Chairman’s Letter to Shareowners

What We Do.

Verizon serves customers by building great networks. It’s what we do. We design networks, invest in technology to deploy them to customers’ homes and businesses, maintain them, and upgrade them for the future. Our networks give us a platform for innovating and delivering the great products, services, applications and content that customers want. This differentiates us from competitors and allows us to marry communications, data and entertainment for customers in ways few other companies can. As we unleash our increasingly powerful high-speed broadband, global IP and mobile technologies, we accelerate our growth and drive our industry forward, which in turn creates value for shareowners and customers.

This is what we believe – the conviction that guides our investment, drives our strategy and motivates our people. This belief unites our leadership team, employees and Board of Directors in our determination to be the industry’s premier network company and the leader in delivering the benefits of advanced communications technologies to the marketplace.

By transforming our networks for the Internet age, we are defining Verizon as a growth company. We made meaningful progress toward this goal in 2006.

Our growth businesses are gaining scale and reach. In wireless, we were the first to deploy a national broadband network, which now reaches more than 200 million people. In telecom, we are upgrading our traditional copper network with the most comprehensive high-speed fiber network in the country, which will reach 18 million homes and businesses by the end of the decade. By combining our large-business organization with MCI to form Verizon Business, we now have a high-speed backbone network that gives us unsurpassed global reach and the ability to offer advanced Internet Protocol solutions to business customers around the world. And we continue to differentiate our platforms with applications and services that make them work better, faster, more securely and more reliably for customers.

By executing a strategy based on investment and innovation, we have built world-class networks that serve millions of customers at home, at work and on the move. What makes this a breakthrough moment for Verizon is the powerful intersection of our network strengths with the trends that are creating new markets and transforming the world of business, entertainment and communications.

2006 will go down as the year that users took over the Internet.

Blogs. Podcasts. YouTube. Wikipedia. MySpace. Open-source software. People creating a shared chronicle of daily life by swapping photos, music, opinions, experiences with friends, families, even strangers. Businesses in constant dialogue with customers, employees and partners – worldwide, 24x7.

This kind of user-generated, interactive, multimedia content is increasingly dominating the marketplace – a sweeping trend known as “Web 2.0.” The Internet is rapidly evolving from a text-based to a visual medium, which requires networks that deliver much higher bandwidth both upstream and downstream. Providing millions of customers the high-speed communications tools they need to participate in this global conversation is one of the great business opportunities of a generation.

Verizon builds the real networks on which these social networks depend.

Together, our broadband, mobile and global IP networks comprise a powerful delivery system for the media-rich, interactive content that is transforming television, the Internet, commerce, medicine and education as we know them today. Verizon is at the heart of this creative, disruptive, market-making shift – delivering high-definition content, helping people and businesses collaborate, and making it all work together for customers, on any screen, wherever they are. Not only does this create value for us, it also pushes the industry forward by fueling innovation in consumer electronics, equipment manufacturing, content, software and search – all along the value chain.

Verizon’s leadership in these transformational technologies gives us an engine for growth and makes us an indispensable driver of the 21st century economy.

Chairman’s Letter continued on next page >