2005 Operating and Financial Results
Revenues were $75 billion in 2005, up 5.4 percent over 2004. In the last four years, we have expanded our revenue base by $8.6 billion through our focus on growth businesses such as wireless, consumer broadband and high-speed business data products. Leading the way was Verizon Wireless, which grew revenues by 16.8 percent – an extraordinary performance for a business with more than $30 billion in revenues. We saw strong growth in consumer broadband and high-speed data services in our Telecom business, which is helping us manage the impact of technology substitution and competition in our traditional business.

We also turned in a solid financial performance in 2005. Reported earnings for the year were $7.4 billion, or $2.65 per diluted share. After adjustments for one-time and special items, earnings grew 1.6 percent over 2004. Our operating businesses generated $22 billion in cash for the year, which enabled us to invest $15.3 billion in capital, reduce debt by $300 million, and pay $4.4 billion in dividends to shareowners. In the last five years, we have reduced total debt by $18.8 billion, making our balance sheet as strong today as at any time in our history.

In 2005, we added millions of new customers across our business. Verizon Wireless had another record-setting year, adding 7.5 million new customers, for a total of 51.3 million. We also had a record-setting year in broadband, adding 1.7 million customers, for a total of 5.1 million.

We continue to focus on what matters to customers. Verizon Wireless set new standards of excellence for the wireless industry, leading the league in customer loyalty, network reliability and quality. Both our landline and wireless companies rank tops in our categories in American Customer Satisfaction and J. D. Power surveys, and our brand is regularly named by consumers as number one in our industry.

Looking ahead, we will continue to focus our resources on our network businesses. To that end, we announced that we are exploring the divestiture of our valuable Verizon Information Services unit. We also are making some tough choices to secure our place in the future. For example, in 2005 we announced that we are making changes to retirement benefits for management employees, which will be effective July 1, 2006. These changes (which do not affect pensions or benefits for current retirees) will help align benefit plans for management employees across the company, address unpredictable and escalating costs, and put Verizon on a more stable competitive footing going forward.

The bottom line is that we entered 2006 in a strong financial position, with consistent revenue growth, solid margins and cash flows, and a strong balance sheet.

Unfortunately, 2005 was a difficult year for Verizon’s stock. Our total return for the year was down 22.2 percent. This is both disappointing and frustrating for us. Investors have told us that they are concerned with the effect of competition and technology substitution in our traditional business, the heavy capital investment we’re making in broadband, and the potential uncertainty created in 2005 by the pending MCI transaction.

2006 will be an important year for us to demonstrate that we can use our capital to produce results in the marketplace and growth for shareowners. Our people are up to the challenge. In fact, as I visit employees around Verizon, I am struck by their commitment to our strategy and their conviction that our technology investments are creating a more valuable company.

Together, we will marshal that conviction to deliver results that will build that same kind of confidence and optimism among investors.

Putting Customers First
Of course, the way to make a company more valuable to investors is by making it more valuable to customers – not just through its products, but also through its people, reputation and commitment to service. In 2005 we formalized our “customer first” commitment and aligned our employees around our core values of integrity, respect, performance excellence and accountability.

Our employees are proud to be part of a company that’s taking charge of its own future. They are passionate about putting customers first. They hold one another – and themselves – accountable for delivering outstanding service with the highest of ethical standards. And just as they’ve done throughout our history, our people came through for their neighbors in times of crisis. Whether it was responding to the tsunami in Asia or Hurricane Katrina on the Gulf Coast, Verizon employees continue to demonstrate the moral fiber and can-do spirit that is built into the foundation of our company.

We are grateful to the members of our Board of Directors, who have steadfastly supported our investments in technology. We’re confident in our pathway to the future. We’re excited about getting on the right side of the big ideas that are pushing our industry forward. And with every step we take toward becoming the premier broadband, wireless and multimedia company in the industry, we know we are creating a better future for our people and a more valuable company for our shareowners.