATA toll services.
Technology substitution and the slowing economy also affected long distance
services revenue growth.

Other Services

Our other services include such services as billing and collections for long
distance carriers, public (coin) telephone and customer premises equipment
services. Other services revenues also include services provided by our
non-regulated subsidiaries such as inventory management and purchasing, and data
solutions and systems integration businesses.

Revenues from other services declined $243 million, or 19.5%, in the first three
months of 2002. This decline was substantially due to lower sales of customer
premises equipment to some major customers, a decline in public telephone
revenues as more customers substituted wireless communications for pay telephone
services, and lower billing and collection revenues reflecting the take-back of
these services by interexchange carriers.

OPERATING EXPENSES



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001    % Change
                                --------            --------    --------
                                                           
Operations and support          $  5,578            $  5,957        (6.4)%
Depreciation and amortization      2,365               2,283         3.6
                                --------            --------
                                $  7,943            $  8,240        (3.6)
                                ========            ========


Operations and Support

Operations and support expenses, which consist of employee costs and other
operating expenses, decreased by $379 million, or 6.4% in the first quarter of
2002 principally due to lower costs at our domestic telephone operations. These
reductions were attributable to lower overtime for repair and maintenance
activity principally as a result of reduced volumes at our dispatch and call
centers and lower employee costs associated with declining workforce levels.
Since year-end 2001, we have reduced our equivalent headcount by approximately
12,000 employees (including overtime and contractor savings), and we have
reduced overtime hours per employee, per week, by nearly 57%. Operating costs
have also decreased due to business integration activities and achievement of
merger synergies. Other effective cost containment measures, including lower
spending by non-strategic businesses, also contributed to cost reductions in the
first three months of 2002. These cost reductions are reflected in improved
productivity levels for installation of 13% and repair services of 7%.
Furthermore, we have reduced rework service levels by 13% for installation and
22% for repair, and repair dispatches have declined by 18%.

These cost reductions were partially offset by higher costs associated with our
growth businesses such as data and long distance services. Increased costs
associated with higher uncollectible accounts receivable and salary and wage
increases for employees further offset cost reductions in 2002. Pension income,
net of postretirement benefit costs, was $322 million in the first quarter of
2002, compared to $342 million in the first quarter of 2001.



                                       17


Depreciation and Amortization

Depreciation and amortization expense increased by $82 million, or 3.6%, in the
first quarter of 2002. This expense increase was principally due to growth and a
change in the mix of depreciable telephone plant and increased software
amortization costs. These factors were partially offset by the effect of lower
rates of depreciation.

SEGMENT INCOME



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                          
Segment Income                  $  1,266            $  1,350       (6.2)%


Segment income decreased by $84 million, or 6.2% in the first quarter of 2002
compared to the first quarter of 2001 primarily as a result of the after-tax
impact of operating revenues and operating expenses described above.

DOMESTIC WIRELESS

Our Domestic Wireless segment provides wireless voice and data services, paging
services and equipment sales. This segment primarily represents the operations
of the Verizon Wireless joint venture.


OPERATING REVENUES



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
Wireless services               $  4,374            $  4,046        8.1%


Revenues earned from our consolidated wireless segment grew by $328 million, or
8.1%, in the first quarter of 2002 compared to the same period in 2001. This
increase was primarily due to the 9% increase in subscribers, partially offset
by lower average service revenue per subscriber of 0.8% to $46.

We ended the first quarter of 2002 with 29.6 million subscribers, compared to
27.1 million subscribers at the end of the first quarter of 2001, an increase of
9%. Approximately 24 million, or 80% of these customers subscribe to digital
service, compared to 60% in the first quarter of 2001. In addition, our average
monthly churn rate, the rate at which customers disconnect service, was 2.6%,
compared to 2.9% in the first quarter of 2001.

Average service revenue per subscriber was impacted by several factors. Retail
customers, who generally have higher service revenue, now comprise approximately
94% of the subscriber base, compared to 92% in the first quarter of 2001. In
addition, we introduced America's Choice pricing during the quarter, which
enables subscribers to these plans to take advantage of the largest built-out
footprint. Since the launch of America's Choice in February 2002, approximately
66% of new contract customers chose these plans. In addition, over 80% of
America's Choice subscribers are on price plans with monthly access of $45 and
above. However, downward pressure on average service revenue per subscriber was
caused by decreased roaming and long distance revenues for the first quarter of
2002 compared to the first quarter of 2001.

In addition, in January 2002, we became the first major U.S. carrier to launch a
high-speed wireless data network with the introduction of the Express Network in
several east and west coast markets. Based on third generation 1XRTT technology,
the Express Network covers a population of 74 million or approximately one-third
of Verizon Wireless's network.

OPERATING EXPENSES



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                           
Operations and support          $  2,819            $  2,637        6.9%
Depreciation and amortization        781                 919      (15.0)
                                --------            --------
                                $  3,600            $  3,556        1.2
                                ========            ========




                                       18


Operations and Support

Operations and support expenses, which represent employee costs and other
operating expenses, increased by $182 million, or 6.9%, in the first quarter of
2002. This increase was primarily due to increased salary and wage expense,
advertising and billing and data processing charges, offset by reduced selling
expenses related to a decrease in gross subscriber additions in the first
quarter of 2002 compared to the first quarter of 2001 and lower roaming costs.
However, during the quarter we reduced full time equivalent headcount by 1,800.

Depreciation and Amortization

Depreciation and amortization expense decreased by $138 million, or 15.0%, in
the first quarter of 2002 compared to the same period in 2001. The decrease is
primarily related to the adoption of SFAS No. 142, effective January 1, 2002,
which requires that goodwill and indefinite-lived intangible assets no longer be
amortized. This decrease was offset by increased depreciation expense related to
increased asset base.

SEGMENT INCOME



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
Segment Income                  $    197            $     98      101.0%


Segment income increased by $99 million, or 101.0% in the first quarter of 2002
compared to the first quarter of 2001 primarily as a result of the after-tax
impact of operating revenues and operating expenses described above, partially
offset by an increase in minority interest.

The significant increase in minority interest in the first quarter of 2002 of
$117 million, or 75.5% to $272 million was principally due to the increase in
the earnings of the Domestic Wireless segment, which has a significant minority
interest attributable to Vodafone Group plc (Vodafone).

INTERNATIONAL

Our International segment includes international wireline and wireless
telecommunication operations and investments in the Americas, Europe, Asia and
the Pacific. Our consolidated international investments as of March 31, 2002
included Grupo Iusacell, S.A. de C.V. (Iusacell) (Mexico), Codetel, C. por A.
(Codetel) (Dominican Republic), TELPRI (Puerto Rico), Micronesian
Telecommunications Corporation (Northern Mariana Islands) and Global Solutions
Inc. (GSI). Those investments in which we have less than a controlling interest
are accounted for by either the cost or equity method.

On January 25, 2002, we exercised our option to purchase an additional 12% of
TELPRI common stock, from the government of Puerto Rico. We now hold 52% of
TELPRI stock, up from 40% at December 31, 2001. As a result of gaining control
of TELPRI, we changed the accounting for our investment in TELPRI from equity
method to full consolidation, effective January 1, 2002. Accordingly, TELPRI's
net results are reported as a component of Income from Unconsolidated Businesses
for the three months ended March 31, 2001, while 2002 results of operations are
included in consolidated revenues and expenses in the table above.

On March 28, 2002, we transferred 5.5 million of our shares in CTI to a newly
created trust for CTI employees. This decreased our ownership percentage from
65% to 48%. We also reduced our representation on CTI's Board of Directors from
five of nine members to four of nine. As a result of these actions that
surrender control of CTI, we changed the method of accounting for our investment
in CTI from consolidation to the equity method. In addition, during the first
quarter of 2002, we wrote our remaining investment in CTI down to zero (see
Special Items). Since we have no other future commitments to fund the company's
operations, in accordance with accounting rules for equity method investments,
we are no longer required to record our share of CTI's operating losses. CTI's
results of operations are reported in revenues and expenses for the three months
ended March 31, 2001, while 2002 revenues and expenses are not included in the
table above.

OPERATING REVENUES



(Dollars in Millions)     THREE MONTHS ENDED MARCH 31,
                              2002                2001   % Change
                          --------            --------   --------
                                                    
Operating Revenues        $    751            $    527       42.5%




                                       19


Revenues earned from our international businesses grew by $224 million, or
42.5%, in the first quarter of 2002 as compared to the same period in 2001. This
growth is primarily due to the consolidation of TELPRI and the deconsolidation
of CTI in 2002. Adjusting the 2001 quarter to be comparable with 2002, revenues
grew by $24 million, or 3.3%. The higher revenue was primarily due to GSI, which
only began its commercial operations in the first quarter of 2001.

OPERATING EXPENSES



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
Operations and support          $    498            $    384       29.7%
Depreciation and amortization        136                 105       29.5
                                --------            --------
                                $    634            $    489       29.7
                                ========            ========


Operations and Support

Operations and support expenses, which include employee costs and other
operating expenses, increased $114 million, or 29.7% in the first quarter of
2002 as compared to the same period in 2001. This growth is primarily due to the
consolidation of TELPRI and the deconsolidation of CTI in 2002. Adjusting the
2001 quarter to be comparable with 2002, operations and support expenses
increased $43 million, or 9.5%, in the first quarter of 2002 as compared to the
same period in 2001. The higher costs were driven primarily by a full quarter of
GSI operations and customer acquisition costs associated with wireless customer
growth. On a comparable basis, proportionate wireless subscribers grew 22.1%
over the first quarter of 2001.

Depreciation and Amortization

Depreciation and amortization expense increased $31 million, or 29.5% in the
first quarter of 2002 as compared to the same period in 2001. This growth is
primarily due to the consolidation of TELPRI and the deconsolidation of CTI in
2002. Adjusting the 2001 quarter to be comparable with 2002, depreciation and
amortization expense decreased $3 million, or 2.2%, in the first quarter of 2002
as compared to the same period in 2001. This decrease was attributable to the
cessation of the amortization of goodwill and intangible assets with indefinite
lives in accordance with our adoption of SFAS 142 on January 1, 2002, offset in
part by increased depreciation due to ongoing network capital expenditures
necessary to meet the increase in subscriber base.

SEGMENT INCOME



(Dollars in Millions)   THREE MONTHS ENDED MARCH 31,
                            2002                2001   % Change
                        --------            --------   --------
                                              
Segment Income          $    211            $    210         .5%


Segment income increased by $1 million, or .5% in the first quarter of 2002
compared to the first quarter of 2001 primarily as a result of the after-tax
impact of operating revenues and operating expenses described above, largely
offset by a decrease in income from unconsolidated businesses.

Income from unconsolidated businesses decreased $41 million, or 18.9% in the
first quarter of 2002 to $176 million as compared to the same period in 2001.
This decline is primarily due to the consolidation of TELPRI and the
deconsolidation of CTI in 2002. Adjusting the 2001 quarter to be comparable with
2002, income from unconsolidated businesses increased $8 million, or 4.8%, in
the first quarter of 2002 as compared to the same period in 2001. The increase
was primarily due to the aforementioned cessation of recording CTI losses in
2002 offset in part by unfavorable foreign currency impacts at Compania Anonima
Nacional Telefonos de Venezuela (CANTV).

INFORMATION SERVICES

Our Information Services segment consists of our domestic and international
publishing businesses, including print and electronic directories and
Internet-based shopping guides, as well as website creation and other electronic
commerce services. This segment has operations principally in North America,
Europe and Latin America.



                                       20


OPERATING REVENUES



(Dollars in Millions)  THREE MONTHS ENDED MARCH 31,
                           2002                2001   % Change
                       --------            --------   --------
                                             
Information services   $    803            $    789        1.8%


Operating revenues from our Information Services segment increased by $14
million, or 1.8%, in the first quarter of 2002. The first quarter increase was
primarily generated by domestic and international advertising revenue growth,
partially offset by lower affiliate revenues. Revenues from SuperPages.com,
Verizon's Internet directory service, grew 83.8% over first quarter 2001 and
Superbundle units sold increased 59% as Information Services continues to
strengthen its leadership position in online directory services.

OPERATING EXPENSES



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
Operations and support          $    434            $    416        4.3%
Depreciation and amortization         15                  21      (28.6)
                                --------            --------
                                $    449            $    437        2.7
                                ========            ========


Total operating expenses for the first quarter of 2002 increased $12 million, or
2.7% as compared to the same period in 2001. The quarter increase was primarily
generated by the costs associated with the increased revenues.

SEGMENT INCOME



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
Segment Income                  $    213            $    212         .5%


Segment income increased by $1 million, or .5% in the first quarter of 2002
compared to the first quarter of 2001 primarily as a result of the after-tax
impact of operating revenues and operating expenses described above.

SPECIAL ITEMS

Special items generally represent revenues and gains as well as expenses and
losses that are nonrecurring and/or non-operational in nature. Several of these
special items include impairment losses. These impairment losses were determined
in accordance with our policy of comparing the fair value of the asset with its
carrying value. The fair value is determined by quoted market prices, if
available, or by estimates of future cash flows.

These special items are not considered in assessing operational performance,
either at the segment level, or for the consolidated company. However, they are
included in our reported results. This section provides a detailed description
of these special items.

TRANSITION COSTS

In connection with the Bell Atlantic Corporation-GTE Corporation merger and the
formation of the wireless joint venture, we expect to incur a total of
approximately $2 billion of transition costs. These costs are incurred to
integrate systems, consolidate real estate and relocate employees. They also
include approximately $500 million for advertising and other costs to establish
the Verizon brand. Transition costs incurred through the first quarter of 2002
total $1,829 million. Transition costs for the quarters ended March 31, 2002 and
2001 were $96 million ($52 million after taxes and minority interest, or $.02
per diluted share) and $163 million ($88 million after taxes and minority
interest, or $.03 per diluted share), respectively.

SALES OF ASSETS, NET

During the first quarter of 2002, we recorded a net pretax gain of $220 million
($116 million after-tax, or $.04 per diluted share), primarily resulting from a
pretax gain on the sale of TSI Telecommunication Services Inc. (TSI) of $466
million ($275 million after-tax, or $.10 per diluted share), partially offset by
an impairment charge in



                                       21


connection with our exit from the video business and other charges of $246
million ($159 million after-tax, or $.06 per diluted share).

MARK-TO-MARKET ADJUSTMENT - FINANCIAL INSTRUMENTS

During 2001, we began recording mark-to-market adjustments in earnings relating
to some of our financial instruments in accordance with newly effective
accounting rules on derivative financial instruments. In the first quarter of
2002, we recorded a loss on a mark-to-market adjustment of $3 million ($3
million after-tax, or less than $.01 per diluted share). In the first quarter of
2001, we recorded a loss on a mark-to-market adjustment of $116 million ($114
million after taxes and minority interest, or $.04 per diluted share) due
primarily to the change in the fair value of the Metromedia Fiber Network, Inc.
(MFN) debt conversion option.

INVESTMENT-RELATED CHARGES

During the first quarter of 2002, we recorded pretax charges totaling $2,146
million ($2,026 million after-tax, or $.74 per diluted share) relating to our
investments in CANTV in Venezuela, MFN in the U.S. and CTI in Argentina, which
are described below.

We recorded a pretax loss of $1,400 million ($1,400 million after-tax, or $.51
per diluted share) due to the other than temporary decline in the market value
of our investment in CANTV. As a result of the recent political and economic
instability in Venezuela, including the devaluation of the Venezuelan bolivar,
and the related impact on CANTV's future economic prospects, we no longer expect
that the future undiscounted cash flows applicable to CANTV will be sufficient
to recover our investment. Accordingly, we wrote our investment down to market
value as of March 31, 2002.

We recorded a pretax loss of $516 million ($436 million after-tax, or $.16 per
diluted share) to market value primarily due to the other than temporary decline
in the market value of our investment in MFN. During 2001, we wrote down our
investment in MFN due to the declining market value of its stock. We wrote off
our remaining investment and other financial statement exposure related to MFN
this quarter primarily as a result of their deteriorating financial condition
and related defaults. In addition, we notified MFN that remaining future
payments required by a long-term network capacity agreement will not be made as
a result of their financial condition.

We recorded a pretax loss of $230 million ($190 million after-tax, or $.07 per
diluted share) to fair value due to the other than temporary decline in the fair
value of our remaining investment in CTI. In 2001, we recorded an estimated loss
of $637 million ($637 million after-tax, or $.23 per diluted share) to reflect
the impact of the deteriorating Argentinean economy and devaluation of the
Argentinean peso on CTI's financial position. As a result of the 2002 and 2001
charges, our financial exposure related to our equity investment in CTI has been
eliminated.

EXTRAORDINARY ITEM

During the first quarter of 2002, we retired $1,536 million of debt prior to the
stated maturity date, resulting in a pretax extraordinary charge of $15 million
($9 million after-tax, or less than $.01 per diluted share).

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

Impact of SFAS No. 142

We adopted the provisions of SFAS No. 142 on January 1, 2002. SFAS No. 142 no
longer permits the amortization of goodwill and indefinite-lived intangible
assets. Instead, these assets must be reviewed annually (or more frequently
under certain conditions) for impairment in accordance with this statement. Our
results for the quarter ended March 31, 2002 include the initial impact of
adoption recorded as a cumulative effect of an accounting change of $496 million
after-tax (or $.18 per diluted share). In accordance with the new rules,
starting January 1, 2002, we are no longer amortizing goodwill, acquired
workforce intangible assets and wireless licenses which we determined have an
indefinite life. On a comparable basis, had we not amortized these intangible
assets in the first quarter of 2001, net income would have been $1,666 million
or $.61 per diluted share.

Impact of SFAS No. 133

We adopted the provisions of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and the related SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities" on January 1,
2001. The impact to Verizon pertains to the recognition of changes in the fair
value of derivative instruments. The initial impact of adoption was recorded as
a cumulative effect of an accounting change of $182 million after-tax (or $.07
per diluted share) in the first quarter of 2001. This cumulative effect charge
primarily relates to the change in the fair value of the MFN debt conversion
option prior to January 1, 2001.



                                       22


OTHER CONSOLIDATED RESULTS

The following discussion of several nonoperating items is based on the amounts
reported in our condensed consolidated financial statements.



(Dollars in Millions)                   THREE MONTHS ENDED MARCH 31,
                                            2002                2001    % Change
                                        --------            --------    --------
                                                               
INTEREST EXPENSE
Interest expense                        $    814            $    921       (11.6)%
Capitalized interest costs                    37                  84       (56.0)
                                        --------            --------
Total interest costs on debt balances   $    851            $  1,005       (15.3)
                                        ========            ========
Average debt outstanding                $ 64,678            $ 59,416         8.9
Effective interest rate                      5.3%                6.8%


The decrease in interest costs for the three months ended March 31, 2002, as
compared to the same period in 2001, was principally attributable to lower
average interest rates and was partially offset by higher average debt levels.
The increase in average debt levels was mainly the result of funding for capital
expenditures and acquisitions at our Domestic Telecom and Domestic Wireless
segments.



(Dollars in Millions)           THREE MONTHS ENDED MARCH 31,
                                    2002                2001   % Change
                                --------            --------   --------
                                                      
MINORITY INTEREST               $    243            $     98      148.0%


The increase in minority interest expense for the three months ended March 31,
2002, as compared to the same period in 2001, is primarily due to the higher
earnings at Verizon Wireless, which has a significant minority interest
attributable to Vodafone.



                                                      THREE MONTHS ENDED MARCH 31,
                                                           2002               2001
                                                   ------------       ------------
                                                                
EFFECTIVE INCOME TAX RATES                                 99.6%              36.4%


The effective income tax rate is the provision for income taxes as a percentage
of income before the provision for income taxes. Our effective income tax rate
in the first quarter of 2002 is not consistent with the same period in 2001
because tax benefits were not available on many of the losses resulting from the
other than temporary decline in fair value of several of our investments during
the first quarter of 2002. See "Special Items" above.

CONSOLIDATED FINANCIAL CONDITION



(Dollars in Millions)                              THREE MONTHS ENDED MARCH 31,
                                                       2002                2001    $ Change
                                                   --------            --------    --------
                                                                          
CASH FLOWS PROVIDED BY (USED IN)
Operating activities                               $  4,478            $  3,102    $  1,376
Investing activities                                 (2,020)             (6,454)      4,434
Financing activities                                 (2,422)              3,284      (5,706)
                                                   --------            --------    --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   $     36            $    (68)   $    104
                                                   ========            ========    ========


We use the net cash generated from our operations to fund capital expenditures
for network expansion and modernization, repay external financing, pay dividends
and invest in new businesses. Additional external financing is utilized when
necessary. While our current liabilities typically exceeded our current assets,
our sources of funds, primarily from operations and, to the extent necessary,
from readily available external financing arrangements, are sufficient to meet
ongoing operating and investing requirements. We expect that capital spending
requirements will continue to be financed primarily through internally generated
funds. Additional debt or equity financing will be needed to fund additional
development activities or to maintain our capital structure to ensure our
financial flexibility.

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

Our primary source of funds continues to be cash generated from operations. The
increase in cash from operations in the first quarter of 2002 compared to the
similar period of 2001 primarily reflects a decrease in working capital
requirements.



                                       23


CASH FLOWS USED IN INVESTING ACTIVITIES

Capital expenditures continue to be our primary use of capital resources. We
invested approximately $1,479 million in our Domestic Telecom business in the
first quarter of 2002, compared to $3,339 million in the first quarter of 2001
to facilitate the introduction of new products and services, enhance
responsiveness to competitive challenges and increase the operating efficiency
and productivity of the network. We also invested approximately $812 million in
our Domestic Wireless business in the first quarter of 2002, compared to $988
million in the first quarter of 2001. The decrease in 2002 is primarily due to
the effective management of our capital expenditure budget to current network
demand. We expect total capital expenditures in 2002 to be approximately $14
billion to $15 billion.

We invested $930 million in acquisitions and investments in businesses during
the first quarter of 2002, including $556 million to acquire some of the
cellular properties of Dobson Communications Corporation and $218 million for
other wireless properties. In the first quarter of 2001, we invested $2,099
million in acquisitions and investments in businesses, including $1,625 million
related to wireless licenses purchased in connection with an FCC auction (see
"Recent Developments - FCC Auction" for additional information), and $410
million for additional wireless spectrum purchased from another
telecommunications carrier.

In the first quarter 2002, we received cash proceeds of $728 million in
connection with the sale of TSI.

In the first quarter of 2001, Other, net investing activities include loans to
Genuity Inc. of $200 million. The loans to Genuity are a part of an agreement to
provide up to $2.0 billion in financing to Genuity with a maturity of 2005.

In addition, under the terms of an investment agreement, Vodafone may require us
or Verizon Wireless to purchase up to $20 billion worth of its interest in
Verizon Wireless between 2003 and 2007 at its then fair market value. The
purchase of up to $10 billion may be required during July 2003 or July 2004 and
the remainder during the following years.

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES

Cash of $1,629 million was used to reduce our total debt during the first
quarter of 2002. We repaid $493 million of Verizon Global Funding Corp.
long-term debt at maturity with cash and reduced our short-term borrowings by
$2,331 million with cash and the issuance of Domestic Telecom long-term debt.
Domestic Telecom issued $2,967 million of long-term debt and retired $1,691
million of long-term debt.

The $4,348 million increase in our total debt during the first three months of
2001 was primarily due to the issuance of $2.1 billion of long-term debt and
$1.4 billion of commercial paper and other short-term borrowings by Verizon
Global Funding, partially offset by $400 million maturity of other corporate
long-term debt. In addition, Verizon Wireless issued $580 million of long-term
debt and Domestic Telecom incurred $773 million of net short-term debt and
retired $310 million of long-term debt.

Our debt to equity ratio was 67.0% at March 31, 2002, compared to 64.1% at March
31, 2001.

As of March 31, 2002, we had approximately $8.5 billion of unused bank lines of
credit and $474 million in bank borrowings outstanding. As of March 31, 2002,
our telephone and financing subsidiaries had shelf registrations for the
issuance of up to $8.9 billion of unsecured debt securities. The debt securities
of our telephone and financing subsidiaries continue to be accorded high ratings
by primary rating agencies. However, in March 2002, Standard & Poor's (S&P)
revised our credit rating outlook from stable to negative, and Moody's Investors
Service (Moody's) reaffirmed our credit rating outlook as negative. S&P and
Moody's cited concern about the overall debt level of Verizon. We have adopted a
debt portfolio strategy that includes a reduction in total debt as well as a
reduction in the short-term debt component. A change in an outlook does not
necessarily signal a rating downgrade but rather highlights an issue whose final
resolution may result in placing a company on review for possible downgrade.

As in prior quarters, dividend payments were a significant use of capital
resources. We determine the appropriateness of the level of our dividend
payments on a periodic basis by considering such factors as long-term growth
opportunities, internal cash requirements, and the expectations of our
shareowners. In the first quarters of 2002 and 2001, we announced quarterly cash
dividends of $.385 per share.

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Our cash and cash equivalents at March 31, 2002 totaled $1,015 million, a $36
million increase over cash and cash equivalents at December 31, 2001 of $979
million.

MARKET RISK

We are exposed to various types of market risk in the normal course of our
business, including the impact of interest rate changes, foreign currency
exchange rate fluctuations, changes in equity investment prices and changes in
corporate tax rates. We employ risk management strategies using a variety of
derivatives, including interest rate



                                       24


swap agreements, interest rate caps and floors, foreign currency forwards and
options, equity options and basis swap agreements. We do not hold derivatives
for trading purposes.

It is our general policy to enter into interest rate, foreign currency and other
derivative transactions only to the extent necessary to achieve our desired
objectives in limiting our exposures to the various market risks. Our objectives
include maintaining a mix of fixed and variable rate debt to lower borrowing
costs within reasonable risk parameters and to protect against earnings and cash
flow volatility resulting from changes in market conditions. We do not hedge our
market risk exposure in a manner that would completely eliminate the effect of
changes in interest rates, equity prices and foreign exchange rates on our
earnings. While we do not expect that our liquidity and cash flows will be
materially affected by these risk management strategies, our net income may be
materially affected by certain market risks associated with the exchangeable
notes discussed below.

EXCHANGEABLE NOTES

In 1998, we issued exchangeable notes as described in Note 9 to the condensed
consolidated financial statements and discussed earlier under "Mark-to-Market
Adjustment - Financial Instruments." These financial instruments expose us to
market risk, including:

o    Equity price risk, because the notes are exchangeable into shares that are
     traded on the open market and routinely fluctuate in value.

o    Foreign exchange rate risk, because the notes are exchangeable into shares
     that are denominated in a foreign currency.

o    Interest rate risk, because the notes carry fixed interest rates.

Periodically, equity price or foreign exchange rate movements may require us to
mark-to-market the exchangeable note liability to reflect the increase or
decrease in the current share price compared to the established exchange price,
resulting in a charge or credit to income. The following sensitivity analysis
measures the effect on earnings and financial condition due to changes in the
underlying share prices of the Telecom Corporation of New Zealand Limited
(TCNZ), Cable & Wireless plc (C&W) and NTL Incorporated (NTL) stock.

o    At March 31, 2002, the exchange price for the TCNZ shares (expressed as
     American Depositary Receipts) was $44.93. The C&W and NTL notes in the
     amount of $3,180 million are exchangeable into 128.4 million shares of C&W
     stock and 24.5 million shares of NTL stock.

o    For each $1 increase in the value of the TCNZ shares above the exchange
     price, our pretax earnings would be reduced by approximately $55 million.
     Assuming the aggregate value of the C&W and NTL stocks exceeds the value of
     the debt liability, each $1 increase in the value of the C&W shares
     (expressed as American Depositary Receipts) or NTL shares would reduce our
     pretax earnings by approximately $43 million or $24 million, respectively.
     A subsequent decrease in the value of these shares would correspondingly
     increase earnings, but not to exceed the amount of any previous reduction
     in earnings.

o    Our cash flows would not be affected by mark-to-market activity relating to
     the exchangeable notes.

o    If we decide to deliver shares in exchange for the notes, the exchangeable
     note liability (including any mark-to-market adjustments) will be
     eliminated and the investment will be reduced by the fair market value of
     the related number of shares delivered. Upon settlement, the excess of the
     liability over the book value of the related shares delivered will be
     recorded as a gain. We also have the option to settle these liabilities
     with cash upon exchange.

EQUITY RISK

We also have equity price risk associated with our cost investments, primarily
in common stocks and equity price sensitive derivatives that are carried at fair
value. The value of these cost investments and derivatives is subject to changes
in the market prices of the underlying securities. Our cost investments and
equity price sensitive derivatives recorded at fair value totaled $1,675 million
at March 31, 2002.

A sensitivity analysis of our cost investments and equity price sensitive
derivatives recorded at fair value indicated that a 10% increase or decrease in
the fair value of the underlying common stock equity prices would result in a
$143 million increase or decrease in the fair value of our cost investments and
equity price sensitive derivatives. Of this amount, a change in the fair value
of our cost investments of $134 million would be recognized in Accumulated Other
Comprehensive Loss in our condensed consolidated balance sheets under SFAS No.
115 "Accounting for Certain Investments in Debt and Equity Securities." Our
equity price sensitive derivatives (primarily several long-term call options on
our common stock) (see Note 8 - Financial Instruments) do not qualify for hedge
accounting



                                       25


under SFAS No. 133. As such, a change of approximately $9 million in the fair
value of our equity price sensitive derivatives would be recognized in our
condensed consolidated balance sheets and in current earnings in mark-to-market
adjustment.

We continually evaluate our investments in marketable securities for impairment
due to declines in market value considered to be other than temporary. That
evaluation includes, in addition to persistent, declining stock prices, general
economic and company-specific evaluations. In the event of a determination that
a decline in market value is other than temporary, a charge to earnings is
recorded for all or a portion of the unrealized loss, and a new cost basis in
the investment is established.

OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS

GENUITY AND BELL ATLANTIC - GTE MERGER

Genuity, formerly a wholly owned subsidiary of GTE, operates a tier-one
interLATA Internet backbone and related data businesses. The transition of
Genuity to a public company was part of a comprehensive proposal filed with the
FCC on January 27, 2000, to permit the Bell Atlantic-GTE merger to close by
addressing regulatory restrictions associated with Verizon's ability to provide
long distance and Internet-related data service offerings that GTE had
previously provided to consumers and businesses.

In accordance with the provisions of an FCC order, in June 2000 Genuity sold 174
million of its Class A common shares, representing 100% of the issued and
outstanding Class A common stock and 90.5% of the overall voting equity in
Genuity, in an initial public offering. GTE retained 100% of Genuity's Class B
common stock, which currently represents 8.2% of the voting equity in Genuity,
as permitted by the Telecommunications Act of 1996 (1996 Act). Our investment
also includes a contingent conversion right.

Our contingent conversion right currently permits us to increase our ownership
interest to as much as 79.6% of the total equity of Genuity, representing 95.1%
of Genuity's total voting rights (before giving effect to outstanding options
granted to Genuity employees), if we eliminate the applicable restrictions of
Section 271 of the 1996 Act as to 100% of the total telephone access lines owned
by Bell Atlantic in 1999 in its region. This option expires if we do not
eliminate these restrictions within five years of the merger, subject to
possible extension. If we eliminate Section 271 restrictions as to 95% of the
former Bell Atlantic in-region lines, we may require Genuity to reconfigure its
operations in one or more former Bell Atlantic in-region states where we have
not eliminated those restrictions in order to bring those operations into
compliance with Section 271. The FCC order also allows us to transfer our Class
B common stock to a disposition trustee for sale to one or more third parties
once we eliminate Section 271 restrictions on at least 50% of the former Bell
Atlantic in-region access lines. As of the current date, we have eliminated
Section 271 restrictions as to approximately 57% of the former Bell Atlantic
in-region access lines.

The initial public offering transferred the majority ownership and control of
Genuity to the public shareholders and, accordingly, we deconsolidated our
investment in Genuity on June 30, 2000. In addition to the transfer, we are also
required to adhere to safeguards in the FCC's order that prohibit us from
exercising influence over Genuity's operations. Therefore, we are accounting for
our investment in Genuity using the cost method.

Federal and state regulatory conditions to the merger also included commitments
to, among other things, promote competition and the widespread deployment of
advanced services while helping to ensure that consumers continue to receive
high-quality, low-cost telephone services. In some cases, there are significant
penalties associated with not meeting these commitments. The cost of satisfying
these commitments could have a significant impact on net income in future
periods. The pretax cost to begin compliance with these conditions was
approximately $200 million in 2000 and approximately $300 million in 2001. We
expect an impact of $200 million to $300 million in 2002.

RECENT DEVELOPMENTS

VERIZON WIRELESS

FCC Auction

On January 29, 2001, the bidding phase of the FCC reauction of 1.9 GHz C and F
block broadband Personal Communications Services spectrum licenses, which began
December 12, 2000, officially ended. Verizon Wireless was the winning bidder for
113 licenses. The total price of these licenses was $8,781 million, $1,822
million of which had been paid. Most of the licenses that were reauctioned
relate to spectrum that was previously licensed to NextWave Personal
Communications Inc. and NextWave Power Partners Inc. (collectively NextWave),
which have appealed to the federal courts the FCC's action canceling NextWave's
licenses and reclaiming the spectrum.



                                       26


In a decision on June 22, 2001, the U.S. Court of Appeals for the D.C. Circuit
ruled that the FCC's cancellation and repossession of NextWave's licenses was
unlawful. The FCC sought a stay of the court's decision which was denied. The
FCC subsequently reinstated NextWave's licenses, but it did not return Verizon
Wireless's payment on the NextWave licenses nor did it acknowledge that the
court's decision extinguished Verizon Wireless's obligation to purchase the
licenses. On October 19, 2001, the FCC filed a petition asking the U.S. Supreme
Court to consider reversing the U.S. Court of Appeals for the D.C. Circuit's
decision. On March 4, 2002, the U.S Supreme Court granted the FCC's petition and
agreed to hear the appeal.

In April 2002, Verizon Wireless filed a petition with the U.S. Court of Appeals
for the District of Columbia seeking a declaration that the auction is void and
a return of its entire payment as well as interest. At that time, Verizon
Wireless also filed a complaint in the U.S. Court of Federal Claims against the
United States government seeking both a declaration that Verizon Wireless has no
further performance obligations with respect to the re-auction and money
damages. Both of these matters are pending. Subsequently, the FCC returned
$1,479 million of Verizon Wireless's $1,822 million license payment without
acknowledging that Verizon Wireless is no longer obligated to purchase the
licenses. As of March 31, 2002, we reported $1,479 million of the payment in
Accounts Receivable, reclassified from Intangible Assets, Net, in the condensed
consolidated balance sheets.

TELECOMMUNICATIONS ACT OF 1996

In-Region Long Distance

We offer long distance service throughout most of the country, except in those
regions served by the former Bell Atlantic telephone operations where we have
not yet received authority to offer long distance service under the 1996 Act. We
now have authority to offer in-region long distance service in six states in the
former Bell Atlantic territory, accounting for more than half of the lines
served by the former Bell Atlantic. In addition to its New York order released
in December 1999, the FCC released orders on April 16, 2001, July 23, 2001,
September 19, 2001, February 22, 2002 and April 17, 2002, approving our
applications for permission to enter the in-region long distance market in
Massachusetts, Connecticut, Pennsylvania, Rhode Island and Vermont,
respectively. Both the Massachusetts and Pennsylvania orders are currently on
appeal to the U.S. Court of Appeals. WorldCom Inc. has filed a complaint with
the FCC seeking to have our long distance authority in Massachusetts revoked or
suspended. The complaint is based on several of Verizon's charges to CLECs.

We have filed applications with the FCC to offer long distance service in Maine
and New Jersey. The FCC must rule on those applications by June 19, 2002 and
June 24, 2002, respectively. We have also filed state applications for support
of anticipated applications with the FCC for permission to enter the in-region
long distance market in New Hampshire, Delaware, Virginia and Maryland.
Third-party testing of our operations support systems is in its final stages for
Virginia, West Virginia, Maryland and the District of Columbia.

FCC REGULATION AND INTERSTATE RATES

Access Charges and Universal Service

The FCC has adopted rules for special access services that provide for pricing
flexibility and ultimately the removal of services from price regulation when
prescribed competitive thresholds are met. In order to use these rules, carriers
must forego the ability to take advantage of provisions in the current rules
that provide relief in the event earnings fall below prescribed thresholds. In
2001, we were authorized to remove special access and dedicated transport
services from price caps in 35 of the 57 Metropolitan Statistical Areas (MSAs)
in the former Bell Atlantic territory and in three additional MSAs in the former
GTE territory. In addition, the FCC found that in 10 MSAs we have met the
stricter standards to remove special access connections to end-user customers
from price caps. In March 2002, we received approval to remove special access
services from price cap regulation in 16 additional MSAs. Approximately 50% of
special access revenues are now removed from price regulation.

Unbundling of Network Elements

In July 2000, the U.S. Court of Appeals for the Eighth Circuit found that some
aspects of the FCC's requirements for pricing UNEs were inconsistent with the
1996 Act. In particular, it found that the FCC was wrong to require incumbent
carriers to base these prices not on their real costs but on the imaginary costs
of the most efficient equipment and the most efficient network configuration.
This portion of the court's decision was stayed pending review by the U.S.
Supreme Court. On May 13, 2002, the U.S. Supreme Court reversed that decision
and upheld the FCC's pricing rules.

Compensation for Internet Traffic

On April 27, 2001, the FCC released an order addressing intercarrier
compensation for dial-up connections for Internet-bound traffic. The FCC found
that Internet-bound traffic is interstate and subject to the FCC's jurisdiction.



                                       27


Moreover, the FCC again found that Internet-bound traffic is not subject to
reciprocal compensation under Section 251(b)(5) of the 1996 Act. Instead, the
FCC established federal rates per minute for this traffic that decline from
$0.0015 to $0.0007 over a three-year period. The FCC order also sets caps on the
total minutes of this traffic that may be subject to any intercarrier
compensation and requires that incumbent local exchange carriers must offer to
pay reciprocal compensation for local traffic at the same rate as they are
required to pay on Internet-bound traffic. On May 3, 2002, the U.S. Court of
Appeals for the D.C. Circuit remanded the April 27, 2001 FCC order for further
proceedings. It did not vacate the interim pricing rules established in that
order and they remain in effect.

Broadband Policy

The FCC has announced its intent to establish a national broadband policy that
will address the appropriate level of regulation of broadband services offered
by Verizon and other telephone companies, as well as competing services that are
offered through other technologies such as cable modem service. In support of
this goal, the FCC has launched four separate rulemaking efforts that examine
various aspects of how these services are regulated today and whether such
regulation should be eliminated or modified going forward.

OTHER MATTERS

RECENT ACCOUNTING PRONOUNCEMENT

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." This standard provides the
accounting for the cost of legal obligations associated with the retirement of
long-lived assets. SFAS No. 143 requires that companies recognize the fair value
of a liability for asset retirement obligations in the period in which the
obligations are incurred and capitalize that amount as a part of the book value
of the long-lived asset. That cost is then depreciated over the remaining life
of the underlying long-lived asset. We are required to adopt SFAS No. 143
effective January 1, 2003. We are currently evaluating the impact this new
standard will have on our future results of operations or financial position.



                                       28


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

In this Management's Discussion and Analysis, and elsewhere in this Quarterly
Report, we have made forward-looking statements. These statements are based on
our estimates and assumptions and are subject to risks and uncertainties.
Forward-looking statements include the information concerning our possible or
assumed future results of operations. Forward-looking statements also include
those preceded or followed by the words "anticipates," "believes," "estimates,"
"hopes" or similar expressions. 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, along with those discussed elsewhere in this
Quarterly Report, could affect future results and could cause those results to
differ materially from those expressed in the forward-looking statements:

     o    the duration and extent of the current economic downturn;

     o    materially adverse changes in economic conditions in the markets
          served by us or by companies in which we have substantial investments;

     o    material changes in available technology;

     o    an adverse change in the ratings afforded our debt securities by
          nationally accredited ratings organizations;

     o    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, and
          unbundled network element and resale rates;

     o    the extent, timing, success, and overall effects of competition from
          others in the local telephone and toll service markets;

     o    the timing and profitability of our entry and expansion in the
          national long distance market;

     o    our ability to satisfy regulatory merger conditions and obtain
          combined company revenue enhancements and cost savings;

     o    the profitability of our broadband operations;

     o    the ability of Verizon Wireless to achieve revenue enhancements and
          cost savings, and obtain sufficient spectrum resources;

     o    the outcome of litigation concerning the FCC NextWave spectrum
          auction;

     o    the continuing financial needs of Genuity, our ability to convert our
          ownership interest in Genuity into a controlling interest consistent
          with regulatory conditions, and Genuity's ensuing profitability;

     o    our ability to recover insurance proceeds relating to equipment losses
          and other adverse financial impacts resulting from the terrorist
          attacks on September 11, 2001; and

     o    changes in our accounting assumptions that regulatory agencies,
          including the SEC, may require or that result from changes in the
          accounting rules or their application, which could result in an impact
          on earnings.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to market risk is included in Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations, in the
Consolidated Financial Condition section under the caption "Market Risk."

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit:

           Exhibit
           Number
           -------

              12       Computation of Ratio of Earnings to Fixed Charges.

(b) Reports on Form 8-K filed during the quarter ended March 31, 2002:

         A Current Report on Form 8-K, filed January 9, 2002, containing a press
         release announcing our key estimated operating results for 2001 and
         selected slides containing supplemental information about our financial
         and other projections.

         A Current Report on Form 8-K, filed February 1, 2002, containing a
         press release announcing earnings for the fourth quarter and year ended
         December 31, 2001, and providing our financial outlook for 2002.

         A Current Report on Form 8-K, filed March 11, 2002, containing a press
         release announcing the accelerated leadership transition of Ivan
         Seidenberg to sole CEO, effective April 1, 2002.



                                       29


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                       VERIZON COMMUNICATIONS INC.

Date: May 31, 2002                     By /s/ John F. Killian
                                         ---------------------------------------
                                         John F. Killian
                                         Senior Vice President and Controller
                                         (Principal Accounting Officer)







UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 2002.



                                       30


                                INDEX TO EXHIBITS



           EXHIBIT
           NUMBER               DESCRIPTION
           -------              -----------
                    
              12       Computation of Ratio of Earnings to Fixed Charges.