<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                             ---------------------

                                   FORM 10-Q

                             ---------------------


(Mark one)
   [X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended June 30, 2001

                                      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 1-7757


                             VERIZON DELAWARE INC.


   A Delaware Corporation      I.R.S. Employer Identification No. 23-0523775


                901 Tatnall Street, Wilmington, Delaware 19801


                        Telephone Number (302) 576-5416

                           -------------------------



THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE
FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).


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
                                       ----   ----
<PAGE>

                             Verizon Delaware Inc.

                        PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                        CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                     Three Months Ended June 30,       Six Months Ended June 30,
                                                                  ----------------------------------------------------------------
(Dollars in Thousands) (Unaudited)                                      2001            2000             2001             2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>              <C>              <C>
OPERATING REVENUES
  (including $1,136, $(1,311), $875 and $(2,483) from affiliates)    $80,526          $77,611        $161,426         $154,508
                                                                  ----------------------------------------------------------------

OPERATING EXPENSES
Operations and support (including $17,878, $19,178, $32,851 and
  $32,749 to affiliates)                                              40,183           46,358          79,568           82,177
Depreciation and amortization                                         18,255           18,320          36,071           35,975
                                                                  ----------------------------------------------------------------
                                                                      58,438           64,678         115,639          118,152
                                                                  ----------------------------------------------------------------

OPERATING INCOME                                                      22,088           12,933          45,787           36,356

OTHER INCOME AND (EXPENSE), NET
   (including $5, $98, $(3,461) and $106 from affiliates)                 68              194          (3,304)             551

INTEREST EXPENSE
   (including $1,028, $1,028, $2,366 and $1,877 to affiliates)         2,281            2,463           4,959            4,699
                                                                  ----------------------------------------------------------------

INCOME BEFORE PROVISION FOR INCOME TAXES                              19,875           10,664          37,524           32,208

PROVISION FOR INCOME TAXES                                             8,059            4,814          16,652           13,564
                                                                  ----------------------------------------------------------------

NET INCOME                                                           $11,816          $ 5,850        $ 20,872         $ 18,644
                                                                  ================================================================

</TABLE>


                 See Notes to Condensed Financial Statements.

                                       1
<PAGE>

                             Verizon Delaware Inc.

                           CONDENSED BALANCE SHEETS

                                    ASSETS
                                    ------
<TABLE>
<CAPTION>

(Dollars in Thousands)                                                                  June 30, 2001        December 31, 2000
--------------------------------------------------------------------------------------------------------------------------------
                                                                                          (Unaudited)
<S>                                                                                          <C>                      <C>
CURRENT ASSETS
Short-term investments                                                                     $    1,768               $    5,304
Accounts receivable:
   Trade and other, net of allowances for
       uncollectibles of $7,536 and $5,382                                                     49,197                   54,816
   Affiliates                                                                                   9,884                    5,499
Material and supplies                                                                           2,494                    1,987
Prepaid expenses                                                                                7,708                    3,390
Deferred income taxes                                                                           2,682                    2,328
Other                                                                                           9,614                    9,892
                                                                                 ------------------------------------------------
                                                                                               83,347                   83,216
                                                                                 ------------------------------------------------

PLANT, PROPERTY AND EQUIPMENT                                                               1,074,499                1,022,528
Less accumulated depreciation                                                                 618,421                  587,168
                                                                                 ------------------------------------------------
                                                                                              456,078                  435,360
                                                                                 ------------------------------------------------

PREPAID PENSION ASSET                                                                          22,738                   14,767
                                                                                 ------------------------------------------------

OTHER ASSETS                                                                                   30,458                   39,402
                                                                                 ------------------------------------------------

TOTAL ASSETS                                                                               $  592,621               $  572,745
                                                                                 ================================================

</TABLE>


                 See Notes to Condensed Financial Statements.

                                       2
<PAGE>

                             Verizon Delaware Inc.

                           CONDENSED BALANCE SHEETS

                    LIABILITIES AND SHAREOWNER'S INVESTMENT
                    ---------------------------------------
<TABLE>
<CAPTION>

(Dollars in Thousands, Except Per Share Amount)                                       June 30, 2001          December 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
                                                                                        (Unaudited)
<S>                                                                                       <C>                         <C>
CURRENT LIABILITIES
Debt maturing within one year:
   Note payable to affiliate                                                              $  31,561                  $  17,850
Accounts payable and accrued liabilities:
   Affiliates                                                                                21,925                     19,515
   Other                                                                                     36,561                     46,556
Other liabilities                                                                            19,069                     18,939
                                                                                 ------------------------------------------------
                                                                                            109,116                    102,860
                                                                                 ------------------------------------------------

LONG-TERM DEBT
Note payable to affiliates                                                                   75,000                     75,000
Other                                                                                        86,547                     86,345
                                                                                 ------------------------------------------------
                                                                                            161,547                    161,345
                                                                                 ------------------------------------------------

EMPLOYEE BENEFIT OBLIGATIONS                                                                 38,531                     38,427
                                                                                 ------------------------------------------------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes                                                                        54,598                     44,271
Unamortized investment tax credits                                                            1,601                      1,675
Other                                                                                        27,353                     24,164
                                                                                 ------------------------------------------------
                                                                                             83,552                     70,110
                                                                                 ------------------------------------------------

SHAREOWNER'S INVESTMENT
Common stock, $25 par value per share                                                       118,442                    118,442
   Authorized shares:  5,262,280
   Outstanding shares: 4,737,686
Reinvested earnings                                                                          81,433                     81,561
                                                                                 ------------------------------------------------
                                                                                            199,875                    200,003
                                                                                 ------------------------------------------------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT                                             $ 592,621                  $ 572,745
                                                                                 ================================================
</TABLE>


                 See Notes to Condensed Financial Statements.

                                       3
<PAGE>

                             Verizon Delaware Inc.


                      CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                Six Months Ended June 30,
                                                                                       ------------------------------------------
(Dollars in Thousands) (Unaudited)                                                                2001                 2000
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                           <C>                  <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                     $ 61,473             $ 56,668
                                                                                       ------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments                                                             3,536                3,200
Capital expenditures                                                                           (55,678)             (43,974)
Other, net                                                                                        (182)              (4,827)
                                                                                       ------------------------------------------
Net cash used in investing activities                                                          (52,324)             (45,601)
                                                                                       ------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease obligations                                                   (7)                 (21)
Net change in short-term note payable to affiliate                                              13,711               (7,243)
Proceeds from medium-term note payable to affiliate                                                ---               30,000
Dividends paid                                                                                 (21,000)             (33,300)
Net change in outstanding checks drawn
     on controlled disbursement accounts                                                        (1,853)                (503)
                                                                                       ------------------------------------------
Net cash used in financing activities                                                           (9,149)             (11,067)
                                                                                       ------------------------------------------

NET CHANGE IN CASH                                                                                 ---                  ---

CASH, BEGINNING OF PERIOD                                                                          ---                  ---
                                                                                       ------------------------------------------

CASH, END OF PERIOD                                                                           $    ---             $    ---
                                                                                       ==========================================
</TABLE>


                 See Notes to Condensed Financial Statements.

                                       4
<PAGE>

                             Verizon Delaware Inc.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (Unaudited)

1.   Basis of Presentation

     Verizon Delaware Inc. is a wholly owned subsidiary of Verizon
Communications Inc. (Verizon Communications). The accompanying unaudited
condensed 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 position for the
interim periods shown including normal recurring accruals. The results for the
interim periods are not necessarily indicative of results for the full year. The
balance sheet at December 31, 2000 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For a more complete discussion of significant accounting
policies and certain other information, you should refer to the financial
statements included in our 2000 Annual Report on Form 10-K.

     We have reclassified certain amounts from prior year's data to conform to
the 2001 presentation.

2.   Revenue Recognition

     We recognize revenue when services are rendered based on usage of our local
exchange network and facilities. For other products and services, revenues are
generally recognized when services are rendered or products are delivered to
customers.

     We defer nonrecurring service activation revenues and costs and amortize
them over the expected term of the customer relationship. The deferred costs are
equal to the activation fee revenue and any excess cost is expensed immediately.
The deferred costs represent incremental direct costs associated with certain
nonrecurring fees, such as service activation and installation fees.

3.   Long-Lived Assets

     We assess the impairment of long-lived assets under Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" whenever events
or changes in circumstances indicate that the carrying value may not be
recoverable. A determination of impairment (if any) is made based on estimates
of future cash flows.

4.   Dividend

     On August 1, 2001, we declared and paid a dividend in the amount of
$11,500,000 to Verizon Communications.

5.   Debt

     On January 30, 2001, we established a $45,000,000 promissory note with an
affiliated company, Verizon NSI Holdings, Inc. (VNSHI). The term is five years,
maturing on January 30, 2006. The note carries a floating interest rate priced
at 3 month LIBOR plus 45bps, reset and paid quarterly. The proceeds from this
issuance were used to pay down $45,000,000 of our note payable with Verizon
Network Funding Corporation (VNFC).

6.   Derivatives and Hedging Activities

     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." SFAS No. 133
requires that all derivatives, including derivatives embedded in other financial
instruments, be measured at fair value and recognized as either assets or
liabilities on our balance sheet. Changes in the fair values of derivative
instruments not qualifying as hedges under SFAS No. 133 or any ineffective
portion of hedges are recognized in earnings in the current period. Changes in
the fair values of derivative instruments used effectively as fair value hedges
are recognized in earnings, along with changes in the fair value of the hedged
item. Changes in the fair value of the effective portions of cash flow hedges
are reported in other comprehensive income (loss), and recognized in earnings
when the hedged item is recognized in earnings. We presently do not have any
derivative instruments or hedging activities and, consequently, SFAS No. 133 did
not have an impact on our financial statements.

                                       5
<PAGE>

                             Verizon Delaware Inc.

7.   Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets."

     SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is no longer permitted. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination that is completed after
June 30, 2001.

     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. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121. Intangible assets that do not have indefinite lives will continue to be
amortized over their useful lives and reviewed for impairment in accordance with
SFAS No. 121. We are required to adopt SFAS No. 142 effective January 1, 2002.
We are currently evaluating our intangible assets in relation to the provisions
of SFAS No. 142 to determine the impact, if any, the adoption of SFAS No. 142
will have on our results of operations or financial position.

8.   Merger Charges

     In connection with the merger of Bell Atlantic and GTE on June 30, 2000, we
incurred charges associated with employee severance of $1,499,000 pre-tax.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the benefit costs for the separation of
management employees who were entitled to benefits under pre-existing separation
plans. During the second quarter of 2000, in connection with the merger, we also
recorded a pre-tax charge of $1,736,000 for direct, incremental merger-related
costs, including compensation, professional services and other direct costs.

     In addition, we recorded pre-tax merger-related transition costs of
$1,817,000 in the first six months of 2001 and $198,000 in the first six months
of 2000. Transition costs consisted of costs to integrate systems, consolidate
real estate, relocate employees and meet certain regulatory conditions of the
merger. They also included costs for advertising and other costs to establish
the Verizon brand. Transition costs since the date of the merger totaled
$2,789,000. Transition costs are expensed as incurred. During the second quarter
of 2000, we also recorded a $27,000 pre-tax charge for other actions in relation
to the Bell Atlantic-GTE merger. This charge was related to the write-off of
duplicate assets.

9.   Shareowner's Investment
<TABLE>
<CAPTION>

                                                                                                                   Reinvested
(Dollars in Thousands)                                                                        Common Stock           Earnings
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>                 <C>
Balance at December 31, 2000                                                                      $118,442           $ 81,561
Net income                                                                                                             20,872
Dividends declared to Verizon Communications                                                                          (21,000)
                                                                                      ----------------------------------------
Balance at June 30, 2001                                                                          $118,442           $ 81,433
                                                                                      ========================================
</TABLE>


     Net income and comprehensive income were the same for the six months ended
June 30, 2001 and 2000.

                                       6
<PAGE>

                              Verizon Delaware Inc.

10.  Commitments and Contingencies

     Various legal actions and regulatory proceedings are 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 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.

     Several regulatory matters may require us to refund a portion of the
revenues collected in the current and prior periods. The outcome of each pending
matter, as well as the time frame within which each matter will be resolved, is
not presently determinable.

     Regulatory conditions to the Bell Atlantic - GTE merger include certain
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.

                                       7
<PAGE>

                             Verizon Delaware Inc.

Item 2. Management's Discussion and Analysis of Results of Operations
        (Abbreviated pursuant to General Instruction H(2).)

     This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements.

RESULTS OF OPERATIONS
---------------------

     We reported net income of $20,872,000 for the six month period ended June
30, 2001, compared to net income of $18,644,000 for the same period in 2000.

     Our results for 2001 and 2000 were affected by special items. The special
items in both periods include our allocated share of charges from affiliates
that provide various centralized services on behalf of Verizon Communications
Inc. subsidiaries.

     The following table shows how special items are reflected in our condensed
statements of income for each period:

<TABLE>
<CAPTION>

                                                                                                         (Dollars in Thousands)
Six Months Ended June 30                                                                            2001                 2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>                   <C>
Operating Revenues
   Regulatory contingency                                                                         $  ---               $   62
                                                                                       -----------------------------------------

Operations and Support Expenses
   Bell Atlantic-GTE merger direct incremental costs                                                 ---                1,736
   Bell Atlantic-GTE merger severance costs                                                          ---                1,499
   Bell Atlantic-GTE merger transition costs                                                       1,817                  198
   Bell Atlantic-GTE merger related costs                                                            ---                   27
   Other charges and special items                                                                   ---                1,398
                                                                                       -----------------------------------------
                                                                                                   1,817                4,858
                                                                                       -----------------------------------------

Interest Expense
   Regulatory contingency                                                                            ---                   22
                                                                                       -----------------------------------------
Net impact on pre-tax income                                                                      $1,817               $4,942
                                                                                       =========================================
</TABLE>

     What follows is a further explanation of the nature of these special items.

Merger Charges

     In connection with the merger of Bell Atlantic and GTE on June 30, 2000, we
incurred charges associated with employee severance of $1,499,000 pre-tax.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the benefit costs for the separation of
management employees who were entitled to benefits under pre-existing separation
plans. During the second quarter of 2000, in connection with the merger, we also
recorded a pre-tax charge of $1,736,000 for direct, incremental merger-related
costs, including compensation, professional services and other direct costs.

     In addition, we recorded pre-tax merger-related transition costs of
$1,817,000 in the first six months of 2001 and $198,000 in the first six months
of 2000. Transition costs consisted of costs to integrate systems, consolidate
real estate, relocate employees and meet certain regulatory conditions of the
merger. They also included costs for advertising and other costs to establish
the Verizon brand. Transition costs are expensed as incurred. During the second
quarter of 2000, we also recorded a $27,000 pre-tax charge for other actions in
relation to the Bell Atlantic-GTE merger. This charge was related to the
write-off of duplicate assets.

Other Charges and Special Items

     In the second quarter of 2000, we recognized a pre-tax charge for a
regulatory matter totaling $84,000. We recorded a reduction to operating revenue
in the amount of $62,000 and a charge to interest expense of $22,000. This
matter relates to a specific issue currently under investigation by the Federal
Communications Commission (FCC). We believe that it is probable that the
ultimate resolution of this matter will result in refunds to our customers,
including interest. In the second quarter of 2000, we

                                       8
<PAGE>

                             Verizon Delaware Inc.

also recorded other charges and special items totaling approximately $1,398,000.
These charges included costs for the write-off of accounts receivable and other
miscellaneous items.

     These and other items affecting the comparison of our results of operations
for the six month periods ended June 30, 2001 and 2000 are discussed in the
following sections.



OPERATING REVENUES
------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>

Six Months Ended June 30,                                                                           2001                 2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                 <C>
Local services                                                                                  $ 96,373             $ 93,996
Network access services                                                                           50,804               43,191
Long distance services                                                                             5,790                8,590
Other services                                                                                     8,459                8,731
                                                                                       -----------------------------------------
Total                                                                                           $161,426             $154,508
                                                                                       =========================================
</TABLE>

LOCAL SERVICES

      2001 - 2000                                             Increase
--------------------------------------------------------------------------------
      Six Months                                        $2,377           2.5%
--------------------------------------------------------------------------------

     Local service revenues are earned 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 revenues, but also
includes local wholesale revenues from unbundled network elements (UNEs),
interconnection revenues from competitive local exchange carriers, certain data
transport revenues and wireless interconnection revenues.

     Local service revenues increased in the first six months of 2001 primarily
as a result of higher customer demand and usage of our wire-maintenance services
and our value-added services as a result of new packaging of services. Higher
payments received from competitive local exchange carriers for the purchase of
unbundled network elements and for interconnection of their networks with our
network also contributed to the increase in local service revenues in the first
six months of 2001.

     Growth in local service revenues was partially offset by the effect of
lower demand and usage of our basic wireline and private line services,
primarily reflecting the impact of an economic slowdown during the first half of
2001. In addition, the effect of technology substitution is increasing, as more
customers are choosing wireless and Internet services over certain basic
wireline services.

NETWORK ACCESS SERVICES

      2001 - 2000                                             Increase
--------------------------------------------------------------------------------
      Six Months                                        $7,613          17.6%
--------------------------------------------------------------------------------

     Network access revenues are earned from end-user subscribers and from 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.

     Network access revenue growth in the first six months of 2001 was mainly
attributable to higher customer demand, primarily for special access services.
This growth reflects a continuing expansion of the business market, particularly
for high-capacity, high-speed digital services. Network access revenue was also
impacted by the effect of a special charge recorded in 2000, as described in the
Results of Operations section.

                                       9
<PAGE>

                             Verizon Delaware Inc.

     These increases were partially offset by price reductions associated with a
federal price cap filing and other regulatory decisions. The Delaware Public
Service Commission (DPSC) regulates us with respect to certain intrastate rates
and services and certain other matters. The FCC regulates rates that we charge
long distance carriers and end-user subscribers for interstate access services.
We are required to file new access rates with the FCC each year. In July 2000,
we implemented the Coalition for Affordable Local and Long Distance Service
(CALLS) plan. Rates included in the July 2000 CALLS plan were in effect through
June 2001. The impact of the slowing economy also affected network access
revenues in 2001.

LONG DISTANCE SERVICES

      2001 - 2000                                            (Decrease)
--------------------------------------------------------------------------------
      Six Months                                       $(2,800)        (32.6)%
--------------------------------------------------------------------------------

     Long distance revenues are earned primarily from calls made to points
outside a customer's local calling area, but within our service area (intraLATA
toll). IntraLATA toll calls originate and terminate within the same LATA, but
generally cover a greater distance than a local call. These services are
regulated by the DPSC except where they cross state lines. Other long distance
services that we provide include 800 services and Wide Area Telephone Service
(WATS).

     Long distance service revenues declined in the first six months of 2001
primarily due to competition and the effects of toll calling discount packages
and product bundling offers of our intraLATA toll services. Long distance
revenues also included an accrual in the first quarter of 2001 for refunds to
customers.

OTHER SERVICES

      2001 - 2000                                            (Decrease)
--------------------------------------------------------------------------------
      Six Months                                         $(272)         (3.1)%
--------------------------------------------------------------------------------

     Our other services include such services as billing and collections for
long distance carriers and affiliates, facilities rentals to affiliates and
nonaffiliates, public (pay) telephone, customer premises equipment (CPE) and
sales of materials and supplies to affiliates. Other service revenues also
include fees paid by customers for nonpublication of telephone numbers and
multiple white page listings and fees paid by an affiliate for usage of our
directory listings.

     Other service revenues decreased in the first six months of 2001 primarily
due to a decline in public telephone revenues, as more customers substituted
wireless communications for pay phone services. Lower billing and collection
revenues, reflecting the take-back of these services by interexchange carriers,
also contributed to the reduction in other service revenues. These decreases
were partially offset by higher facilities rental revenues.

OPERATING EXPENSES
------------------
(Dollars in Thousands)

OPERATIONS AND SUPPORT

      2001 - 2000                                            (Decrease)
--------------------------------------------------------------------------------
      Six Months                                       $(2,609)         (3.2)%
--------------------------------------------------------------------------------

     Operations and support expenses consist of employee costs and other
operating expenses. Employee costs consist of salaries, wages and other employee
compensation, employee benefits and payroll taxes. Other operating expenses
consist of contract services including centralized services expenses allocated
from affiliates, rent, network software costs, operating taxes other than
income, the provision for uncollectible accounts receivable, reciprocal
compensation, and other costs.

     The decrease in operations and support expenses was primarily attributable
to the effect of merger-related costs and other special items recorded in 2000
and 2001, as described in the Results of Operations section. Operations and
support expenses were

                                      10
<PAGE>

                             Verizon Delaware Inc.

further reduced by lower pension and benefit costs primarily due to increased
amortization of actuarial gains and by reduced employee overtime pay. Operating
costs have also decreased due to business integration activities. These
decreases were partially offset by higher centralized services expenses
allocated from affiliates and annual salary and wage increases for management
and non-management employees.

     We continue to incur expenditures related to reciprocal compensation
arrangements with competitive local exchange carriers and other carriers to
terminate calls on their network. In March 2000, the United States Court of
Appeals for the District of Columbia Circuit reversed and remanded the FCC's
February 1999 order that concluded that calls to the Internet through Internet
service providers (ISP) do not terminate at the ISP but are single interstate
calls. The FCC had concluded that calls to the Internet are not therefore
subject to reciprocal compensation under section 251(b)(5) of the
Telecommunications Act, but left it to state regulatory commissions to determine
whether local interconnection agreements entered into with competing carriers
required the payment of compensation on such calls.

     On April 27, 2001, the FCC released an order responding to the court's
remand. The FCC found that Internet-bound traffic is interstate and subject to
the FCC's jurisdiction. Moreover, the FCC again found that Internet-bound
traffic is not subject to reciprocal compensation under section 251(b)(5) of the
Telecommunications Act. Instead, the FCC established federal rates that decline
from $0.0015 to $0.0007 over a three year period. The FCC order also sets caps
on the total minutes 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.

DEPRECIATION AND AMORTIZATION

      2001 - 2000                                             Increase
--------------------------------------------------------------------------------
      Six Months                                           $96            .3%
--------------------------------------------------------------------------------

     Depreciation and amortization expense increased in the first six months of
2001 principally due to growth in depreciable telephone plant as a result of
increased capital expenditures for higher growth services and increased software
amortization costs. These factors were substantially offset by the effect of
lower rates of depreciation and amortization.

OTHER INCOME AND (EXPENSE), NET

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Six Months                                       $(3,855)            ---%
--------------------------------------------------------------------------------

     The change in other income and (expense), net, was primarily attributable
to equity losses recognized from our investment in Verizon Advanced Data Inc.
(VADI). VADI is a wholly owned subsidiary of Verizon Communications that
provides new exchange access services. At June 30, 2001, our ownership interest
in VADI was 2.69%.

INTEREST EXPENSE

      2001 - 2000                                               Increase
--------------------------------------------------------------------------------
      Six Months                                          $260           5.5%
--------------------------------------------------------------------------------

     Interest expense includes costs associated with borrowings and capital
leases, net of interest capitalized as a cost of acquiring or constructing plant
assets.

     Interest expense increased in the first six months of 2001, over the same
period in 2000, primarily due to higher levels of average borrowings with
affiliates. This increase was partially offset by higher capitalized interest
costs resulting from higher levels of average telephone plant under
construction. The effect of additional interest costs in 2000 associated with a
regulatory contingency, as described in the Results of Operations section, also
offset the increase in expense, but to a lesser extent.

                                      11
<PAGE>

                             Verizon Delaware Inc.

EFFECTIVE INCOME TAX RATES

      Six Months Ended June 30,
--------------------------------------------------------------------------------
      2001                                                      44.4%
--------------------------------------------------------------------------------
      2000                                                      42.1%
--------------------------------------------------------------------------------


      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 was higher in the first six months of 2001, principally due to equity
losses associated with our investment in VADI, for which we do not recognize
income tax benefits.

OTHER MATTERS
-------------

Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets."

     SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is no longer permitted. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination that is completed after
June 30, 2001.

     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. 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." Intangible assets that do not have indefinite lives
will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121. We are required to adopt SFAS No.
142 effective January 1, 2002. We are currently evaluating our intangible assets
in relation to the provisions of SFAS No. 142 to determine the impact, if any,
the adoption of SFAS No. 142 will have on our results of operations or financial
position.

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<PAGE>

                             Verizon Delaware Inc.

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

        There were no proceedings reportable under this Item.

Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits:

            Exhibit
            Number
            -------
              12       Computation of Ratio of Earnings to Fixed Charges.

        (b) There were no Current Reports on Form 8-K filed during the quarter
            ended June 30, 2001.

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<PAGE>

                             Verizon Delaware Inc.

                                  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 Delaware Inc.



Date:  August 13, 2001                     By  /s/ Edwin F. Hall
                                              ---------------------------
                                                   Edwin F. Hall
                                                   Controller


     UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 8, 2001.

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