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Verizon 2005 Interactive Annual Report
note 21 (page 1 of 2)
GUARANTEES OF OPERATING SUBSIDIARY DEBT

Verizon has guaranteed the following two obligations of indirect wholly owned operating subsidiaries: $480 million 7% debentures series B, due 2042 issued by Verizon New England Inc. and $300 million 7% debentures series F issued by Verizon South Inc. due 2041. These guarantees are full and unconditional and would require Verizon to make scheduled payments immediately if either of the two subsidiaries failed to do so. Both of these securities were issued in denominations of $25 and were sold primarily to retail investors and are listed on the New York Stock Exchange. SEC rules permit us to include condensed consolidating financial information for these two subsidiaries in our periodic SEC reports rather than filing separate subsidiary periodic SEC reports.

Below is the condensed consolidating financial information. Verizon New England and Verizon South are presented in separate columns. The column labeled Parent represents Verizon’s investments in all of its subsidiaries under the equity method and the Other column represents all other subsidiaries of Verizon on a combined basis. The Adjustments column reflects intercompany eliminations.
Condensed Consolidating       Verizon           (dollars in millions )
Statements of Income       New   Verizon       Adjust -    
Year Ended December 31, 2005   Parent England   South   Other ments   Total  
Operating revenues $ –   $ 3,936   $ 907   $ 70,766   $ (497 ) $ 75,112  
Operating expenses   8     3,628     684     56,475     (497 )   60,298  
Operating Income (Loss)   (8 )   308     223     14,291     –     14,814  
Equity in earnings of
   unconsolidated businesses		   6,698     23     –     276     (6,308 )   689  
Income from other
   unconsolidated businesses		   35     –     –     57     –     92  
Other income and (expense), net   502     (4 )   6     141     (408 )   237  
Interest expense   (58 )   (172 )   (63 )   (1,905 )   18     (2,180 )
Minority interest   –     –     –     (3,045 )   –     (3,045 )
Income before provision for
   income taxes		   7,169     155     166     9,815     (6,698 )   10,607  
Income tax benefit (provision)   228     (40 )   (62 )   (3,336 )   –     (3,210 )
Net Income   7,397     115     104     6,479     (6,698 )   7,397  
Condensed Consolidating       Verizon           (dollars in millions )
Statements of Income       New   Verizon       Adjust -    
Year Ended December 31, 2004   Parent England   South   Other ments   Total  
Operating revenues $ –   $ 3,955   $ 934   $ 66,756   $ (362 ) $ 71,283  
Operating expenses   260     3,664     717     53,887     (362 )   58,166  
Operating Income (Loss)   (260 )   291     217     12,869     –     13,117  
Equity in earnings of
   unconsolidated businesses		   7,714     59     –     1,438     (7,520 )   1,691  
Income from other
   unconsolidated businesses		   –     –     –     75     –     75  
Other income and (expense), net   171     8     7     38     (202 )   22  
Interest expense   (20 )   (165 )   (63 )   (2,144 )   8     (2,384 )
Minority interest   –     –     –     (2,409 )   –     (2,409 )
Income before provision for
   income taxes and discontinued
   operations		   7,605     193     161     9,867     (7,714 )   10,112  
Income tax benefit (provision)   229     (50 )   (34 )   (2,996 )   –     (2,851 )
Income Before Discontinued
   Operations
  7,834     143     127     6,871     (7,714 )   7,261  
Gain (loss) on discontinued
    operations, net of tax		   (3 )   –     –     573     –     570  
Net Income $ 7,831   $ 143   $ 127   $ 7,444   $ (7,714 ) $ 7,831  
Condensed Consolidating       Verizon           (dollars in millions )
Statements of Income       New   Verizon       Adjust -    
Year Ended December 31, 2003   Parent England   South   Other ments   Total  
Operating revenues $ –   $ 4,102   $ 951   $ 62,692   $ (277 ) $ 67,468  
Operating expenses   562     4,148     808     54,820     (277 )   60,061  
Operating Income (Loss)   (562 )   (46 )   143     7,872     –     7,407  
Equity in earnings (loss) of
   unconsolidated businesses		   3,176     (42 )   –     1,272     (3,128 )   1,278  
Income (loss) from other
   unconsolidated businesses 		  (10 )   –     –     341     –     331  
Other income and (expense), net   75     (1 )   2     (3 )   (36 )   37  
Interest expense   (78 )   (160 )   (64 )   (2,483 )   (12 )   (2,797 )
Minority interest   –     –     –     (1,583 )   –     (1,583 )
Income (loss) before provision for
   income taxes, discontinued
   operations and cumulative
   effect of accounting change 		  2,601     (249 )   81     5,416     (3,176 )   4,673  
Income tax benefit (provision)   476     82     (32 )   (1,739 )   –     (1,213 )
Income (Loss) Before
    Discontinued Operations And
    Cumulative Effect Of
    Accounting Change		   3,077     (167 )   49     3,677     (3,176 )   3,460  
Loss on discontinued operations,
   net of tax		   –     –     –     (886 )   –     (886 )
Cumulative effect of accounting
   change, net of tax		   –     369     47     87     –     503  
Net Income $ 3,077   $ 202   $ 96   $ 2,878   $ (3,176 ) $ 3,077  
For continuation of Note 21, see next page.
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* This is an interactive electronic version of Verizon’s 2005 Annual Report to Shareholders, and it is intended to be complete and accurate. The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is available in PDF format on this website.