<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

<TABLE>
<S>       <C>
   /X/      ANNUAL REPORT PURSUANT TO SECTION 13 OR
                         15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934
          FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                              OR

   / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR
                         15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934
                FOR THE TRANSITION PERIOD FROM
                                     TO
</TABLE>

                          COMMISSION FILE NO. 1-14087

                                 U S WEST, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                             <C>
    A DELAWARE CORPORATION                                84-0953188
-------------------------------                 -------------------------------
 (State or other jurisdiction                          (I.R.S. Employer
      of incorporation or                             Identification No.)
         organization)
</TABLE>

                 1801 CALIFORNIA STREET, DENVER, COLORADO 80202
                        TELEPHONE NUMBER (303) 672-2700
                            ------------------------

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                NAME OF EACH EXCHANGE ON
     TITLE OF EACH CLASS            WHICH REGISTERED
     -------------------        ------------------------
<S>                             <C>
    U S WEST Common Stock       New York Stock Exchange
 ($0.01 per share, par value)       Pacific Exchange

U S WEST Capital Funding, Inc.  New York Stock Exchange
  ($500,000,000 6.125% Notes
      due July 15, 2002)
</TABLE>

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

          Securities registered pursuant to Section 12(g) of the Act:
                                      None

    At February 25, 2000, 507,402,131 shares of U S WEST common stock were
outstanding. At February 25, 2000, the aggregate market value of the U S WEST
voting stock held by non-affiliates was approximately $37,430,299,416.

    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 ___

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

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<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                            DESCRIPTION                             PAGE
----                                            -----------                           --------
<C>                     <S>                                                           <C>

                                                   PART I

                   1.   Business....................................................         2
                   2.   Properties..................................................         5
                   3.   Legal Proceedings...........................................         5
                   4.   Submission of Matters to a Vote of Security Holders.........         5

                                                  PART II
                   5.   Market for Registrant's Common Equity and Related
                          Stockholder Matters.......................................         6
                   6.   Selected Financial Data.....................................         6
                   7.   Management's Discussion and Analysis of Financial Condition
                          and Results of Operations.................................         6
                  7A.   Quantitative and Qualitative Disclosures about Market
                          Risk......................................................         6
                   8.   Consolidated Financial Statements and Supplementary Data....         6
                   9.   Changes in and Disagreements with Accountants on Accounting
                          and Financial Disclosure..................................         6

                                                  PART III

                  10.   Directors and Executive Officers of the Registrant..........         7
                  11.   Executive Compensation......................................        13
                  12.   Security Ownership of Certain Beneficial Owners and
                          Management................................................        30
                  13.   Certain Relationships and Related Transactions..............        31

                                                  PART IV
                  14.   Financial Statement Schedules, Reports on Form 8-K and
                          Exhibits..................................................        31
</TABLE>

                                       i
<PAGE>
                                 U S WEST, INC.
                                   FORM 10-K
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Some of the information presented in this Annual Report on Form 10-K
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Although
U S WEST, Inc. ("U S WEST" or the "Company," which may also be referred to as
"we," "us" or "our") believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its businesses and operations,
there can be no assurance that actual results will not differ materially from
its expectations. Factors that could cause actual results to differ from
expectations include:

    - greater than anticipated competition from new entrants into the local
      exchange, intraLATA (local access transport area) toll, wireless, data and
      directories markets, causing loss of customers and increased price
      competition;

    - changes in demand for our products and services, including optional custom
      calling features;

    - higher than anticipated employee levels, capital expenditures and
      operating expenses (such as costs associated with interconnection);

    - the loss of significant customers;

    - pending and future state and federal regulatory changes affecting the
      telecommunications industry, including changes that could have an impact
      on the competitive environment and service pricing in the local exchange
      market;

    - acceleration of the deployment of additional services and/or advanced new
      services to customers, such as broadband data, wireless (including the
      purchase of spectrum licenses) and video services, which would require
      substantial expenditure of financial and other resources;

    - changes in economic conditions in the various markets served by our
      operations;

    - higher than anticipated start-up costs associated with new business
      opportunities;

    - delays in our ability to begin offering interLATA long-distance services;

    - timing, cost and consumer acceptance of broadband services, including
      telephony, data, video and wireless services;

    - delays in the development of anticipated technologies, or the failure of
      such technologies to perform according to expectations; and

    - timing and completion of the announced merger with Qwest Communications
      International Inc. ("Qwest") and the subsequent integration of the
      businesses of the two companies.

    You should not construe these cautionary statements as an exhaustive list or
as any admission by us regarding the adequacy of disclosures made by us. We
cannot always predict or determine after the fact what factors would cause
actual results to differ materially from those indicated by our forward-looking
statements or other statements. In addition, you are urged to consider
statements that include the terms "believes," "belief," "expects," "plans,"
"objectives," "anticipates," "intends," or the like to be uncertain and
forward-looking. All cautionary statements should be read as being applicable to
all forward-looking statements wherever they appear.

    We do not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.

                                       1
<PAGE>
                                     PART I

ITEM 1. BUSINESS

GENERAL

    We are incorporated under the laws of the State of Delaware and have our
principal executive offices at 1801 California Street, Denver, Colorado 80202,
telephone number (303) 672-2700. We are a diversified communications company
providing services principally to customers in a 14-state mountain and western
region of the United States, which is comprised of the states of Arizona,
Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oregon, South Dakota, Utah, Washington and Wyoming (collectively referred to as
the "Region" or "U S WEST Region"). Our services include telecommunications and
related services, wireless services, high-speed data and Internet services and
directory services. The largest component of our company is U S WEST
Communications, Inc. ("U S WEST Communications"), a wholly-owned subsidiary,
which provides communications services to more than 25 million residential and
business customers in our Region.

    U S WEST Communications serves approximately 74% of our Region's population.
We had 58,272 employees at December 31, 1999. We have one class of common stock,
par value $.01 per share.

RECENT DEVELOPMENTS

    MERGER WITH QWEST.  On July 18, 1999 we entered into an Agreement and Plan
of Merger (the "Qwest Merger Agreement") with Qwest to merge both companies.
Upon completion of the merger, holders of our common stock will receive for each
share, subject to the collar and the cash options described in the Qwest Merger
Agreement, shares of Qwest common stock having a value of $69. Subject to the
terms of the Qwest Merger Agreement, we would be merged with and into Qwest with
Qwest surviving. The merger was approved by our shareholders and Qwest's
shareholders on November 2, 1999, and is subject to the approval of the Federal
Communications Commission ("FCC") and other state regulatory reviews.

    TERMINATION OF GLOBAL MERGER.  Prior to the execution of the Qwest Merger
Agreement, we terminated the Agreement and Plan of Merger, dated as of May 16,
1999 (the "Global Merger Agreement"), between us and Global Crossing Ltd.
("Global Crossing"). In connection with the Global Merger Agreement, we
completed a cash tender offer for approximately 39 million shares of Global
Crossing common stock at a price of $62.75 per share in June 1999. As
consideration for the termination of the Global Merger Agreement, we paid Global
Crossing $140 million in cash and 2,231,076 shares of Global Crossing common
stock. We obtained a $140 million loan from Qwest to pay the cash portion and
Qwest entered into an agreement to buy $140 million in services from Global
Crossing. In December 1999, we monetized a portion of our holdings in Global
Crossing and sold 24 million Global Crossing shares for approximately
$1.14 billion (before expenses). For further information regarding the Global
Crossing monetization, you should refer to the section entitled "Risk
Management" under Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 48.

    THE SEPARATION.  On October 25, 1997, the Board of Directors of our former
parent company (referred to as "Old U S WEST"), adopted a proposal to separate
Old U S WEST into two independent companies (the "Separation"). Old U S WEST
conducted its businesses through two groups: (i) the U S WEST Communications
Group (the "Communications Group"), which included the communications businesses
of Old U S WEST, and (ii) the U S WEST Media Group (the "Media Group"), which
included the multimedia and directory businesses of Old U S WEST. On June 4,
1998, stockholders of Old U S WEST voted in favor of the Separation, which
became effective June 12, 1998 (the "Separation Date"). As part of the
Separation, Old U S WEST contributed to us the businesses of the Communications
Group and the domestic directories business of the Media Group known as
U S WEST Dex, Inc. ("Dex"). The alignment of Dex with our Company is referred to
in this report as the "Dex Alignment." Old

                                       2
<PAGE>
U S WEST has continued as an independent public company comprised of the
businesses of Media Group, other than Dex, and has been renamed MediaOne Group,
Inc. ("MediaOne").

    The Separation was implemented under the terms of a separation agreement
(the "Separation Agreement") between us and MediaOne. In connection with the Dex
Alignment: (i) Old U S WEST distributed, as a dividend to holders of Media Group
common stock, approximately 16,341,000 shares of our common stock (net of the
redemption of approximately 305,000 fractional shares) with an aggregate value
of $850 million (the "Dex Dividend") and (ii) we refinanced $3.9 billion of Old
U S WEST debt formerly allocated to Media Group (the "Dex Indebtedness").

OPERATIONS

    We are organized on the basis of our products and services and operate in
four segments: (i) retail services, (ii) wholesale services, (iii) network
services and (iv) directory services. For further financial information on our
segments, you should refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 12 to the consolidated financial
statements on pages F-24 through F-26.

RETAIL SERVICES

    The principal types of retail services we offer are: (i) local exchange
telephone services, (ii) long-distance services within local access and
transport areas ("LATAs") in the Region, (iii) wireless services and
(iv) high-speed data and Internet services.

    LOCAL EXCHANGE.  Local exchange telephone services provide lines from
telephone exchange offices to customers' premises to originate and terminate
telecommunications services within our local exchange service territories as
defined by the state public utilities commissions ("PUCs"). These services
include basic local exchange services provided through our regular switched
network, dedicated private line facilities for voice and special services, such
as transport of data, radio and video, switching services for customers'
internal communications through facilities owned by us, data transport services
that include managing and configuring special service networks and dedicated low
and high-capacity public or private digital networks. Other local exchange
revenue is derived from directory assistance, public telephone service and
various custom calling features such as Caller ID, Call Waiting, Call Return and
3-Way Calling.

    We also provide other products and services, such as customer premises
equipment and enhanced services, including voice mail to residents, business
customers and governmental agencies.

    INTRALATA LONG-DISTANCE.  We provide intraLATA long-distance services within
our Region. These services include intraLATA service beyond the local calling
area, Wide Area Telecommunications Service or "800" services for customers with
highly concentrated demand, and special services, such as transport of data,
radio and video. We intend to begin offering interLATA long-distance services in
our Region pursuant to the Telecommunications Act of 1996 (the
"Telecommunications Act" or the "Act") upon satisfaction of certain regulatory
conditions primarily related to local exchange telephone competition. We
currently offer limited out-of-region long-distance services.

    WIRELESS SERVICES.  We hold 10 MHz licenses to provide personal
communications services ("PCS") in 53 markets in our Region. These licenses,
which cover approximately 20 million POPs (i.e., potential customers), were
purchased in an FCC auction held in January 1997. In December 1997, we purchased
additional licenses for a majority of the Seattle market, which cover an
additional 4 million POPs. Using these licenses, we are constructing networks
utilizing digital code division multiple access technology. We launched wireless
PCS services in (i) Denver, Fort Collins, Greeley and Colorado Springs,
Colorado; Portland and Salem, Oregon; and Vancouver, Washington in 1997;
(ii) Phoenix and Tucson, Arizona; Minneapolis, St. Cloud, St. Paul and
Rochester, Minnesota; and Seattle, Olympia and Bremerton, Washington in 1998;
and (iii) Cheyenne, Wyoming; Pueblo, Colorado and Salt Lake City, Utah
(including

                                       3
<PAGE>
the Wasatch front region) in 1999, covering approximately 15 million POPs. These
wireless services, which are being marketed under the "U S WEST Wireless" brand,
enable customers to use the same number for their wireless phone as for their
home or business phone. We recently announced a joint venture with Touch
America, Inc., the telecommunications subsidiary of The Montana Power
Corporation, to provide the nation's only one-number digital PCS service to
customers in seven states in the Pacific Northwest and the Upper Midwest.

    HIGH-SPEED DATA AND INTERNET SERVICES.  We offer high-speed data and
Internet services to customers inside and outside our Region. Through U S WEST
!NTERPRISE, our data division, and U S WEST Interprise America, Inc., one of our
subsidiaries, we provide high-speed data communications and network services,
including frame relay service, transparent LAN (Local Area Network) service, ATM
(Asynchronous Transfer Mode) Cell Relay Service, network integration solutions
and other data-related services to business customers. In 1997 and 1998, we
introduced U S WEST Megabit-TM- Services, a high-speed Internet access service,
and U S WEST.net, a standard Internet access service, in select markets and
expect to launch these services in additional markets in 2000. In 1999, we also
launched our Title VI broadband video and Internet services under the name of
Choice TV and Online Services in Phoenix, Arizona.

    At December 31, 1999, U S WEST Communications had over 17 million telephone
network access lines in service, an increase of 2.5% over 1998. In June 1999,
U S WEST Communications entered into a series of definitive agreements to sell
local exchange telephone properties serving approximately 530,000 access lines
in nine states for approximately $1.65 billion in cash, subject to adjustment.
Approval of the sale is subject to review by federal and state regulatory
agencies. The transfer of ownership, which will occur on a state-by-state basis,
is expected to be completed over the next two years. Additionally, U S WEST
Communications is planning to sell approximately 270,000 access lines in New
Mexico and Washington. For the year ended December 31, 1999, retail services
accounted for 68% of U S WEST's total revenue. For financial information about
segments of our business, please refer to Note 12 to the consolidated financial
statements on pages F-24 through F-26.

WHOLESALE SERVICES

    We provide sales, marketing and customer care for competitive local exchange
carriers ("CLECs"), interexchange carriers ("IXCs") and wireless providers in
the purchase of wholesale local network services. CLECs are communications
companies, certified by a state PUC, that provide local exchange service within
a U S WEST associated local calling area. IXCs provide transitional long
distance services to end users by handling calls that are made from a phone
exchange in one LATA to an exchange in another LATA. We have 27 LATAs within our
Region. We provide such wholesale local network services by interconnecting such
carriers and providers to our public switched network or through our dedicated
private lines. These carriers can resell our products and services. For the year
ended December 31, 1999, wholesale services accounted for 22% of U S WEST's
total revenue.

NETWORK SERVICES

    Our network segment provides access to our telecommunications network,
including our information technologies, primarily to our retail services and
wholesale services segments. Our revenue from network services accounted for
less than 10% of U S WEST's total revenue.

DIRECTORY SERVICES

    Through Dex, we publish White and Yellow Pages directories in our Region.
Dex's business scope includes all facets of directory-related publishing
services such as market identification, analysis and planning, advertising and
sales, customer service, directory design, printing and distribution, billing
and collection, and product service promotion. Dex's customers include
businesses that purchase advertising in its directories and other related
products, and consumers who use directories and other advertising and

                                       4
<PAGE>
information services. Dex also provides directory publishing services to other
telephone companies on a contract basis and electronic directory services. Dex
is expanding its directories business onto the Internet by marketing innovative
and interactive listings, advertising and websites, primarily through existing
sales channels throughout our Region. Our revenue from the directory services
business accounted for approximately 11% of U S WEST's total revenue.

COMPETITION

    We face increasing competition from a variety of sources, including other
local service providers, long-distance service providers, cable television
companies, wireless service providers, data and Internet service providers and
other entrants from closely related industries. For a discussion of competition,
you should refer to the section entitled "Competition" under Management's
Discussion and Analysis of Financial Condition and Results of Operations on
page 49.

REGULATION

    U S WEST Communications is subject to varying degrees of regulation by state
PUCs with respect to intrastate rates and services and access charge tariffs. We
are also subject to the jurisdiction of the FCC with respect to interstate
access tariffs (that specify the charges for the origination and termination of
interstate communications) and other matters.

    U S WEST Communications is currently working with regulators to gain
approval of various initiatives, including gaining long-distance entry, efforts
to rebalance prices, achieve alternative forms of regulation and accelerated
capital recovery and eliminate subsidies.

    State and local regulatory authorities may also regulate certain terms and
conditions of the offering of wireless services, such as the siting and
construction of transmitter towers, antennas and equipment shelters and zoning
and building permit approvals. For a further discussion, you should refer to the
section entitled "Regulation" under Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 50.

ITEM 2. PROPERTIES

    Our properties do not lend themselves to description by character and
location of principal units. At December 31, 1999, substantially all of our
property was utilized by U S WEST Communications (and in particular, the network
segment) in providing telecommunications services. Substantially all of
U S WEST Communications' central office equipment is located in owned buildings
situated on land owned in fee, while many garages and administrative and
business offices are leased.

ITEM 3. LEGAL PROCEEDINGS

    Our Company and its subsidiaries are subject to claims and proceedings
arising in the ordinary course of business. For a discussion of certain of these
actions that may be material, you should read Note 15 to the consolidated
financial statements on pages F-27 through F-28.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    On November 2, 1999, we held our special meeting of shareholders to consider
and vote upon a proposal to approve and adopt the merger with Qwest. As reported
in our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999, our shareholders approved the merger with Qwest.

    We intend to hold our annual meeting of shareholders in December 2000 if the
merger with Qwest is not consummated before then. Accordingly, shareholder
proposals for inclusion in the annual meeting proxy statement should be sent to
our Secretary at 1801 California Street, Suite 5100, Denver, Colorado, 80202 and
must be received by August 3, 2000.

                                       5
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The information required by this item can be found at Note 16 to the
consolidated financial statements on page F-29. The United States markets for
trading in U S WEST common stock are the New York Stock Exchange and the Pacific
Exchange. As of February 25, 2000, our common stock was held by approximately
567,293 shareholders of record.

ITEM 6. SELECTED FINANCIAL DATA

    For a discussion of the information required by this item, you should refer
to pages 37 and 38.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

    For a discussion of the information required by this item, you should refer
to pages 38 through 53.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    For a discussion of the information required by this item, you should refer
to page 48 under the caption entitled "Risk Management."

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    For a discussion of the information required by this item, you should refer
to pages F-1 through F-31.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    We have nothing to report under this item.

                                       6
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The following table sets forth certain information regarding U S WEST's
directors and executive officers:

<TABLE>
<CAPTION>
            NAME                AGE                              POSITION
            ----              --------                           --------
<S>                           <C>        <C>
Solomon D. Trujillo.........     48      President, Chief Executive Officer and Chairman(1)
Linda G. Alvarado...........     48      Director(1)
Craig R. Barrett............     60      Director(1)
Betsy J. Bernard............     44      Executive Vice President - Retail Markets
Hank Brown..................     60      Director(2)
Jerry J. Colangelo..........     60      Director(1)
Janet K. Cooper.............     46      Vice President - Finance and Controller
Manuel A. Fernandez.........     52      Director(3)
Sean P. Foley...............     41      Vice President - Treasurer
George J. Harad.............     55      Director(2)
Peter S. Hellman............     50      Director(3)
John A. Kelley, Jr..........     50      President of Wholesale - U S WEST Communications, Inc.
Marilyn C. Nelson...........     60      Director(2)
Frank Popoff................     64      Director(3)
Mark Roellig................     44      Executive Vice President - Public Policy, Human
                                         Resources & Law, General Counsel and Secretary
James A. Smith..............     47      Executive Vice President and President of U S WEST Dex,
                                           Inc.
Allan R. Spies..............     51      Executive Vice President and Chief Financial Officer
Gregory M. Winn.............     50      Executive Vice President - Operations and Technology
Joseph R. Zell..............     40      President - U S WEST !NTERPRISE Networking Services
</TABLE>

    Except for Ms. Bernard, Ms. Cooper, Mr. Foley and Mr. Kelley, each of the
above executive officers has held a managerial position with Old U S WEST or an
affiliate of Old U S WEST since 1994.

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

(1) Class III Director (Term Expires 2001)

(2) Class I Director (Term Expires 2002)

(3) Class II Director (Term Expires 2000)

    The following is a brief description of the principal occupations, business
experience, terms as director (if applicable) and directorships of the directors
and executive officers of U S WEST. Executive officers are not elected for a
fixed term of office, but serve at the discretion of the Board of Directors.

<TABLE>
<S>                              <C>
SOLOMON D. TRUJILLO
DIRECTOR SINCE:                  June 1998 (Chairman since 1999)
PRINCIPAL OCCUPATION:            President and Chief Executive Officer of U S WEST since
                                 June 1998.
BUSINESS EXPERIENCE:             President and Chief Executive Officer of the Communications
                                 Group of Old U S WEST from 1995 to 1998. President and Chief
                                 Executive Officer of U S WEST Marketing Resources Group,
                                 Inc. from 1992 to 1995. Mr. Trujillo joined The Mountain
                                 States Telephone and Telegraph Company in 1974 and has been
                                 affiliated with U S WEST and its predecessors since that
                                 time, serving in various marketing, sales, finance and
                                 public policy positions.
OTHER DIRECTORSHIPS:             BankAmerica Corporation; Dayton Hudson Corporation; PepsiCo,
                                 Inc.
</TABLE>

                                       7
<PAGE>
<TABLE>
<S>                              <C>
LINDA G. ALVARADO
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION AND         President and Chief Executive Officer of Alvarado
BUSINESS EXPERIENCE:             Construction, Inc. since 1978.
OTHER DIRECTORSHIPS:             Engelhard Corporation; Pitney Bowes, Inc.; Pepsi Bottling
                                 Group, Inc.; Lennox International Inc.
COMMITTEES:                      Human Resources Committee; Public Policy/Nominating
                                 Committee

CRAIG R. BARRETT
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            President and Chief Executive Officer of Intel Corporation
                                 since 1998.
BUSINESS EXPERIENCE:             President and Chief Operating Officer of Intel Corporation
                                 from 1997 to 1998, Executive Vice President and Chief
                                 Operating Officer from 1993 to 1997 and Executive Vice
                                 President from 1990 to 1993. Various technology, engineering
                                 and manufacturing management positions with Intel
                                 Corporation from 1974 to 1990. Professor of Engineering at
                                 Stanford University from 1965 to 1974. Member of National
                                 Academy of Engineering.
OTHER DIRECTORSHIPS:             Intel Corporation
COMMITTEES:                      Audit Committee; Finance Committee

BETSY J. BERNARD
PRINCIPAL OCCUPATION:            Executive Vice President - Retail Markets of U S WEST since
                                 July 1998.
BUSINESS EXPERIENCE:             Before joining U S WEST, Ms. Bernard was head of AVIRNEX, an
                                 advanced international telecommunications services company
                                 from 1997 to 1998. Prior to that, Ms. Bernard was President
                                 and Chief Executive Officer of Pacific Bell Communications,
                                 the long-distance subsidiary of Pacific Telesis Group from
                                 1995 to 1997. Before joining PacBell, Ms. Bernard worked for
                                 AT&T from 1977 to 1995 in a number of positions.
DIRECTORSHIPS:                   Mile High United Way; The Principal Financial Group;
                                 Zantaz.com Inc.

HANK BROWN
DIRECTOR SINCE:                  November 1998
PRINCIPAL OCCUPATION:            President of the University of Northern Colorado since 1998.
BUSINESS EXPERIENCE:             Director of the Center for Public Policy for the University
                                 of Denver from 1997 to 1998. United States Senator for the
                                 State of Colorado from 1991 to 1997. United States
                                 Congressman for the State of Colorado from 1981 to 1991.
                                 Various positions with Monfort of Colorado Incorporated from
                                 1969 to 1981. United States Navy from 1962 to 1966. Attorney
                                 and Certified Public Accountant.
OTHER DIRECTORSHIPS:             Sealed Air Corporation; Centennial Bank Holdings Inc.
COMMITTEES:                      Human Resources Committee; Public Policy/Nominating
                                 Committee
</TABLE>

                                       8
<PAGE>
<TABLE>
<S>                              <C>
JERRY J. COLANGELO
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            Owner, Chairman and Chief Executive Officer of the Arizona
                                 Diamondbacks since 1995. Chairman and Chief Executive
                                 Officer of the Phoenix Suns, NBA since 1987.
BUSINESS EXPERIENCE:             General Manager of the Phoenix Suns, NBA from 1968 to 1987.
                                 Head Scout and Director of Merchandising for the Chicago
                                 Bulls, NBA from 1966 to 1968. Associate of D.O. Klein &
                                 Associates from 1964 to 1965. Partner at the House of
                                 Charles, Inc. from 1962 to 1964.
OTHER DIRECTORSHIPS:             Phoenix Art Museum; Phoenix Community Alliance; Arizona
                                 Diamondbacks; Phoenix Suns Charities
COMMITTEES:                      Human Resources Committee; Public Policy/Nominating
                                 Committee

JANET K. COOPER
PRINCIPAL OCCUPATION:            Vice President - Finance and Controller of U S WEST since
                                 June 1999.
BUSINESS EXPERIENCE:             Prior to her current assignment, Ms. Cooper was Vice
                                 President - Treasurer and Controller of U S WEST from
                                 March 1999 to June 1999, and Vice President and Treasurer
                                 of U S WEST from May 1998 to March 1999. Before joining
                                 U S WEST, Ms. Cooper was Vice President of Treasury and Tax
                                 Business of The Quaker Oats Company from 1997 to 1998, and
                                 Vice President and Treasurer from 1992 to 1997. Ms. Cooper
                                 joined The Quaker Oats Company in 1978 and held various
                                 financial and managerial positions.
OTHER DIRECTORSHIPS:             Lennox International Inc.; The Toro Company

MANUEL A. FERNANDEZ
DIRECTOR SINCE:                  April 1999
PRINCIPAL OCCUPATION:            Chairman of the Gartner Group since 1995.
BUSINESS EXPERIENCE:             Chief Executive Officer of the Gartner Group from 1995 to
                                 1998; and President from 1991 to 1995. President and Chief
                                 Executive Officer of Dataquest, Inc. from 1984 to 1991.
                                 President and Chief Executive Officer of Gavilan Computer
                                 Corporation from 1982 to 1984. President of Zilog
                                 Incorporated from 1977 to 1982.
OTHER DIRECTORSHIPS:             Black & Decker; Brunswick Corporation; Click Commerce, Inc.;
                                 NetNumbers; Timesoft, Inc.; Warrantycheck.com, Inc.
COMMITTEES:                      Human Resources Committee; Finance Committee

SEAN P. FOLEY
PRINCIPAL OCCUPATION:            Vice President and Treasurer of U S WEST since June 1999
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Foley was Assistant
                                 Treasurer for U S WEST from June 1998 to June 1999.
                                 Mr. Foley joined U S WEST in 1995 and served in various
                                 manager positions in the Capital Markets and Corporate
                                 Finance organizations of the Company. Before joining
                                 U S WEST, Mr. Foley served as Investment Officer for the
                                 City of Westminster, Colorado from 1991 to 1995.
</TABLE>

                                       9
<PAGE>
<TABLE>
<S>                              <C>
GEORGE J. HARAD
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            Chairman of the Board of Boise Cascade Corporation since
                                 1995. President and Chief Executive Officer of Boise Cascade
                                 Corporation since 1994.
BUSINESS EXPERIENCE:             President and Chief Operating Officer of Boise Cascade
                                 Corporation from 1991 to 1994. Chairman of the Board of
                                 Boise Cascade Office Products Corporation since 1995.
OTHER DIRECTORSHIPS:             FM Global Insurance; Homestead Technologies, Inc.
COMMITTEES:                      Finance Committee (Chair); Audit Committee

PETER S. HELLMAN
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            Executive Vice President, Chief Financial and Administrative
                                 Officer of Nordson Corporation.
BUSINESS EXPERIENCE:             President and Chief Operating Officer of TRW Inc. from 1995
                                 to 1999. Assistant President of TRW Inc. from 1994 to 1995.
                                 Executive Vice President and Chief Financial Officer from
                                 1991 to 1994. Vice President and Treasurer from 1989 to
                                 1991. Various positions with BP America from 1979 to 1989
                                 and the Irving Trust Company from 1972 to 1979.
COMMITTEES:                      Audit Committee (Chair); Finance Committee

JOHN A. KELLEY, JR.
PRINCIPAL OCCUPATION:            President of Wholesale - U S WEST Communications since
                                 April 1998.
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Kelley was Vice
                                 President - Large Business and Government Accounts and
                                 President - Federal Services of U S WEST Communications
                                 since 1995. Prior to joining U S WEST, Mr. Kelley was Area
                                 President for Mead Corporation's Zellerbach Southwest
                                 businesses and Vice President and General Manager for
                                 Zellerbach's Industrial business unit.

MARILYN C. NELSON
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            Chairman, Chief Executive Officer and President of Carlson
                                 Companies, Inc.
BUSINESS EXPERIENCE:             Since joining Carlson Companies in 1989, Ms. Nelson has held
                                 various positions with Carlson Companies including Director,
                                 Chief Operating Officer and Senior Vice President of Carlson
                                 Holdings, Inc., Co-Chair Carlson Wagonlit Travel, and Deputy
                                 Chairman of Thomas Cook Holdings, Inc. Ms. Nelson is also
                                 National Chair of Travel Industry of America, and a member
                                 of the United States National Tourism Organization, World
                                 Travel and Tourism Council, International Advisory Council,
                                 Center for International Leadership and Committee of 200.
OTHER DIRECTORSHIPS:             Exxon Mobil Corporation; Carlson Companies, Inc.
COMMITTEES:                      Public Policy/Nominating Committee (Chair); Audit Committee
</TABLE>

                                       10
<PAGE>
<TABLE>
<S>                              <C>
FRANK POPOFF
DIRECTOR SINCE:                  June 1998
PRINCIPAL OCCUPATION:            Chairman of The Dow Chemical Company since 1992.
BUSINESS EXPERIENCE:             Chief Executive Officer of The Dow Chemical Company from
                                 1987 to 1995.
OTHER DIRECTORSHIPS:             American Express Company; Chemical Financial Corporation;
                                 United Technologies Corporation.
COMMITTEES:                      Human Resources Committee (Chair); Finance Committee

MARK ROELLIG
PRINCIPAL OCCUPATION:            Executive Vice President - Public Policy, Human Resources
                                 and Law, General Counsel and Secretary of U S WEST since
                                 June 1998.
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Roellig was Vice
                                 President - Public Policy and Regulatory Law of U S WEST
                                 Communications Group from 1997 until the Separation.
                                 Mr. Roellig had served as a Vice President of Old U S WEST
                                 since 1994 and has held a variety of positions in the Law
                                 Department of Old U S WEST since 1983.

JAMES A. SMITH
PRINCIPAL OCCUPATION:            Executive Vice President of U S WEST since June 1998.
BUSINESS EXPERIENCE:             Mr. Smith has served as President and Chief Executive
                                 Officer of U S WEST Dex, Inc. since 1997. Mr. Smith had been
                                 a Vice President of Old U S WEST since 1987 and has held a
                                 variety of operational, marketing and management positions
                                 with Old U S WEST and its predecessors for 20 years.
DIRECTORSHIPS:                   U S WEST Foundation; the Public Education Network; The
                                 Children's Hospital; The Wigwam Club, Inc.; Critical Path,
                                 Inc.

ALLAN R. SPIES
PRINCIPAL OCCUPATION:            Executive Vice President and Chief Financial Officer of
                                 U S WEST since June 1998.
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Spies was Vice
                                 President and Chief Financial Officer of U S WEST
                                 Communications Group from 1997 until the Separation. Mr.
                                 Spies had been a Vice President of Old U S WEST since 1995
                                 and has held a variety of finance and management positions
                                 with Old U S WEST and its predecessors for over 29 years.
</TABLE>

                                       11
<PAGE>
<TABLE>
<S>                              <C>
GREGORY M. WINN
PRINCIPAL OCCUPATION:            Executive Vice President - Operations and Technology of
                                 U S WEST since July 1998.
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Winn was Executive Vice
                                 President - Retail Markets for U S WEST Communications
                                 Group from 1997 until the Separation and for U S WEST from
                                 the Separation until July 1998. Mr. Winn has been a Vice
                                 President of Old U S WEST since 1994 and has held a variety
                                 of marketing and sales positions with Old U S WEST and its
                                 predecessors for 29 years.

JOSEPH R. ZELL
PRINCIPAL OCCUPATION:            President of U S WEST !NTERPRISE Networking Services since
                                 1997.
BUSINESS EXPERIENCE:             Prior to his current assignment, Mr. Zell was President of
                                 the Carrier Wholesale Division of Old U S WEST from 1996 to
                                 1997. Mr. Zell began his career at Old U S WEST in 1991 as
                                 a director of Product Development for !NTERPRISE. Later, he
                                 served as the Executive Director of Applications Innovation
                                 and Vice President of Markets and Innovation for U S WEST
                                 !NTERPRISE.
DIRECTORSHIPS:                   USInternetworking, Inc.; Intertainer, Inc.; Netpliance, Inc.
</TABLE>

    The Board of Directors currently consists of 10 Directors divided into three
classes (Class I, Class II and Class III) serving staggered three-year terms.

OTHER MATTERS

    On February 29, 2000, our Chairman, President and Chief Executive Officer,
Solomon D. Trujillo, indicated that he would not join Qwest upon the completion
of the merger. It is anticipated that announcements regarding the proposed
management of the post-merger combined company may be made in the near future.

                                       12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

    The table below shows the compensation for Solomon D. Trujillo, who served
as President and Chief Executive Officer, and the four next most highly
compensated executive officers for the last three years (with the exception of
Ms. Bernard, who joined the company in 1998). Compensation for 1997 and from
January 1, 1998 until the Separation relates to services rendered to Old
U S WEST.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                     ANNUAL COMPENSATION
                                       ------------------------------------------------

                                                                          OTHER ANNUAL      RESTRICTED
                                                   SALARY      BONUS      COMPENSATION         STOCK
     NAME AND PRINCIPAL POSITION         YEAR       ($)         ($)            ($)        AWARD(S) ($)(2)
     ---------------------------       --------   --------   ----------   -------------   ---------------
<S>                                    <C>        <C>        <C>          <C>             <C>
SOLOMON D. TRUJILLO .................    1999     $896,552   $1,025,000     $119,132(1)     $16,293,750(3)
Chairman, President and Chief            1998     $716,041   $  650,000     $ 42,432           --
Executive                                1997     $525,220   $  645,000     $ 11,821           --
  Officer

GREGORY M. WINN .....................    1999     $441,379   $  300,000     $ 16,294           (4)
Executive Vice President -               1998     $338,099   $  217,000     $ 11,475           (5)
Operations &                             1997     $264,127   $  225,000     $  9,033            $67,987(6)
  Technology

JOSEPH R. ZELL ......................    1999     $364,943   $  275,000     $  1,616         (4)(5)
President - U S WEST                     1998     $288,793   $  144,600     $ 12,421           --
  !NTERPRISE Networking Services         1997     $206,688   $  115,000     $  2,000           $315,010

BETSY J. BERNARD ....................    1999     $373,372   $  262,500     $  3,410         (4)(7)
Executive Vice President - Retail        1998     $179,694   $  155,167     $ 10,066           $374,581(8)
Markets

JOHN A. KELLEY, JR. .................    1999     $360,632   $  275,000     $ 14,786         (4)(5)
President of Wholesale -                 1998     $307,084   $  157,750     $ 19,072           --
  U S WEST Communications                1997     $210,267   $  162,153     $ 25,846           --

<CAPTION>
                                                   LONG-TERM COMPENSATION
                                       ----------------------------------------------
                                        SECURITIES
                                        UNDERLYING
                                       OPTIONS/SARS                      ALL OTHER
                                       -------------   LTIP PAYOUTS   COMPENSATION(9)
     NAME AND PRINCIPAL POSITION            (#)            ($)              ($)
     ---------------------------       -------------   ------------   ---------------
<S>                                    <C>             <C>            <C>
SOLOMON D. TRUJILLO .................    1,400,000       $974,043        $128,581
Chairman, President and Chief            1,063,000       $414,090        $ 62,948
Executive                                  113,836       $267,319        $ 51,129
  Officer
GREGORY M. WINN .....................      415,212       $252,041        $ 98,467
Executive Vice President -                 364,071       $ 50,397        $111,376
Operations &                                25,933       $ 32,956        $301,296
  Technology
JOSEPH R. ZELL ......................      317,000       $174,719        $ 75,366
President - U S WEST                       287,500       $ 24,396        $ 24,905
  !NTERPRISE Networking Services            39,350       $ 15,907        $ 23,360
BETSY J. BERNARD ....................      614,000       $     --        $334,592
Executive Vice President - Retail          101,500       $     --        $111,068
Markets
JOHN A. KELLEY, JR. .................      343,745       $149,182        $ 71,115
President of Wholesale -                   289,963       $ 54,570        $ 15,770
  U S WEST Communications                   11,300       $ 35,814        $ 16,870
</TABLE>

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

NOTE: On June 5, 1998, the shareholders of Old U S WEST approved the Separation.
As part of the Separation: (i) restricted Old U S WEST Media Group targeted
stock ("Media Stock"), held by individuals who became employees of U S WEST, was
replaced immediately prior to the Separation with substitute restricted Old
U S WEST Communications Group targeted stock ("Communications Stock"), each
share of which, along with existing restricted Communications Stock, was then
replaced with a share of restricted U S WEST common stock; (ii) phantom stock
units for Media Stock, held by individuals who became employees of U S WEST,
were replaced immediately prior to the Separation with substitute phantom stock
units of Communications Stock, each unit of which, along with each existing unit
of Communications Stock, was then replaced with a phantom unit for U S WEST
common stock; (iii) option holders who continued employment with U S WEST did
not forfeit their stock options for Media Stock as a result of their termination
of employment with Old U S WEST; and (iv) stock options for Communications Stock
were replaced with substitute options for U S WEST common stock. On October 31,
1995, the shareholders of Old U S WEST approved the creation of two classes of
common stock, Communications Stock and Media Stock, intended to reflect
separately the communications businesses and the multimedia businesses of Old
U S WEST (the "1995 Recapitalization"). Options granted between November 1, 1995
and June 12, 1998 were options in either Communications Stock or Media Stock.

(1) Mr. Trujillo's other annual compensation includes aircraft use ($65,463) and
    taxes paid by the company ($35,956).

(2) At December 31, 1999, Messrs. Trujillo, Winn, Zell, Kelley and Ms. Bernard,
    respectively, held 300,000, 9,600, 8,720, 13,400, and 7,300 shares of
    restricted U S WEST common stock with an aggregate value, respectively, of
    $21,600,000, $691,200, $627,840, $964,800 and $525,600. Mr. Winn's, Zell's
    and Kelley's and Ms. Bernard's restricted U S WEST common stock share
    amounts at year end do not include 30,000, 25,000, 25,000 and 25,000 shares,
    respectively, which were granted in tandem with options (see Notes 5 and 7),
    and they do not include the August 1999 merger retention awards (see Note
    4). At December 31, 1998, Messrs. Trujillo, Winn, Zell, Kelley and Ms.
    Bernard, respectively, held 0, 9,600, 8,720, 13,400 and 7,300 shares of
    restricted U S WEST common stock with an aggregate value, respectively, of
    $-0-, $620,400, $563,350, $865,975 and $471,763. Dividends on restricted
    U S WEST common stock may be reinvested in U S WEST common stock.

(3) Mr. Trujillo was granted 300,000 shares of restricted U S WEST common stock
    as part of the August 1999 merger retention plan.

                                       13
<PAGE>
(4) The shares of restricted U S WEST common stock approved for Messrs. Winn,
    Zell and Kelley and Ms. Bernard in the amounts of 50,000, 30,000, 40,000 and
    40,000, respectively, as part of the August 1999 merger retention plan, will
    not be granted until just prior to the merger with Qwest and therefore are
    not listed in the above table or in year end totals.

(5) Messrs. Winn, Zell and Kelley were granted 30,000, 25,000 and 25,000 shares,
    respectively, of restricted U S WEST common stock in tandem with a grant of
    300,000, 250,000 and 250,000 options, respectively, in August 1998. These
    tandem grants cliff vest four years from the date of grant. Upon vesting,
    these executives shall only be entitled to receive one of the tandem grants
    with the other grant being forfeited. Only the options are listed in the
    above table.

(6) Mr. Winn was granted 1,550 shares of Communications Stock in February of
    1997, subject to a six-month restriction as to sale or transferability.
    Mr. Winn was granted an additional 2,100 shares of Communications Stock in
    February of 1997, subject to a four-year restriction as to sale or
    transferability. At December 31, 1997, Mr. Winn held 10,600 shares of
    restricted Communications Stock and 1,000 shares of restricted Media Stock,
    all of which were entitled to dividends, if any, paid during the restriction
    period, and which had an aggregate value of $478,325 and $28,875,
    respectively.

(7) Ms. Bernard was granted 25,000 shares of restricted U S WEST common stock in
    tandem with a grant of 250,000 options in February, 1999. This tandem grant
    cliff vests four years from the date of grant. Upon vesting, Ms. Bernard
    shall only be entitled to receive one of the tandem grants with the other
    grant being forfeited. Only the options are listed in the above table.

(8) Ms. Bernard was granted 7,300 shares of restricted U S WEST common stock in
    June 1998.

(9) The amounts in this column are attributed to (a)(i) the U S WEST matching
    contribution under the Deferred Compensation Plan, (ii) the U S WEST
    matching contribution under the Savings Plan/ESOP, (iii) the current dollar
    value of the remainder of the premium paid under a split-dollar insurance
    arrangement and (iv) the amount paid for the term insurance portion of the
    foregoing split-dollar arrangement and (b) the retention and relocation
    payments. The separate amounts relating to (a)(i) through (a)(iv) are set
    forth in the table below. The separate amounts relating to (b) are described
    as follows in narrative form. In 1999, Messrs. Winn, Zell and Kelley were
    each paid $40,000 in 1999 in accordance with their respective 1998 retention
    agreements. In 1998, U S WEST and Old U S WEST paid Mr. Winn $68,450 for
    certain additional relocation expenses including spousal travel. In 1997,
    Old U S WEST paid Mr. Winn $274,977 to cover certain housing expenses he
    incurred in connection with a relocation. In 1998, U S WEST paid Ms. Bernard
    $48,505 for certain relocation expenses and $62,500 as a sign-on cash award.
    In 1999, Ms. Bernard was paid a retention bonus of $309,745 ($282,000 plus
    interest) as part of her employment arrangement for remaining an employee
    for 18 months.

<TABLE>
<CAPTION>
                                 DEFERRED COMPENSATION   SAVINGS PLAN COMPANY    SPLIT-DOLLAR PREMIUM   TERM PORTION
                                     COMPANY MATCH               MATCH                  VALUE             PREMIUM
                                 ---------------------   ---------------------   --------------------   ------------
                                                            YEAR ENDED DECEMBER 31, 1999
                                 -----------------------------------------------------------------------------------
<S>                              <C>                     <C>                     <C>                    <C>
Solomon D. Trujillo............         $69,327                 $8,000                 $50,309              $945
Gregory M. Winn................         $26,367                 $6,552                 $25,128              $420
Joseph R. Zell.................         $10,247                 $8,000                 $16,951              $168
Betsy J. Bernard...............         $24,502                     --                      --              $345
John A. Kelley, Jr.............         $10,247                 $8,000                 $12,532              $336
</TABLE>

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31, 1998
                                 -----------------------------------------------------------------------------------
<S>                              <C>                     <C>                     <C>                    <C>
Solomon D. Trujillo............         $29,576                 $8,000                 $24,770              $602
Gregory M. Winn................         $22,768                 $7,480                 $12,468              $210
Joseph R. Zell.................         $ 5,750                 $8,000                 $11,028              $127
Betsy J. Bernard...............              --                     --                      --              $ 63
John A. Kelley, Jr.............              --                 $8,000                 $ 7,529              $241
</TABLE>

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31, 1997
                                 -----------------------------------------------------------------------------------
<S>                              <C>                     <C>                     <C>                    <C>
Solomon D. Trujillo............         $19,250                 $8,000                 $23,441              $438
Gregory M. Winn................         $ 6,666                 $7,157                 $12,319              $177
Joseph R. Zell.................         $ 3,341                 $8,000                 $11,909              $110
John A. Kelley, Jr.............              --                 $8,000                 $ 8,674              $196
</TABLE>

                                       14
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR AND YEAR END OPTION/SAR VALUES

    The table below shows the stock options granted to the named executive
officers during 1999 by U S WEST. We employed the Black-Scholes option pricing
model to develop the theoretical values set forth under the "Grant Date Present
Value" column. These stock options comprise a portion of the named executive
officers' total long-term compensation potential.

<TABLE>
<CAPTION>
                                                            INDIVIDUAL GRANTS
                         ---------------------------------------------------------------------------------------
                                                PERCENT OF TOTAL
                                                  OPTIONS/SARS
                         NUMBER OF SECURITIES      GRANTED TO                                       GRANT DATE
                         UNDERLYING OPTIONS/      EMPLOYEES IN     EXERCISE OR BASE   EXPIRATION   PRESENT VALUE
         NAME             SARS GRANTED(#)(1)      FISCAL YEAR        PRICE ($/SH)        DATE         ($)(5)
         ----            --------------------   ----------------   ----------------   ----------   -------------
<S>                      <C>                    <C>                <C>                <C>          <C>
Solomon D. Trujillo....             400,000(1)       3.5250%           $62.2500        02/05/09     $12,073,880
                                  1,000,000(3)       8.8126%           $54.3125        08/06/09     $26,868,700
Gregory M. Winn........             112,000(1)       0.9870%           $62.2500        02/05/09     $ 3,380,686
                                    300,000(3)       2.6438%           $54.3125        08/06/09     $ 8,060,610
                                      1,141(2)       0.0101%           $55.6875        09/01/05     $    31,433
                                        414(2)       0.0036%           $55.6875        11/08/03     $    11,405
                                      1,657(2)       0.0146%           $55.6875        03/15/06     $    45,649
Joseph R. Zell.........              67,000(1)       0.5904%           $62.2500        02/05/09     $ 2,022,375
                                    250,000(3)       2.2032%           $54.3125        08/06/09     $ 6,717,175
Betsy J. Bernard.......             250,000(4)       2.2032%           $61.0250        02/04/09     $ 7,404,900
                                     89,000(1)       0.7843%           $62.2500        02/05/09     $ 2,686,438
                                    275,000(3)       2.4235%           $54.3125        08/06/09     $ 7,388,893
John A. Kelley.........              89,000(1)       0.7843%           $62.2500        02/05/09     $ 2,686,438
                                    250,000(3)       2.2032%           $54.3125        08/06/09     $ 6,717,175
                                      3,392(2)       0.0299%           $55.6880        09/01/05     $    93,446
                                      1,353(2)       0.0119%           $55.6880        09/01/05     $    37,274
</TABLE>

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

(1) These stock options become exercisable and cliff vest on the third
    anniversary of the date of grant, and include the reload feature. The reload
    feature gives the optionee the right to receive a further option, at the
    then current market price, for a number of shares equal to the number of
    shares of stock surrendered by the optionee in payment of the exercise price
    of the original option.

(2) These stock options become fully exercisable one year from the date of grant
    and do not include a reload feature.

(3) These stock options become exercisable in one-fourth increments on the
    first, second, third, and fourth anniversaries of the date of grant, and
    include a reload feature. The reload feature gives the optionee the right to
    receive a further option, at the then current market price, for a number of
    shares equal to the number of shares of stock surrendered by the optionee in
    payment of the exercise price of the original option.

(4) Ms. Bernard was granted 25,000 shares of restricted U S WEST common stock in
    tandem with a grant of 250,000 options on February 4, 1999. This tandem
    grant cliff vests four years from the date of grant. Upon vesting, Ms.
    Bernard shall only be entitled to receive one of the tandem grants with the
    other grant being forfeited.

(5) Standard application of Black-Scholes option pricing model using the
    expected dividend yield (0.0%), expected stock price volatility (57.0%), two
    and five year risk free rate of return based on United States Treasury Bond
    rates and options being outstanding for an average term of 4.0 years.

                                       15
<PAGE>
    AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
                               OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                               NUMBER OF SECURITIES
                                                              UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                                              OPTIONS/SARS AT FY-END       IN-THE-MONEY OPTIONS/SARS
                                                                        (#)                      AT FY-END ($)
                        SHARES ACQUIRED ON      VALUE       ---------------------------   ---------------------------
NAME                       EXERCISE (#)      REALIZED ($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                    ------------------   ------------   -----------   -------------   -----------   -------------
<S>                     <C>                  <C>            <C>           <C>             <C>           <C>
Solomon D. Trujillo..             --           $     --       429,890       2,383,334     $15,851,035    $42,508,937
Gregory M. Winn......          4,700           $126,469        81,197         763,579     $ 2,816,911    $13,740,346
Joseph R. Zell.......             --           $     --        50,183         622,617     $ 1,896,553    $11,841,919
Betsy J. Bernard.....             --           $     --        33,832         681,668     $   691,307    $ 9,858,255
John A. Kelley,
  Jr.................          7,202           $208,808        70,895         622,713     $ 2,621,901    $11,156,441
</TABLE>

LONG-TERM INCENTIVE PLANS AND AWARDS IN LAST FISCAL YEAR

    No dividend equivalent units were granted during 1999. The table below shows
dividend equivalent units granted to the named executive officers during 1998
under the Long-Term Incentive Plan for U S WEST and Old U S WEST and the target
payout at the effective time of the merger with Qwest. Each dividend equivalent
unit represents the right to receive an amount equal to the cumulative dividends
paid on our common stock during a performance period, multiplied by a percentage
representing the extent to which our Company achieves certain performance goals
based on financial results, revenue, productivity and efficiency, service and
customer care, employee satisfaction, and stock performance.

<TABLE>
<CAPTION>
                              NUMBER OF UNITS   PERFORMANCE PERIOD UNTIL      ESTIMATED FUTURE PAYOUTS UNDER
NAME                          GRANTED IN 1998     MATURATION OR PAYOUT     NON-STOCK PRICE-BASED PLAN TARGET(1)
----                          ---------------   ------------------------   ------------------------------------
<S>                           <C>               <C>                        <C>
Solomon D. Trujillo.........      231,000               1998-2000                       $1,532,685
Gregory M. Winn.............       47,000               1998-2000                       $  311,845
Joseph R. Zell..............       27,700               1998-2000                       $  183,790
Betsy J. Bernard............           --                      --                       $       --
John A. Kelley, Jr..........       28,000               1998-2000                       $  185,780
</TABLE>

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

(1) These amounts have been estimated based on the anticipated merger with
    Qwest. Estimated future payouts comprised of eleven quarters at $0.535 per
    share and one quarter at $0.750 per share for August 1999.

                                       16
<PAGE>
U S WEST PENSION PLANS

    The tables below show the maximum estimated annual benefits payable to the
named executive officers when they retire under the U S WEST Pension Plans.
These estimates are based on applicable pension plan formulas for specified
final average annual compensation and specified years of service. The second
table is based on the "defined lump sum" pension plan formula. Messrs. Trujillo
and Winn and Ms. Bernard are eligible to receive the greater of any pension
amount that is calculated under either table. Messrs. Zell and Kelley are
eligible to receive pension amounts under the second table.

                               PENSION PLAN TABLE
                                  FIRST TABLE

<TABLE>
<CAPTION>
                                                       YEARS OF SERVICE
FINAL AVERAGE ANNUAL   --------------------------------------------------------------------------------
COMPENSATION              15         20         25         30          35           40           45
--------------------   --------   --------   --------   --------   ----------   ----------   ----------
<S>                    <C>        <C>        <C>        <C>        <C>          <C>          <C>
$  500,000...........  $111,200   $148,200   $185,300   $222,400   $  259,400   $  290,700   $  321,900
   600,000...........   133,700    178,200    222,800    267,400      311,900      349,400      386,900
   700,000...........   156,200    208,200    260,300    312,400      364,400      408,200      451,900
   800,000...........   178,700    238,200    297,800    357,400      416,900      466,900      516,900
   900,000...........   201,200    268,200    335,300    402,400      469,400      525,700      581,900
 1,000,000...........   223,700    298,200    372,800    447,400      521,900      584,400      646,900
 1,100,000...........   246,200    328,200    410,300    492,400      574,400      643,200      711,900
 1,200,000...........   268,700    358,200    447,800    537,400      626,900      701,900      776,900
 1,300,000...........   291,200    388,200    485,300    582,400      679,400      760,700      841,900
 1,400,000...........   313,700    418,200    522,800    627,400      731,900      819,400      906,900
 1,500,000...........   336,200    448,200    560,300    672,400      784,400      878,200      971,900
 1,600,000...........   358,700    478,200    597,800    717,400      836,900      936,900    1,036,900
 1,700,000...........   381,200    508,200    635,300    762,400      889,400      995,700    1,101,900
 1,800,000...........   403,700    538,200    672,800    807,400      941,900    1,054,400    1,166,900
 1,900,000...........   426,200    568,200    710,300    852,400      994,400    1,113,200    1,231,900
 2,000,000...........   448,700    598,200    747,800    897,400    1,046,900    1,171,900    1,296,900
</TABLE>

                                       17
<PAGE>
                                  SECOND TABLE

<TABLE>
<CAPTION>
                                                       YEARS OF SERVICE
FINAL AVERAGE ANNUAL   --------------------------------------------------------------------------------
COMPENSATION              15         20         25         30          35           40           45
--------------------   --------   --------   --------   --------   ----------   ----------   ----------
<S>                    <C>        <C>        <C>        <C>        <C>          <C>          <C>
$  500,000...........  $152,400   $187,600   $211,000   $228,600   $  240,300   $  246,200   $  252,100
   600,000...........   183,400    225,700    253,900    275,100      289,200      296,200      303,300
   700,000...........   214,300    263,800    296,800    321,500      338,000      346,200      354,500
   800,000...........   245,300    301,900    339,600    367,900      386,800      396,200      405,600
   900,000...........   276,200    340,000    382,500    414,300      435,600      446,200      456,800
 1,000,000...........   307,200    378,100    425,300    460,800      484,400      496,200      508,000
 1,100,000...........   338,100    416,200    468,200    507,200      533,200      546,200      559,200
 1,200,000...........   369,100    454,300    511,100    553,600      582,000      596,200      610,400
 1,300,000...........   400,000    492,400    553,900    600,100      630,800      646,200      661,600
 1,400,000...........   431,000    530,500    596,800    646,500      679,700      696,200      712,800
 1,500,000...........   462,000    568,600    639,600    692,900      728,500      746,200      764,000
 1,600,000...........   492,900    606,700    682,500    739,400      777,300      796,200      815,200
 1,700,000...........   523,900    644,800    725,400    785,800      826,100      846,200      866,400
 1,800,000...........   554,800    682,900    768,200    832,200      874,900      896,200      917,600
 1,900,000...........   585,800    721,000    811,100    878,700      923,700      946,200      968,800
 2,000,000...........   616,700    759,000    853,900    925,100      972,500      996,300    1,020,000
</TABLE>

    The pension benefits, listed in the above tables, set forth the projected
benefit assuming the executive retires at age 65. The calculation of "final
average annual compensation" is the highest average compensation for 60
consecutive months of the 120 consecutive-month period preceding retirement and
includes compensation that would appear under the "Salary" and "Bonus" columns
of the Summary Compensation Table. At December 31, 1999, Messrs. Trujillo, Winn,
Zell and Kelley and Ms. Bernard had 25, 29, 8, 4 and 23 years of service,
respectively. Ms. Bernard is subject to a special arrangement that grants her
full service credit under the old formula of the U S WEST Pension Plan for her
original AT&T employment date of 1977.

    Benefits set forth in the preceding tables are computed as a straight-life
annuity and are subject to deduction for Social Security. For information
relating to a recent increase in Mr. Trujillo's base salary, please refer to the
section entitled "Report of Human Resources Committee on Executive
Compensation--Base Salary" on page 25.

                                       18
<PAGE>
                           COMPENSATION OF DIRECTORS

GOAL

    To attract and retain highly qualified Directors, we offer a competitive
Director compensation package. This compensation package includes various equity
components intended to align the interests of Directors with the long-term
interests of shareholders. The Board of Directors periodically reviews Director
compensation policies, and based on the input of several nationally recognized
sources, the Board of Directors has determined that the Company's policies are
in line with suggested industry standards.

FEES

    Directors fees, paid only to Directors who are not U S WEST employees, are
as follows:

<TABLE>
<S>                                                           <C>
Annual retainer.............................................  $35,000
Committee chairman retainer.................................  $ 5,000
Significant special project consultation fee................  $ 1,500
Attendance fee for each Board or Committee meeting..........  $ 1,500 per day
Annual telecommunications services and equipment allowance
  (net of taxes)............................................  $ 3,000 (up to)
</TABLE>

    Any Director who is an employee of U S WEST or one of its subsidiaries
receives no compensation for serving as a Director. Directors may elect to
receive payment of all or any portion of their annual or committee chair
retainers and meeting fees in common stock.

DEFERRED FEES

    Directors can choose to have the payment of all or some of their fees
deferred in the form of common stock or cash. Deferred amounts that otherwise
would be payable in common stock are credited in an account as phantom stock
units. The value of these phantom stock units rises and falls with the price of
our common stock. Also, we provide a five percent match if a Director defers
into phantom stock. Additional phantom stock units are credited to the account
when we declare a dividend on our common stock. Deferred cash payments earn
interest that is compounded quarterly at a rate equal to the average interest
rate for ten-year United States Treasury notes plus one percent.

STOCK PLAN

    Under the terms of the U S WEST 1998 Stock Plan, as amended, Directors also
receive (i) an up-front grant of 3,000 shares of restricted common stock, which
becomes unrestricted over four years, (ii) options to purchase 30,000 shares of
common stock that vest equally over three years, with annual grants of 10,000
options after the initial vesting period, and (iii) shares of restricted common
stock equal to ten times the annual retainer paid to Directors which vests 50%
at five years and 10% per year thereafter for the next 5 years, and immediately
upon certain events. The options have value for Directors only if the price of
our common stock appreciates from the date of the option grant. Non-employee
Directors who were Directors of Old U S WEST are also entitled to their vested
pension on the Separation Date.

                                       19
<PAGE>
EXECUTIVE CHANGE OF CONTROL AND TERMINATION ARRANGEMENTS

    We have entered into change of control agreements with certain of our
executive officers, including each of our named executive officers. By providing
these executive officers with either compensation or termination benefits or
both, if a change of control of the Company occurs, these agreements encourage
these executive officers to continue to perform their duties after the
announcement of a change of control. The following discussion is a summary of
such agreements. The actual forms of the agreements have been filed as exhibits
to our filings with the Securities and Exchange Commission.

    In certain circumstances, the officers are entitled to receive specified
benefits upon termination of their employment or if their duties or compensation
and benefits are reduced or substantially changed in another manner after a
change of control. Since the Chief Executive Officer's duties necessarily are
significantly impacted as a result of a change of control, he may voluntarily
resign within 90 days after a change of control and receive his benefits.

WHAT IS A CHANGE OF CONTROL?

    Any of the following events is a change of control:

        (i) a change of control that would have to be reported under Item
    6(e) of Schedule 14A of the Securities Exchange Act of 1934, even if the
    Company is not subject to that reporting requirement;

        (ii) a party or certain related parties directly or indirectly acquiring
    securities representing twenty percent or more of the total voting power of
    the Company's outstanding voting securities at that time;

       (iii) any period of two consecutive calendar years during which a
    majority of the Board of Directors ceases to be composed of individuals who
    either (a) were a Director at the beginning of the two-year period or
    (b) are a new Director whose election by the Board or nomination for
    election by the Company's shareholders was approved by at least two-thirds
    of the Directors who either were Directors at the beginning of the two-year
    period or whose election or nomination for election was previously so
    approved (and excluding for this purpose any individual whose initial
    assumption of office resulted from an actual or threatened proxy contest);

        (iv) shareholders of the Company approve a merger, consolidation, sale
    or other disposition of all or substantially all of the assets of the
    Company, unless immediately afterwards the holders of the Company's voting
    securities prior to this change of control hold securities representing more
    than seventy percent of the voting power of the outstanding voting
    securities of the Company or other surviving entity at that time and, also
    immediately afterwards, no party or certain related parties (other than
    trustees of employee benefit plans) hold twenty percent or more of the total
    voting power of the Company's outstanding voting securities at that time and
    members of the Board of Directors prior to such transaction constitute more
    than half of the Company's or other surviving entity's Board of Directors;

        (v) the shareholders of the Company approve a plan of complete
    liquidation or dissolution; or

        (vi) any other event that a majority of the Board of Directors deems to
    be a change of control.

    Under the change of control agreements, termination benefits are to be paid
immediately following the officer's termination, under certain circumstances,
after a change of control. These benefits include salary and payments under both
short and long-term incentive plans in which the officers participate. These
benefit payments will be calculated as if a change of control had also occurred
under these plans.

    Termination benefits also consist of three times an amount equal to the sum
of:

    - the officer's annual base salary before termination, plus

                                       20
<PAGE>
    - the officer's annual bonus amount under any short-term incentive program
      in which the officer participates (which will be calculated as if 100% of
      the target was achieved, unless the percentage actually achieved is
      greater than 100%, in which case the higher percentage shall apply), plus

    - for the Chief Executive Officer, the annual long-term incentive grant
      value under any long-term incentive program in which he participates (also
      calculated as if 100% of the target was achieved, unless the percentage
      actually achieved is greater than 100%, in which case the higher
      percentage shall apply).

In addition, all unvested stock options (except as described below) held by the
officer on the termination date will vest immediately and be fully exercisable,
and any restrictions on restricted stock will immediately lapse. Options granted
after the announcement of the Qwest merger will not immediately vest upon the
Qwest merger but would immediately vest upon a subsequent change of control. The
Company will adjust income in order to cover any excise taxes incurred in
connection with the benefits paid upon termination. The change of control
agreements also provide for continued health care benefits on terms
substantially similar to those that would have been provided if the officer were
eligible for retiree health care benefits immediately before the change of
control. If pension benefits are not already vested, they will vest immediately
before the change of control and an additional three years will be added to both
the officer's age and years of service for the purpose of calculating the
officer's benefits.

AUTOMATIC RENEWAL; CANCELLATION

    The change of control agreements automatically renew every three years.
However, the Board of Directors may cancel them before renewal by giving the
officers notice at least 90 days before the approaching three-year renewal date.

CHIEF EXECUTIVE OFFICER'S COVENANT NOT TO COMPETE

    In exchange for receiving these benefits on a change of control, the Chief
Executive Officer has agreed he will not, for a three-year period after his
termination:

        (i) directly or indirectly engage in the United States, in any business
    that competes with the Company's business as of his termination date or at
    any time during such three-year period (certain investments of not more than
    two percent are nonetheless permissible);

        (ii) solicit, entice or endeavor to solicit or entice away from the
    Company or its subsidiaries any person who was an officer, employee or sales
    representative either for his own account or for another individual, firm or
    corporation, even if as a result of leaving the Company or its subsidiaries,
    such officer, employee or sales representative would not breach his or her
    employment contract with the Company;

       (iii) directly or indirectly employ any person who was an officer,
    employee or sales representative of the Company or its subsidiaries or who,
    by reason of such position at any time, possesses or may likely possess any
    confidential information or trade secrets relating to the Company's or its
    subsidiaries' businesses or products; and

        (iv) solicit, entice or endeavor to solicit or entice away from the
    Company or its subsidiaries any of the Company's customers or prospective
    customers, either for his own account or for another individual, firm or
    corporation.

    Many of these restrictions also apply to other officers of U S WEST.

EXECUTIVE SEVERANCE AGREEMENTS

    We have also entered into executive severance agreements with certain of our
officers, including the named executive officers. These agreements set forth
benefits that are payable in certain circumstances,

                                       21
<PAGE>
including a change of control of the Company, an officer's termination that is
not for cause, an officer's termination in connection with a downsizing, or an
officer's resignation after electing not to accept a reassignment to a
non-comparable position.

    In general, if an officer's employment is terminated as a result of certain
circumstances set forth in the agreements, he or she will be entitled to the
following severance benefits:

        (i) a sum equal to between 1.5 and 2 times, depending upon the officer,
    of his or her base salary;

        (ii) amounts due under the Executive Short-Term Incentive Plan and any
    long-term incentive plan, based on the officer's date of termination and
    calculated as if each plan's applicable targeted performance levels had been
    fully achieved; and

       (iii) financial counseling services through the year after the year in
    which the officer was terminated, or the cash value of such financial
    counseling services.

    Restrictions placed on certain grants of common stock issued to the officer
would be terminated and the vesting of a proportionate amount of the officer's
stock options would be accelerated. In addition, terminated officers are
entitled to certain medical, dental and vision benefits. The agreements also
contain certain confidentiality and arbitration provisions. Before receiving
severance benefits, an executive officer must deliver to the Company a waiver
and a release of claims. If a change of control occurs, the executive severance
agreements will be superseded by any applicable change of control agreement, as
supplemented by the terms and conditions of any option or restricted stock
agreement.

    In order to encourage Messrs. Winn's, Zell's and Kelley's continued
employment, they received 30,000, 25,000 and 25,000 shares, respectively, of
restricted U S WEST common stock in tandem with a grant of 300,000, 250,000 and
250,000 options, respectively, in August of 1998 which cliff vest four years
from the date of grant, all pursuant to their 1998 retention agreements. Upon
vesting, each executive will only be entitled to receive one of the tandem
grants with the other grant being forfeited. These agreements also entitle
Messrs. Winn, Zell and Kelley to annual cash payments, which are conditioned on
their respective continuous employment until such payments are due. Messrs.
Winn, Zell and Kelley each received an annual cash payment of $40,000 in 1999
under such agreements, and each will receive annual cash payments of $60,000 and
$100,000, respectively, in 2000 and 2001.

    In order to encourage Ms. Bernard's continued employment, she received
25,000 shares of restricted U S WEST common stock in tandem with a grant of
250,000 options in February of 1999 which cliff vest four years from the date of
grant, all pursuant to a 1999 stock and option agreement. Upon vesting,
Ms. Bernard will only be entitled to receive one of the tandem grants with the
other grant being forfeited.

MODIFICATION OF CHANGE OF CONTROL AGREEMENTS

    In connection with the anticipated merger with Qwest, the Human Resources
Committee of the U S WEST Board approved and the U S WEST Board ratified various
retention agreements and arrangements for Mr. Trujillo and for certain executive
officers (including named executive officers) and certain other key executives
and critical employees of U S WEST. The purpose for such retention awards and
grants was to provide additional incentives to individuals who are critical to
the business both in terms of completing the merger and beyond, and who are
likely targets for competitive offers from other companies.

    In order to provide retention incentives for Mr. Trujillo and given the
demand for senior executives in the telecommunications industry, the Human
Resources Committee approved and the U S WEST Board ratified the terms of a
retention agreement with Mr. Trujillo. The retention agreement with
Mr. Trujillo modifies the current terms of his change of control agreement and
expires on August 31, 2003 or earlier if U S WEST and Qwest cease their efforts
to complete the merger. Termination or expiration of the retention agreement
will not affect any rights that would have accrued to Mr. Trujillo before the
date of

                                       22
<PAGE>
termination. Under the retention agreement, Mr. Trujillo agreed (i) not to
engage, directly or indirectly, within the United States, in any business that
is competitive with U S WEST or the combined company for a period of
eighteen months following his separation from employment for any reason and
(ii) for the same period not to solicit or entice away any employee, sales
representative or customer from U S WEST or the combined company. This
non-compete provision is broader than the non-compete provision in
Mr. Trujillo's change of control agreement. Mr. Trujillo also agreed under the
retention agreement that mandatory arbitration would apply to all disputes with
respect to the retention agreement and to his change of control agreement. In
connection with Mr. Trujillo's agreement not to compete, not to solicit and to
mandatorily arbitrate any disputes with U S WEST, and to further provide
retention incentives for his employment, the Human Resources Committee approved
and the U S WEST Board ratified grants of options and restricted stock to
Mr. Trujillo that were described in U S WEST's Proxy Statement on Schedule 14A
dated March 24, 1999 (the "Merger Proxy Statement").

    The retention agreements for the named executive officers also modify the
current terms of their respective change of control agreements and expire on
December 21, 2001 or earlier if U S WEST and Qwest cease their efforts to
complete the merger. Termination or expiration of the executive officers'
retention agreements will also not affect any rights that would have accrued to
them before the date of termination or expiration. Under their retention
agreements, the named executive officers agreed to mandatory arbitration of all
disputes which also would apply to their change of control agreements. In
connection with these retention agreements, the Human Resources Committee also
approved retention cash awards and option and restricted stock grants to the
named executive officers as described in the Merger Proxy Statement.

                                       23
<PAGE>
         REPORT OF HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION

HUMAN RESOURCES COMMITTEE

    The Human Resources Committee of the Board of Directors is made up of
independent outside Directors who meet regularly to oversee executive
compensation and benefits plans. The Human Resources Committee makes every
effort to ensure that executive compensation and benefit plans are both
appropriately competitive with the marketplace and aligned with your interests
as a shareholder. The Human Resources Committee submits reports to the full
Board of Directors concerning its activities and decisions. None of the Human
Resources Committee's Directors has interlocking or other relationships with
other boards or the Company that would call into question his or her
independence as a Human Resources Committee member.

COMPENSATION PHILOSOPHY; OVERALL PRINCIPLES

    The Company takes an integrated and managed approach to developing its
executive compensation strategy and programs. This approach balances the overall
needs of the Company, including its unique business strategies and human
resources initiatives. The Human Resources Committee has approved a compensation
plan designed to attract, motivate and retain the high-caliber executives needed
to achieve the Company's business strategies. The plan rewards those executives
for building and enhancing long-term value for Company shareholders.

    Each element of the compensation plan supports the Company's mission, values
and culture. The following compensation principles link the individual elements
into an integrated compensation strategy:

        (i) creating and maintaining a compensation structure that aligns the
    interests and concerns of executives with those of shareholders;

        (ii) providing competitive compensation that is comparable to
    compensation provided by the industry and our peer companies;

       (iii) developing and maintaining customized business unit plans that
    reflect the unique characteristics of the Company's diversified operations;

        (iv) providing individual compensation that is highly correlated with
    personal performance and the creation of shareholder value; and

        (v) implementing executive development and succession planning programs
    to provide for long-term organizational strength and flexibility.

    Overall, the Human Resources Committee believes that the Company's
competitive market for executive talent is more comprehensive than those
established by industry peer groups to compare shareholder returns, as are set
forth on the accompanying Performance Graphs. Accordingly, the population of
companies surveyed for compensation data extends beyond the companies included
in peer group indices set forth in the Performance Graphs.

    For each component of compensation, the Human Resources Committee targets
total compensation to industry median benchmarks of surveyed companies. As a
result, superior performance will lead to above-market total compensation
delivered through variable-pay components, and less-than-satisfactory
performance will result in below-market total compensation.

KEY ELEMENTS

    The key elements of the Company's executive compensation program are base
salary, annual incentives, and long-term incentive compensation. In developing
an executive's total compensation package, the Human Resources Committee
considers each of these key elements, as well as retirement benefits, insurance,
and limited perquisites.

                                       24
<PAGE>
BASE SALARY

    The Company has implemented a combined market and performance-based salary
structure for its executive employees. Determination of appropriate compensation
is based on the following factors:

    - the executive's level of responsibility,

    - the scope and impact of decision-making, and

    - internal and external comparability.

    For purposes of comparability and competitive market pricing, the Company
uses annual executive compensation salary surveys that are prepared by
nationally recognized independent compensation consulting firms. These surveys
encompass the telecommunications industry as well as companies of similar size
in other industries. On average, the Company seeks to target executive base
salary levels at the median range of the surveyed companies.

    Executive salary reviews generally are conducted on a 12-month cycle. Base
salary adjustments may occur at the time of these reviews and depend upon
individual performance results, changes in job responsibilities, competitive
forces, and/or the overall financial condition of the Company.

    Mr. Trujillo's base salary for 1999 was $900,000. Mr. Trujillo's current
base salary places him within the median range of surveyed companies.

SHORT-TERM INCENTIVE COMPENSATION

    The Executive Short-Term Incentive Plan, which was approved by shareholders
in May 1994 and ratified as part of the Separation by the Company, provides each
named executive officer with the potential to earn annual cash awards based on
the achievement of pre-established performance goals. Participants include the
Chief Executive Officer and any individual employed by the Company at the end of
any calendar year who appears in the Summary Compensation Table of the Annual
Proxy Statement to Shareholders. The cash bonus pool from which the Company pays
the bonuses for the Chief Executive Officer and the other named executive
officers is limited to 0.25% of "Cash Provided by Operating Activities" for the
annual performance period. The Human Resources Committee may pay any portion of
this pool based on various factors, including the Company's performance relative
to pre-set financial, strategic and customer goals, as well as individual
performance goals. Any amount of the cash bonus pool not paid in this manner may
be added, at the Human Resources Committee's sole discretion, to the cash bonus
pool that is available for any subsequent year or combination of years. The
Human Resources Committee has elected not to add unpaid portions of the cash
bonus pool to the bonus pool for future years.

    The pre-set performance goals for 1999 were based on various factors
including the Company's net cash flow, operating income, revenue, service and
independent customers' analysis of the reputation of the Company (CVA or
Customer Value Analysis).

    In determining the amount to be paid to Mr. Trujillo in connection with 1999
performance goals, the Human Resources Committee considered the above-mentioned
pre-set performance goals for the Company and individual performance.
Mr. Trujillo received Executive Short-Term Incentive Plan compensation of
$1,025,000, or 113% of his 1999 base salary.

LONG-TERM INCENTIVE COMPENSATION

    For 1999, the Company's long-term incentive compensation program was
comprised of stock options issued under the U S WEST 1998 Stock Plan and
performance-based Dividend Equivalent Units previously issued under Long-Term
Incentive Plans approved in prior years. Shareholders have previously approved
all three plans.

                                       25
<PAGE>
    During the past year, the combination of stock options and performance-based
long-term incentive opportunities provided a strategic mix of equity-based
incentives that:

    - continues to focus performance on the attainment of long-term strategic
      objectives;

    - provides an incentive to the executives to increase total shareholder
      return; and

    - provides continuity throughout the officer team by rewarding long-term
      commitment to the Company.

THE LONG-TERM INCENTIVE PLAN

    New grants of Dividend Equivalent Units under the Long-Term Incentive Plan
were suspended in 1999; however payouts were made for Dividend Equivalent Units
issued under that plan in prior years.

    In general, the Human Resources Committee has assigned dividend equivalent
units to participants in the Long-Term Incentive Plan at the beginning of each
performance period. A "Dividend Equivalent Unit" equaled the regular cash
dividends, if any, that are paid on our common stock that is paid during a
performance period under the Long-Term Incentive Plan. The Long-Term Incentive
Plan includes a three-year performance period that ended on December 31, 1999.
At the conclusion of each performance period, participants may receive a
percentage of the product of their respective dividend equivalent units times
the total value of dividends paid during the performance period on one share of
our common stock. The percentage, which for the 1997-1999 performance period
could not exceed 100%, is determined pursuant to a performance formula
established by the Human Resources Committee. This formula is based on one or
more of the Company's financial results, productivity and efficiency measures,
customer service, stock performance and employee and management satisfaction
measures. Under this formula, Mr. Trujillo received 13,731 shares of our common
stock worth $974,043.

STOCK OPTIONS

    In general, the Human Resources Committee has elected to grant stock options
annually. The Company's stock option grants are designed to deliver, together
with other long-term incentives, the opportunity for the executive to earn a
market-based percentage of salary dependent on future stock performance. In
determining the current year's stock option grants, the Human Resources
Committee may take into consideration prior years' grants and circumstances.

    Stock options granted during 1999 have an exercise price equal to the market
price of our common stock on the date of grant and carry a ten-year term and,
except in the retention grants described below, vest in one-third increments
beginning one year from the grant date.

    In 1999, Mr. Trujillo received a stock option grant of 400,000 shares of
common stock. The Human Resources Committee believes that the grant to
Mr. Trujillo in 1999 is consistent with its total compensation philosophy to
link a substantial portion of the Chief Executive Officer's compensation
directly with the long-term value created for shareholders. In addition,
Mr. Trujillo's option grant is consistent with the average grants made to peer
company chief executive officers as determined by market survey data. In
connection with our proposed merger with Qwest, Mr. Trujillo also received
three million stock options (one million in August 1999 and two million in
January 2000) as a special incentive grant that will incrementally vest over
four years from the August 1999 grant date.

RESTRICTED STOCK

    In connection with the proposed merger with Qwest, Mr. Trujillo also
received 300,000 shares of restricted stock which will vest, contingent upon the
merger closing, 50 percent after two years, 75 percent after three years and
100% after four years. For a further discussion of the terms of Mr. Trujillo's
retention grants, please refer to the Merger Proxy Statement.

                                       26
<PAGE>
DEDUCTIBILITY OF COMPENSATION; TAX CODE CONCERNS

    The Human Resources Committee has carefully considered Section 162 (m) of
the Internal Revenue Code of 1986 and believes the Company's pay-for-performance
practices ensure that executive compensation is strongly tied to performance.
The Human Resources Committee believes it is in the best interests of the
Company and its shareholders to comply with the tax law while still preserving
the flexibility to reward executives consistent with the Company's pay
philosophy for each compensation element. The Human Resources Committee is
obligated to the Board of Directors and shareholders to recognize and reward
performance that increases the value of the Company. Accordingly, the Human
Resources Committee will exercise its discretion in those instances where tax
law considerations would compromise the interests of the shareholders.

STOCK OWNERSHIP GUIDELINES

    To encourage further growth in shareholder value, the Board of Directors has
approved stock ownership targets for the Company's executive officers. The Board
of Directors established these targets because it believes that a significant
level of stock ownership provides a powerful incentive to executive officers to
manage the Company as owners. On an annual basis, the Human Resources Committee
reviews executive officers' stock ownership and, at its discretion, may consider
such ownership in the granting of restricted shares and stock options.

    The target ownership level for the Chairman and Chief Executive Officer
equals 5 times his base salary. At the end of 1999, Mr. Trujillo held common
stock valued at approximately 68 times his 1999 salary.

CONCLUSION

    It is the Human Resources Committee's opinion that the Company's integrated
executive compensation strategy aligns the Company's executive compensation
practices with corporate performance and your best interests as a shareholder.
The strategy does so by ensuring both the continuity and ongoing development of
a strong leadership team that is fully in line with our shareholders. We trust
this letter and the accompanying tables and graphs will help you understand
further the Company's compensation philosophy, programs and actions.

    U S WEST, Inc. Human Resources Committee of the Board of Directors:

           Frank Popoff (Chairman)
           Hank Brown
           Jerry J. Colangelo
           Manuel A. Fernandez

                                       27
<PAGE>
                     STOCKHOLDER RETURN PERFORMANCE GRAPHS

    The graph and chart below compares the yearly change in cumulative total
stockholder return on our common stock since the Separation and Communications
Group targeted stock from October 31, 1995 to the Separation, including the
reinvestment of dividends, with the return on the Standard & Poor's 500 Stock
Index, the S&P Telecommunications Index, and a customized peer group (the
"Communications Peer Group") that includes companies that offer communications
services, including local telephone services, to business and residential
customers in domestic geographic markets. The performance graph shows the return
of $100 invested in Communications Group targeted stock on October 31, 1995, and
reflects a return for (i) Communications Group targeted stock from October 31,
1995 to the Separation, which occurred on June 12, 1998, and (ii) U S WEST
common stock for periods after the Separation to December 31, 1999. In
accordance with the Separation, holders of Communications Group targeted stock
received one share of U S WEST common stock for each share of Communications
Group targeted stock.

               COMPARISON OF 50-MONTH CUMULATIVE TOTAL RETURN(A)
           AMONG U S WEST/COMMUNICATIONS GROUP, S&P 500 STOCK INDEX,
       S&P TELECOMMUNICATIONS INDEX(B), AND COMMUNICATIONS PEER GROUP(C)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
                                         OCT-95  DEC-95  DEC-96  DEC-97  DEC-98  DEC-99
<S>                                      <C>     <C>     <C>     <C>     <C>     <C>
U S WEST/Communications Group              $100    $124    $120    $177    $265    $308
S&P 500                                    $100    $107    $131    $174    $224    $271
S&P Telecommunications Index Weighted      $100    $110    $111    $155    $227    $240
Communications Peer Group - Weighted       $100    $109    $111    $155    $224    $237
</TABLE>

<TABLE>
<CAPTION>
                                                    OCT-95     DEC-95     DEC-96     DEC-97     DEC-98     DEC-99
                                                   --------   --------   --------   --------   --------   --------
<S>                                                <C>        <C>        <C>        <C>        <C>        <C>
U S WEST/Communications Group....................    $100       $124       $120       $177       $265       $308
S&P 500..........................................     100        107        131        174        224        271
S&P Telecommunications Index--Weighted...........     100        110        111        155        227        240
Communications Peer Group--Weighted..............     100        109        111        154        224        237
</TABLE>

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

Notes.

(a) Total return assumes the reinvestment of dividends.

(b) Consists of returns weighted by market capitalization of Alltel, Bell
    Atlantic, BellSouth, Centurytel, GTE and SBC Communications.

(c) Consists of returns weighted by market capitalization of Alltel, BellSouth,
    GTE, Nynex, Pacific Telesis, SBC Communications and Southern New England
    Telecommunications. Pacific Telesis, Southern New England Telecommunications
    and Ameritech were acquired by SBC Communications on April 1, 1997;
    October 26, 1998; and October 8, 1999, respectively. The total shareholder
    returns of the acquired companies parallel that of SBC Communications after
    such dates. Nynex was acquired by Bell Atlantic on August 14, 1997. The
    total shareholder return of Nynex parallels that of Bell Atlantic after such
    date. Frontier and Cincinnati Bell, both companies contained in last year's
    peer group, were acquired by companies outside of the peer group and thus
    omitted from this year's total shareholder return calculation.

                                       28
<PAGE>
    Assumes $100 invested on October 31, 1995 in Communications Group targeted
stock, the Standard & Poor's 500 Stock Index, the S&P Telecommunications Index,
and the Communications Peer Group.

    The graph and chart below compares the quarterly change in cumulative total
stockholder return on our common stock since the Separation, including the
reinvestment of dividends, with the return on the Standard & Poor's 500 Stock
Index, the S&P Telecommunications Index, and the Communications Peer Group. The
performance graph shows the return of $100 invested in our common stock for
monthly periods after the Separation to December 31, 1999.

               COMPARISON OF 18-MONTH CUMULATIVE TOTAL RETURN(A)
                      AMONG U S WEST, S&P 500 STOCK INDEX,
       S&P TELECOMMUNICATIONS INDEX(B), AND COMMUNICATIONS PEER GROUP(C)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
                                  S&P          COMMUNICATIONS
<S>     <C>       <C>      <C>                 <C>
                           Telecommunications     Peer Group-
                               Index-Weighted        Weighted
        U S WEST  S&P 500
Jun-98      $100     $100                $100            $100
Sep-98      $113      $90                $108            $107
Dec-98      $141     $109                $133            $133
Mar-99      $121     $115                $121            $120
Jun-99      $130     $123                $147            $148
Sep-99      $128     $115                $142            $143
Dec-99      $163     $132                $141            $138
</TABLE>

<TABLE>
<CAPTION>
                                             JUN-98     SEP-98     DEC-98     MAR-99     JUN-99     SEP-99     DEC-99
                                            --------   --------   --------   --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>
U S WEST..................................    $100       $113       $141       $121       $130       $128       $163
S&P 500...................................     100         90        109        115        123        115        132
S&P Telecommunications Index--Weighted....     100        108        133        121        147        142        141
Communications Peer Group--Weighted.......     100        107        133        120        148        143        138
</TABLE>

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

Notes.

(a) Total return assumes the reinvestment of dividends.

(b) Consists of returns weighted by market capitalization of Alltel, Bell
    Atlantic, BellSouth, Centurytel, GTE, and SBC Communications.

(c) Consists of returns weighted by market capitalization of Alltel, Ameritech,
    Bell Atlantic, BellSouth, GTE, Nynex, Pacific Telesis, SBC Communications
    and Southern New England Telecommunications. Pacific Telesis, Southern New
    England Telecommunications and Ameritech were acquired by SBC Communications
    on April 1, 1997; October 26, 1998; and October 8, 1999, respectively. The
    total shareholder returns of the acquired companies parallel that of SBC
    Communications after such dates. Nynex was acquired by Bell Atlantic on
    August 14, 1997. The total shareholder return of Nynex parallels that of
    Bell Atlantic after such date. Frontier and Cincinnati Bell, both companies
    contained in last year's peer group, were acquired by companies outside of
    the peer group and thus omitted from this year's total shareholder return
    calculation.

    Assumes $100 invested on June 30, 1998 in our common stock, the Standard &
Poor's 500 Stock Index, the S&P Telecommunications Index, and the Communications
Peer Group.

                                       29
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF MANAGEMENT

    The following table sets forth the information concerning shares of common
stock beneficially owned by each Director and named executive officer of
U S WEST as of December 31, 1999 (or as of such other date as may be specified)
and by the Directors and executive officers of U S WEST as a group. These shares
represent less than one percent of the outstanding shares of U S WEST common
stock. Fractional shares have been rounded to the nearest whole share.

<TABLE>
<CAPTION>
                                                      SHARES SUBJECT
                                                       TO OPTIONS**                          SHARE EQUIVALENTS
                                    TOTAL NUMBER       (INCLUDED IN                          HELD IN DEFERRED
             NAME                    OF SHARES*           TOTAL)       SAVINGS PLAN/ESOP   COMPENSATION PLANS***
             ----                ------------------   --------------   -----------------   ---------------------
<S>                              <C>                  <C>              <C>                 <C>
Linda G. Alvarado..............          20,986(1)         10,000               --                  2,740
Craig R. Barrett...............          32,072(1)         10,000               --                     --
Betsy J. Bernard...............          67,313            33,832               --                  5,694
Hank Brown.....................          20,464(2)         10,000               --                  2,916
Jerry J. Colangelo.............          21,273(1)         10,000               --                     --
Manuel A. Fernandez............           9,601(3)             --               --                  1,690
George J. Harad................          23,885(1)(4)      13,000               --                  3,976
Peter S. Hellman...............          21,386(1)         10,000               --                  2,721
John A. Kelley, Jr.............         132,305            82,995              839                    518
Marilyn C. Nelson..............          32,386(1)(5)      22,000               --                 10,502
Frank Popoff...................          39,470(1)         16,000               --                  1,385
Solomon D. Trujillo............         909,355(6)        558,890            3,030                 15,801
Gregory M. Winn................         159,175           106,564(7)         4,524                  3,937
Joseph R. Zell.................          99,535            59,550            1,632                    667
All Directors and executive
  officers of U S WEST (as a
  group).......................       1,922,430         1,187,259           23,167                 68,525
</TABLE>

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

*   Includes shares subject to acquisition through exercise of stock options
    within 60 days and equivalent Savings Plan/ESOP shares.

**  Shares subject to acquisition through exercise of stock options within 60
    days.

*** Includes units denominated as common share equivalents held in deferred
    compensation accounts.

(1) Includes 8,700 unvested shares of restricted stock granted as part of
    director compensation.

(2) Includes 7,887 unvested shares of restricted stock granted as part of
    director compensation.

(3) Includes 8,700 unvested shares of restricted stock granted as part of
    director compensation.

(4) Includes 40 shares subject to shared voting and investment power.

(5) Includes 3,002 shares subject to shared voting and investment power.

(6) Includes 300,000 shares of restricted U S WEST common stock as part of the
    August 1999 merger retention plan.

(7) Includes 2,250 shares subject to options held by spouse.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    The following table sets forth, as of December 31, 1999, information with
respect to each person who was known by U S WEST (based upon a review of
schedules and reports filed with the Securities and Exchange Commission (the
"Commission")) to be the beneficial owner of more than 5% of U S WEST's common
stock.

<TABLE>
<CAPTION>
                                                                                     REPORTED
            NAME AND ADDRESS OF BENEFICIAL OWNER              NUMBER OF SHARES   PERCENT OF CLASS
            ------------------------------------              ----------------   ----------------
<S>                                                           <C>                <C>
Capital Research and Management Company.....................     45,304,700             9.0%
  333 South Hope Street
  Los Angeles, California 90071-1447
State Street Bank and Trust Company,........................     31,828,145            6.28%
  as trustee for the U S WEST Savings Plan/ESOP
  225 Franklin Street
  Boston, Massachusetts 02110
</TABLE>

                                       30
<PAGE>
            SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934 requires our Directors
and executive officers, and persons who own more than 10% of our common stock,
to file with the Commission, the New York Stock Exchange and the Pacific
Exchange reports of ownership and changes in ownership of common stock and other
equity securities of the Company. Executive officers, Directors and greater than
10% shareholders are required by Commission regulation to furnish to us copies
of all Section 16(a) forms they file.

    Based solely on a review of the copies of Section 16(a) forms furnished to
us and written representations that no other filings were required, U S WEST
believes that all Commission filing requirements applicable to its executive
officers, Directors and greater than 10% shareholders were complied with for
1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    ALVARADO CONSTRUCTION INC. ("ALVARADO CONSTRUCTION").  In February 2000, one
of the Company's subsidiaries entered into a master professional services
agreement with Alvarado Construction to provide project management services for
certain of our high speed data initiatives and buildouts. Linda G. Alvarado is
the President and Chief Executive Officer of Alvarado Construction and is a
member of the Company's Board of Directors. The agreement expires in February
2002 and specific projects will be evidenced by separate statements of work. As
of the filing of this Annual Report on Form 10-K, one statement of work (and
associated work order) had been entered into between the parties for an amount
of approximately $1.5 million. The engagement of Alvarado Construction was
approved by the Company's Board of Directors, and management believes that the
engagement has been structured on an arm's-length basis.

    For a discussion of other related transactions required to be disclosed
under this item, you should refer to Note 13 of the consolidated financial
statements on page F-26.

                                    PART IV

ITEM 14. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS

(a) Documents filed as part of this report:

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>   <C>                                                           <C>
(i)   Report of Independent Public Accountants....................        F-1
(ii)  Consolidated Financial Statements:
      Consolidated Statements of Income for the years ended
        December 31, 1999, 1998 and 1997..........................    F-2 and F-3
      Consolidated Balance Sheets as of December 31, 1999 and
        1998......................................................        F-4
      Consolidated Statements of Cash Flows for the years ended
        December 31, 1999, 1998 and 1997..........................        F-5
      Consolidated Statements of Stockholders' Equity.............        F-6
      Notes to Consolidated Financial Statements and Supplementary
        Data......................................................  F-7 through F-29
(iii) Consolidated Financial Statement Schedule:
      Report of Independent Public Accountants....................        F-30
      Schedule II--Valuation and Qualifying Accounts..............        F-31
</TABLE>

Financial statement schedules other than those listed above have been omitted
because the required information is contained in the consolidated financial
statements and notes thereto or because such schedules are not required or
applicable.

                                       31
<PAGE>
(b) Reports on Form 8-K:

    U S WEST filed the following reports on Form 8-K during the fourth quarter
of 1999 and through the filing of this Form 10-K:

    (i) Form 8-K dated October 22, 1999 providing notification of the release of
        third quarter earnings of U S WEST.

    (ii) Form 8-K dated November 2, 1999 providing notification of a press
         release announcing results of the November 2, 1999 special shareholders
         meeting regarding the Qwest Merger.

   (iii) Form 8-K dated January 4, 2000 providing notification of a press
         release announcing the Global Crossing Shares Monetization.

    (iv) Form 8-K dated January 26, 2000 providing notification of the release
         of fourth quarter earnings of U S WEST.

    (v) Form 8-K dated February 29, 2000 providing notification of a press
        release announcing our Chairman, President and Chief Executive Officer's
        decision not to join Qwest upon the completion of the merger.

(c) Exhibits:

    Exhibits identified in parentheses below are on file with the Commission and
are incorporated herein by reference. All other exhibits are provided as part of
this electronic submission.

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
        (2-A)                  -- Separation Agreement between U S WEST, Inc. (renamed
                                  "MediaOne Group, Inc.") and U S WEST, Inc. (formerly USW-C,
                                  Inc.), dated June 5, 1998 (Exhibit 99.1 to Form 8-K/A dated
                                  June 26, 1998, File No. 1-14087).

       (2-A.1)                 -- Amendment to the Separation Agreement between MediaOne
                                  Group, Inc. (formerly U S WEST, Inc.) and U S WEST, Inc.
                                  (formerly USW-C, Inc.) dated June 12, 1998 (Exhibit 10(p) to
                                  Form 10-K/A for the year ended December 31, 1998, File
                                  No. 1-14087).

       (2-A.2)                 -- Offer to Purchase; Letter of Transmittal relating to the
                                  Common Stock; Letter to Brokers, Dealers, Commercial Banks,
                                  Trust Companies and Other Nominees; Letter from Brokers,
                                  Dealers, Commercial Banks, Trust Companies and Other
                                  Nominees to Clients, Notices of Guaranteed Delivery relating
                                  to the Common Stock; Press Release issued by the Offeror and
                                  the Company on May 17, 1999; and Guidelines for Certificate
                                  of Taxpayer Identification Number on Substitute Form W-9,
                                  each dated May 21, 1999 (Exhibits (a)(1) through (a)(7) to
                                  Schedule 14D-1, dated May 21, 1999, as amended).

       (2-A.3)                 -- Agreement and Plan of Merger, dated as of May 16, 1999,
                                  between Global Crossing Ltd. and U S WEST, Inc. (Exhibit 2
                                  to Form 8-K, dated May 21, 1999, File No. 1-14087).

       (2-A.4)                 -- Tender Offer and Purchase Agreement, dated as of May 16,
                                  1999, between Global Crossing Ltd. and U S WEST, Inc.
                                  (Exhibit (c)(2) to Schedule 14D-1 and Schedule 13-D, dated
                                  May 21, 1999, as amended).

       (2-A.5)                 -- Voting Agreement, dated as of May 16, 1999, between Global
                                  Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(3) to Schedule
                                  14D-1 and Schedule 13D, dated May 21, 1999, as amended).

       (2-A.6)                 -- Standstill Agreement, dated as of May 16, 1999, between
                                  Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(4) to
                                  Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as
                                  amended).
</TABLE>

                                       32
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
       (2-A.7)                 -- Tender and Voting Agreement, dated as of May 16, 1999,
                                  between U S WEST, Inc., Global Crossing Ltd. and each of the
                                  parties listed on the signature page thereto
                                  (Exhibit (c)(5) to Schedule 14D-1 and Schedule 13D, dated
                                  May 21, 1999, as amended).

       (2-A.8)                 -- Agreement, dated as of May 16, 1999, between Global Crossing
                                  Ltd. and each person whose name appears on the signature
                                  page thereto (Exhibit (c)(6) to Schedule 14D-1 and Schedule
                                  13D, dated May 21, 1999, as amended).

       (2-A.9)                 -- Letter Agreement, dated as of May 16, 1999, between
                                  U S WEST, Inc. and Global Crossing Ltd. (Exhibit 99 to
                                  Form 8-K, dated May 21, 1999, File No. 1-14087).

      (2-A.10)                 -- Transfer Agreement, dated as of May 16, 1999, between Global
                                  Crossing Ltd. and each person whose name appears on the
                                  signature page thereto (Exhibit (c)(8) to Schedule 14D-1 and
                                  Schedule 13D, dated May 21, 1999, as amended).

      (2-A.11)                 -- Agreement and Plan of Merger between U S WEST, Inc. and
                                  Qwest Communications International Inc., dated as of
                                  July 18, 1999 and amended by Amendment No. 1, dated as of
                                  September 8, 1999 (Annex A to Schedule 14A dated
                                  September 17, 1999).

      (2-A.12)                 -- Voting Agreement among each of the stockholders listed on
                                  the signature page thereto and U S WEST, Inc., dated as of
                                  July 18, 1999 (Exhibit 10.1 to Form 8-K, dated July 20,
                                  1999, File No. 1-14087).

      (2-A.13)                 -- Termination Agreement between U S WEST, Inc. and Global
                                  Crossing Ltd., dated as of July 18, 1999 (Exhibit 10.2 to
                                  Form 8-K, dated July 20, 1999, File No. 1-14087).

      (2-A.14)                 -- Amendment No. 1, dated as of July 18, 1999, to Tender Offer
                                  and Purchase Agreement, dated as of May 16, 1999, between
                                  U S WEST, Inc. and Global Crossing Ltd. (Exhibit 2-A.14 to
                                  Form 10-Q for the quarter ended June 30, 1999, File No.
                                  1-14087).

        (3-A)                  -- Restated Certificate of Incorporation of U S WEST, Inc.
                                  (Exhibit 3(A) to Form S-4/A Registration Statement No.
                                  333-45765, filed March 18, 1998).

        (3-B)                  -- Bylaws of U S WEST, Inc. effective as of June 12, 1998
                                  (Exhibit 3(ii) to Form 8-K/A dated June 26, 1998, File
                                  No. 1-14087).

       (4-A.1)                 -- Amendment No. 1 to Rights Agreement between U S WEST, Inc.
                                  and State Street Bank and Trust Company, dated as of
                                  May 16, 1999 (Exhibit 4 to Form 8-K, dated May 21, 1999,
                                  File No. 1-14087).

       (4-A.2)                 -- Amendment No. 2 to Rights Agreement between U S WEST, Inc.
                                  and State Street Bank and Trust Company, dated as of
                                  July 18, 1999 (Exhibit 4-A.2 to Form 10-Q for the quarter
                                  ended June 30, 1999, File No. 1-14087).

       (4-A.3)                 -- Registration Rights Agreement, dated August 20, 1999,
                                  between U S WEST Capital Funding, Inc., U S WEST, Inc., J.P.
                                  Morgan Securities, Inc. and Merrill Lynch, Pierce, Fenner &
                                  Smith Incorporated (Exhibit 4-A.3 to Form S-4 Registration
                                  Statement No. 333-92523, filed December 10, 1999).

        (4-B)                  -- Indenture, dated as of June 29, 1998, by and among
                                  U S WEST Capital Funding, Inc., U S WEST, Inc. and The First
                                  National Bank of Chicago (now known as Bank One Trust
                                  Company, National Association) as Trustee (Exhibit 4(a) to
                                  Form 8-K dated November 18, 1998, File No. 1-14087).

       (10-A)                  -- Employee Matters Agreement between U S WEST, Inc. (renamed
                                  MediaOne Group, Inc.) and USW-C, Inc. (renamed U S WEST,
                                  Inc.), dated June 5, 1998 (Exhibit 99.2 to Form 8-K/A dated
                                  June 26, 1998, File No. 1-14087).
</TABLE>

                                       33
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
       (10-B)                  -- Tax Sharing Agreement between U S WEST, Inc. (renamed
                                  MediaOne Group, Inc.) and USW-C, Inc. (renamed U S WEST,
                                  Inc.), dated June 5, 1998 (Exhibit 99.3 to Form 8-K/A dated
                                  June 26, 1998, File No. 1-14087).

       (10-C)                  -- 364-Day Credit Agreement, dated May 8, 1998, with Morgan
                                  Guaranty Trust Company of New York, as Administrative Agent
                                  (Exhibit 10A to Form 10-Q for the quarter ended March 31,
                                  1998, File No. 1-14087).

       (10-D)                  -- Five Year Credit Agreement, dated May 8, 1998, with Morgan
                                  Guaranty Trust Company of New York, as Administrative Agent
                                  (Exhibit 10B to Form 10-Q for the quarter ended March 31,
                                  1998, File No. 1-14087).

      (10-D.1)                 -- Amendment No. 1 to Credit Agreements dated as of June 30,
                                  1998 to the 364-Day Credit Agreement and the Five Year
                                  Credit Agreement, each dated as of May 8, 1998, among
                                  U S WEST Capital Funding, Inc., U S WEST, Inc., the banks
                                  listed on the signature pages thereto and Morgan Guaranty
                                  Trust Company of New York (Exhibit 10(e)(1) to Form 10-Q for
                                  the quarter ended September 30, 1998, File No. 1-14087).

      (10-D.2)                 -- Amended and Restated Credit Agreement, dated as of May 7,
                                  1999, among U S WEST Capital Funding, Inc., U S WEST, Inc.
                                  and the banks listed on the signature pages thereof
                                  (Exhibit (b)(4) to Schedule 14D-1 and Schedule 13D, dated
                                  May 21, 1999, as amended).

      (10-D.3)                 -- Amendment to Credit Agreements, dated as of June 11, 1999,
                                  which further amends (i) the 364-Day Credit Agreement dated
                                  as of May 8, 1999, as amended and (ii) the Five Year Credit
                                  Agreement dated as of May 8, 1998, as amended, among U S
                                  WEST Capital Funding, Inc., U S WEST, Inc., the banks listed
                                  on the signature pages thereto, and Morgan Guaranty Trust
                                  Company of New York (Exhibit 10-D.3 to Form 10-Q for the
                                  quarter ended June 30, 1999, File No. 1-14087).

       (10D.4)                 -- 364-Day $1.5 billion Credit Agreement dated as of June 11,
                                  1999, among U S WEST Capital Funding, Inc., U S WEST,
                                  Inc., the banks listed therein and Morgan Guaranty Trust
                                  Company of New York, as administrative agent
                                  (Exhibit (b)(6) to Amendment No. 3 to Schedule 14D-1 and
                                  Schedule 13D, dated June 11, 1999, filed on behalf of Global
                                  Crossing Ltd. and U S WEST, Inc.).

      (10-D.5)                 -- Assignment and Assumption Agreement among each institution
                                  listed on Schedule 1 thereto, U S WEST, Inc. and Morgan
                                  Guaranty Trust Company of New York, dated as of July 6, 1999
                                  (Exhibit 10-D.5 to Form 10-Q for the quarter ended June 30,
                                  1999, File No. 1-14087).

       (10-E)                  -- 364-Day Credit Agreement, among the banks listed therein,
                                  U S WEST Communications, Inc. and Morgan Guaranty Trust
                                  Company of New York, as administrative agent, dated as of
                                  May 19, 1999 (Exhibit 10-E to Form 10-Q for the quarter
                                  ended June 30, 1999, File No. 1-14087).

       (10-F)                  -- Amendment No. 1 to the 364-Day Credit Agreement, dated as of
                                  May 19, 1998, among U S WEST Communications, Inc.,
                                  U S WEST, Inc., the banks listed on the signature pages
                                  thereto and Morgan Guaranty Trust Company of New York, as
                                  administrative agent, dated as of June 11, 1999
                                  (Exhibit 10-F to Form 10-Q for the quarter ended June 30,
                                  1999, File No. 1-14087).

       (10-G)*                 -- Change of Control Agreement for the President and Chief
                                  Executive Officer of U S WEST, Inc. (Exhibit 10(f) to
                                  Form 10-Q for the quarter ended June 30, 1998, File
                                  No. 1-14087).
</TABLE>

                                       34
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
      (10-G.1)*                -- Retention Agreement for the Chairman, Chief Executive
                                  Officer and President of U S WEST, Inc., dated as of
                                  September 7, 1999 (Exhibit 10-G.1 to Form 8-K dated
                                  September 20, 1999, File No. 1-14087).

       (10-H)*                 -- Form of Change of Control Agreement for Tier II Executives
                                  of U S WEST, Inc. (Exhibit 10(g) to Form 10-Q for the
                                  quarter ended June 30, 1998, File No. 1-14087).

      (10-H.1)*                -- Form of Retention Agreement for Executive Officers of
                                  U S WEST, Inc. (Exhibit 10-H.1 to Form 8-K dated
                                  September 20, 1999, File No. 1-14087).

       (10-I)*                 -- Form of Executive Severance Agreement (Exhibit 10(h) to
                                  Form 10-Q for the quarter ended June 30, 1998, File No.
                                  1-14087).

       (10-J)*                 -- 1998 U S WEST Stock Plan (Exhibit 10-A to the Form S-4
                                  Registration Statement No. 333-45765, filed February 6,
                                  1998, as amended).

       (10-K)*                 -- U S WEST Long-Term Incentive Plan (Exhibit 10-D to the
                                  Form S-4 Registration Statement No. 333-45765, filed
                                  February 6, 1998, as amended).

       (10-L)*                 -- U S WEST Executive Short-Term Incentive Plan (Exhibit 10-E
                                  to the Form S-4 Registration Statement No. 333-45765, filed
                                  February 6, 1998, as amended).

       (10-M)*                 -- U S WEST 1998 Broad Based Stock Option Plan dated June 12,
                                  1998 (Exhibit 10(l) to Form 10-Q for the quarter ended
                                  September 30, 1998, File No. 1-14087).

       (10-N)*                 -- U S WEST Deferred Compensation Plan, amended and restated
                                  effective as of June 12, 1998 (Exhibit 10(m) to Form 10-Q
                                  for the quarter ended September 30, 1998, File
                                  No. 1-14087).

       (10-O)*                 -- U S WEST 1998 Stock Plan, as amended June 22, 1998
                                  (Exhibit 10(n) to Form 10-Q for the quarter ended
                                  September 30, 1998, File No. 1-14087).

      (10-O.1)*                -- 1998 U S WEST Stock Plan, as amended August 6, 1999
                                  (Exhibit 10-O.1 to Form 10-Q for the quarter ended
                                  September 30, 1999, File No. 1-14087).

      (10-O.2)*                -- 1999 U S WEST Stock Plan as amended August 6, 1999
                                  (Exhibit 10-O.2 to Form 10-Q for the quarter ended
                                  September 30, 1999, File No. 1-14087).

       (10-P)*                 -- Shareowner Investment Plan dated June 12, 1998 (Form S-3
                                  Registration Statement No. 333-52781, filed May 15, 1998).

       (10-Q)*                 -- Form of Non-Qualified Stock Option Agreement (Exhibit 10-Q
                                  to Form 10-Q for the quarter ended March 31, 1999, File No.
                                  1-14087).

       (10-R)                  -- Form of Agreement for Purchase and Sale of Telephone
                                  Exchanges, dated as of June 16, 1999, between Citizens
                                  Utilities Company and U S WEST Communications, Inc.
                                  (Exhibit 99 to Form 8-K, dated June 17, 1999, File No.
                                  1-14087).

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

         18                    -- Preferability Letter on Change of Accounting Principles.

         21                    -- Subsidiaries of the Registrant.

         23                    -- Consent of Arthur Andersen LLP.

         24                    -- Powers of Attorney.

         27                    -- Financial Data Schedule.

        (99)                   -- Annual Report on Form 11-K for the U S WEST Savings
                                  Plan/ESOP for the year ended December 31, 1999 to be filed
                                  by amendment to this Form 10-K.
</TABLE>

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

(*) Executive Compensation Plans and Arrangements

                                       35
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Denver,
State of Colorado, on March 3, 2000.

<TABLE>
<S>                                                    <C>      <C>
                                                       U S WEST, Inc.

                                                       By:                        /s/ ALLAN R. SPIES
                                                                      ------------------------------------------
                                                                                    Allan R. Spies
                                                                             EXECUTIVE VICE PRESIDENT AND
                                                                               CHIEF FINANCIAL OFFICER
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<S>                                            <C>
PRINCIPAL EXECUTIVE OFFICER

/S/ Solomon D. Trujillo                        President and Chief Executive Officer

PRINCIPAL FINANCIAL OFFICER:

/S/ Allan R. Spies                             Executive Vice President and Chief Financial Officer

PRINCIPAL ACCOUNTING OFFICER:

/S/ Janet K. Cooper                            Vice President-Finance and Controller

DIRECTORS:

/S/ Solomon D. Trujillo                        Chairman of the Board

/S/ Linda G. Alvarado

/S/ Craig R. Barrett

/S/ The Honorable Hank Brown

/S/ Jerry J. Colangelo

/S/ Manuel A. Fernandez

/S/ George J. Harad

/S/ Peter S. Hellman

/S/ Marilyn C. Nelson

/S/ Frank Popoff
</TABLE>

Dated: March 3, 2000

                                       36
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                            ----------------------------------------------------
                                              1999     1998(5)    1997(5)      1996       1995
                                            --------   --------   --------   --------   --------
                                               (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S>                                         <C>        <C>        <C>        <C>        <C>
Revenues..................................  $ 13,182   $ 12,395   $ 11,521   $ 11,168   $ 10,508
Operating expenses........................     9,845      9,346      8,745      8,356      7,931
Operating income..........................     3,337      3,049      2,776      2,812      2,577
Income before extraordinary item and
  cumulative effect of change in
  accounting principle(1).................     1,102      1,508      1,527      1,501      1,431
Net income(2,3)...........................     1,342      1,508      1,524      1,535      1,423
Historical earnings per share:(4)
    Basic.................................      2.66       3.05       3.16       3.21       3.02
    Diluted...............................      2.63       3.02       3.12       3.17       2.98
Average common shares outstanding
  (thousands):
    Basic.................................   504,423    494,395    482,751    477,549    470,716
    Diluted...............................   509,306    498,798    491,232    488,591    481,933
Dividends per common share(4).............  $   2.36   $   2.14   $   2.14   $   2.14   $   2.14
Total assets..............................    23,216     18,407     17,667     17,279     16,960
Total debt................................    13,071      9,919      5,715      6,545      6,782
Debt to total capital ratio...............      91.2%      92.9%      56.7%      61.6%      65.0%
Capital expenditures......................  $  4,218   $  2,905   $  2,672   $  2,831   $  2,770
Telephone network access lines in service
  (thousands).............................    17,009     16,601     16,033     15,424     14,795
Billed access minutes of use (millions):
  Interstate..............................    61,854     58,927     55,362     52,039     47,801
  Intrastate..............................    13,022     12,366     11,729     10,451      9,504
Total employees...........................    58,272     54,483     51,110     51,477     54,552
Telephone company employees...............    46,352     46,310     43,749     45,427     47,934
Telephone company employees per 10,000
  access lines............................      27.3       27.9       27.3       29.5       32.4
</TABLE>

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

(1) 1999 income includes terminated merger-related expenses of $282 ($0.56 per
    diluted share) related to the Global Crossing merger termination, a loss of
    $225 ($0.44 per diluted share) on the sale of shares of Global Crossing
    common stock and a charge of $34 ($0.07 per diluted share) on the decline in
    the market value of derivative financial instruments. 1998 income includes
    Separation expenses of $68 ($0.13 per diluted share) associated with the
    Separation of Old U S WEST into two independent companies and an asset
    impairment charge of $21 ($0.04 per diluted share). 1997 income includes a
    $152 regulatory charge ($0.31 per diluted share) related primarily to the
    1997 Washington State Supreme Court ruling that upheld a Washington rate
    order, a gain of $32 ($0.07 per diluted share) on the sale of the Company's
    1/7th interest in Bell Communications Research, Inc. ("Bellcore") and a gain
    of $48 ($0.10 per diluted share) on the sales of local telephone exchanges.
    1996 income includes a gain of $36 ($0.07 per diluted share) on the sales of
    local telephone exchanges and the current effect of $15 ($0.03 per diluted
    share) from adopting Statement of Financial Accounting Standards ("FAS") No.
    121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
    Assets to be Disposed of." 1995 income includes a gain of $85 ($0.18 per
    diluted share) on the sales of local telephone exchanges and costs of $8
    ($0.02 per diluted share) associated with the 1995 Recapitalization
    discussed in footnote 4 below.

(2) 1999 net income includes $240 ($0.47 per diluted share) for the cumulative
    effect of a change in accounting principle related to recognizing directory
    publishing revenues and expenses from the "deferral method" to the "point of
    publication" method. See Note 2 to the consolidated financial statements.
    1997 net income was reduced by an extraordinary charge of $3 ($0.01 per
    diluted share) for the early extinguishment of debt. 1996 net income
    includes a gain of $34 ($0.07 per diluted share) for the cumulative effect
    of the adoption of FAS No. 121. 1995 net income was reduced by an
    extraordinary charge of $8 ($0.02 per diluted share) for the early
    extinguishment of debt.

                                       37
<PAGE>
(3) For 1998, pro forma net income, assuming the incremental interest expense
    associated with the Dex Indebtedness was incurred from the beginning of the
    year through the Separation and approximately 16,341,000 shares of common
    stock (net of the redemption of approximately 305,000 fractional shares)
    issued in connection with the Dex Alignment had been issued at the beginning
    of the year, would have been $1,436 ($2.86 per basic share or $2.84 per
    diluted share).

(4) The historical average shares outstanding assume a one-for-one conversion of
    historical Communications Group common shares outstanding into shares of
    U S WEST as of the Separation date. The 1998 historical average common
    shares outstanding include the issuance of approximately 16,341,000 shares
    of common stock (net of redemption of approximately 305,000 fractional
    shares) issued in connection with the Dex Alignment. Effective November 1,
    1995, each share of common stock of Old U S WEST was converted into one
    share each of Communications Group common stock and Media Group common stock
    (the "1995 Recapitalization"). Earnings per common share and dividends per
    common share for 1995 have been presented on a pro forma basis to reflect
    the two classes of stock as if they had been outstanding since January 1,
    1995.

(5) Certain amounts have been reclassified to conform to the current year's
    presentation.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

    Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" on page 1 for additional
factors relating to such statements.

RESULTS OF OPERATIONS

1999 COMPARED WITH 1998

    Several non-recurring and non-operating items impacted net income in 1999
and 1998. Results of operations for the two years, normalized to exclude the
effects of such items, are as follows:

<TABLE>
<CAPTION>
                                                                                         INCREASE
                                                                1999       1998         (DECREASE)
                                                              --------   --------   -------------------
<S>                                                           <C>        <C>        <C>        <C>
Net income..................................................   $1,342     $1,508     $ (166)     (11.0)%
Pro forma adjustment(1).....................................       --        (72)        72      100.0
Non-recurring and non-operating items.......................      301         89        212      238.2
                                                               ------     ------     ------     ------
Normalized pro forma income.................................   $1,643     $1,525     $  118        7.7%
                                                               ======     ======     ======     ======

Diluted earnings per share..................................   $ 2.63     $ 3.02     $(0.39)     (12.9)%
Pro forma adjustment(2).....................................       --      (0.18)      0.18      100.0
Non-recurring and non-operating items.......................     0.60       0.17       0.43      252.9
                                                               ------     ------     ------     ------
Normalized pro forma diluted earnings per share.............   $ 3.23     $ 3.01     $ 0.22        7.3%
                                                               ======     ======     ======     ======
</TABLE>

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

(1) Reflects incremental (after-tax) interest expense associated with the Dex
    Indebtedness from the beginning of 1998 up to the Separation date.

(2) Reflects the issuance of approximately 16,341,000 shares of common stock
    (net of the redemption of approximately 305,000 fractional shares) issued in
    connection with the Dex Alignment as if the shares had been issued as of the
    beginning of 1998.

    Non-recurring and non-operating items in 1999 include:

    - an after-tax charge of $282 or $0.56 per diluted share for Global Crossing
      terminated merger-related expenses,

    - an after-tax charge of $225 or $0.44 per diluted share for the loss on the
      sale of Global Crossing common stock,

    - an after-tax charge of $34 or $0.07 per diluted share for the decline in
      the market value of derivative financial instruments associated with the
      sale of Global Crossing common stock, and

                                       38
<PAGE>
    - an after-tax benefit of $240 or $0.47 per diluted share representing the
      cumulative effect of change in accounting principle applicable to the
      change in accounting method for directory publishing revenues and
      expenses.

    Non-recurring and non-operating items in 1998 include:

    - an after-tax charge of $68 or $0.13 per diluted share for Separation
      costs, and

    - an after-tax charge of $21 or $0.04 per diluted share related to the
      impairment of certain long-lived assets.

    The following sections provide a more detailed discussion of the changes in
revenues and expenses.

REVENUES

<TABLE>
<CAPTION>
                                                     1999       1998          INCREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Local services revenues..........................   $7,746     $7,104      $642       9.0%
                                                    ======     ======      ====       ===
</TABLE>

    LOCAL SERVICES REVENUES.  Local services revenues include retail and
wholesale basic monthly service fees, fees for calling services such as voice
messaging and caller identification, wireless revenues, subscriber line charges,
MegaBit-TM- data services, local number portability ("LNP") charges, public
phone revenues, interconnection, paging, and installation and connection
charges. State PUCs regulate most local service rates.

    Local services revenues increased primarily due to greater sales of wireless
and calling services of $142 and $119, respectively. Additionally, access line
growth contributed to the rise in revenues. Second line additions by residential
and small business customers contributed to access line growth due to continuing
demand for Internet access and data transport capabilities. As of the end of
1999, we had added 408,000 access lines, an increase of 2.5% over the end of
1998. Of this increase, residential second line installations accounted for
187,000 lines, an increase of 11.8% compared with 1998. Also contributing to the
revenue growth were greater revenues from inside wire maintenance plans, LNP
charges, interconnection revenues, subscriber line charges and increases in the
subscriber base of our Megabit-TM- data services, collectively contributing
$212. Partially offsetting these increases were net regulatory rate adjustments
and refunds of $16 for 1999, over the comparable 1998 period.

    While local services revenues increased in 1999, our growth rate has
declined from 1998. The decline in the growth rate was primarily attributable to
increased competition as well as our customer retention strategy of offering
bundles of services to customers at lower prices in return for entering into
longer-term contracts. Additionally, some business customers have opted to
migrate from multiple single lines to high capacity lines, which decreases local
services revenues but increases access services revenues. We believe we may
continue to experience declining growth rates as the level of customer demand
slows and competition increases. In June 1999, we entered into a series of
definitive agreements to sell local exchange telephone properties serving
approximately 530,000 access lines in nine states for approximately $1,650 in
cash, subject to adjustment. The transfer of ownership, which will occur on a
state-by-state basis, is expected to be completed over the next two years. The
access lines accounted for approximately 3% of fiscal 1999 local services
revenues. While the sale is expected to provide us with one-time gains in 2000
and 2001, it will negatively impact future local services revenue growth.
Additionally, we are planning the sale of approximately 270,000 access lines in
New Mexico and Washington.

<TABLE>
<CAPTION>
                                                      1999       1998          INCREASE
                                                    --------   --------   -------------------
<S>                                                 <C>        <C>        <C>        <C>
Access services revenues..........................   $2,729     $2,660      $69        2.6%
                                                     ======     ======      ===        ===
</TABLE>

                                       39
<PAGE>
    ACCESS SERVICES REVENUES.  Access services revenues are derived primarily
from charging IXCs, such as AT&T and MCI WorldCom, for use of our local network
to connect customers to their long-distance networks. Also included in access
services revenues are special access and private line revenues from end-users
buying dedicated local exchange capacity to support their private networks.

    The growth in access services revenues was attributable to increased demand
for private line and special access services. Revenues from private line and
special access services increased $186 primarily due to the increased demand for
data services. Additionally, increased demand from IXCs contributed to the
revenue increase. Access minutes of use increased 5.0% for 1999. The growth in
access minutes of use was partially offset by mandated rate reductions of $164.

<TABLE>
<CAPTION>
                                                     1999       1998          INCREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Directory services revenues......................   $1,436     $1,318      $118       9.0%
                                                    ======     ======      ====       ===
</TABLE>

    DIRECTORY SERVICES REVENUES.  Directory services revenues are primarily
derived from selling advertising in our published directories. Effective in
1999, Dex changed to the "point of publication" method of accounting, which
recognizes revenues and expenses at the time the related directory is published.
Previously, revenues and expenses were recognized under the "deferral" method
under which revenues and expenses were recognized over the lives of the
directories, generally one year. We changed the methodology to align our revenue
and expense policy with the earnings process and to better reflect the operating
activity of the business. Directory services revenues for 1998 do not include
the effects of the directory publishing accounting change. Including the effects
of the accounting change in 1998, directory services revenues increased $87, or
6.4%. The increase in directory services revenues was primarily attributable to
increased sales of premium advertisements and price changes.

<TABLE>
<CAPTION>
                                                     1999       1998          DECREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Long-distance services revenues..................    $584       $795      $(211)     (26.5)%
                                                     ====       ====      =====      =====
</TABLE>

    LONG-DISTANCE SERVICES REVENUES.  Long-distance services revenues are
derived from customer calls to locations outside of their local calling area but
within the same LATA. The decrease in long-distance services revenues for 1999
was primarily attributable to greater competition, strategic price reductions
and the expansion in the number and size of extended service areas. Mandated
rate reductions of $40 for 1999 also contributed to the revenue decrease. As of
December 31, 1999, customers in all 14 states in which we operate are able to
choose an alternative provider for intraLATA calls without dialing a special
access code when placing a call.

    We believe we will continue to experience further declines in long-distance
services revenues as regulatory actions provide for increased levels of
competition. We are responding to competition through competitive pricing of
intraLATA long-distance services and increased promotional efforts to retain
customers. See "Special Note Regarding Forward-Looking Statements" on page 1.

<TABLE>
<CAPTION>
                                                       1999       1998          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Other services revenues............................    $687       $518       $169       32.6%
                                                       ====       ====       ====       ====
</TABLE>

    OTHER SERVICES REVENUES.  Other services revenues include billing and
collection services for IXCs, collocation services for other CLECs, customer
equipment sales and sales of other unregulated products, such as
U S WEST.net-Registered Trademark-, our Internet service. Other services
revenues increased primarily as a result of increased revenues for
U S WEST.net-Registered Trademark-, the national expansion of our data business
and increased customer equipment sales.

                                       40
<PAGE>
EXPENSES

<TABLE>
<CAPTION>
                                                     1999       1998          INCREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Employee-related expenses........................   $4,733     $4,312      $421       9.8%
                                                    ======     ======      ====       ===
</TABLE>

    EMPLOYEE-RELATED EXPENSES.  Employee-related expenses include salaries and
wages, benefits, payroll taxes and contract labor.

    Employee-related expenses for 1998 include $21 of costs related to the third
quarter 1998 work stoppage and do not include the effects of the directory
publishing accounting change. Including the effects of the accounting change and
excluding the work stoppage costs, employee-related expenses increased $439 or
10.2% for 1999 over 1998. The number of employees increased from 54,483 at the
end of 1998 to 58,272 at December 31, 1999. Employee-related expenses increased
because of increased commitments towards improving customer service, including
meeting requests for installation and repair services, resulting in higher labor
costs. Additionally, growth in several sectors of the business, primarily
wireless and data communications and year 2000 costs, resulted in increased
employee levels and contract labor costs. Across-the-board wage increases also
contributed to the increase in employee-related expenses. Additionally, included
in employee-related expenses for 1999 are the salary and benefit costs for
employees who were transferred from Old U S WEST as part of the Separation.
Prior to the Separation, these costs were allocated to us and included in other
operating expenses. Partially offsetting these increases was the capitalization
in 1999 of employee-related costs associated with developing internal use
software due to the adoption of the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." In accordance with
the SOP, $85 of employee-related costs were capitalized in 1999. An increase in
net pension credits of $47 also partially offset the increase in
employee-related expenses for 1999. As a result of the favorable return on
investment earnings on pension plan assets, we will continue to experience
increases in our pension credits in 2000.

<TABLE>
<CAPTION>
                                                    1999       1998          DECREASE
                                                  --------   --------   -------------------
<S>                                               <C>        <C>        <C>        <C>
Other operating expenses........................   $2,745     $2,835      $(90)      (3.2)%
                                                   ======     ======      ====       ====
</TABLE>

    OTHER OPERATING EXPENSES.  Other operating expenses include access charges
paid to carriers for the routing of local and long-distance traffic to their
facilities, interconnection costs, taxes other than income taxes, paper,
printing, delivery and distribution costs associated with publishing activities
and other selling, general and administrative costs. Included in 1998 were $129
of Separation costs and asset impairment charges. Additionally, 1998 does not
include the effects of the directory publishing accounting change. Including the
effects of the accounting change in 1998 and excluding the Separation costs and
asset impairment charges, other operating expenses increased $33, or 1.2% for
1999 over 1998. This increase was primarily attributable to the following:

    - increased costs of product sales associated with our growth initiatives,
      including wireless handset costs and costs applicable to our data
      communications services and our directory segment,

    - higher access and interconnection expenses resulting from regulatory
      rulings that require us to pay access charges to carriers for calls that
      originate on our network and terminate on other carriers' networks offset
      by reductions in access expense due to end-users dialing toll calls
      directly to IXCs and bypassing our network,

    - higher rent expense related to increased computer software, hardware and
      telephone pole leasing,

    - higher property taxes,

    - higher bad debt expense related to increased revenues, and

                                       41
<PAGE>
    - higher marketing and advertising costs for wireless, data communications
      services and calling services such as caller identification.

    Offsetting the increase in other operating expenses was the effect of
capitalizing $329 of software costs in 1999 primarily associated with developing
internal use software in accordance with SOP 98-1. A $20 refund related to a
gross receipts tax settlement also offset increases to expenses for 1999.
Additionally, for the second half of 1998, the transfer of employees from Old
U S WEST as part of the Separation resulted in the reclassification of related
salary and benefit costs to employee-related expenses.

<TABLE>
<CAPTION>
                                                     1999       1998          INCREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Depreciation and amortization expense............   $2,367     $2,199      $168       7.6%
                                                    ======     ======      ====       ===
</TABLE>

    DEPRECIATION AND AMORTIZATION EXPENSE.  Depreciation and amortization
expense increased primarily due to higher overall property, plant and equipment
balances resulting from continued investment in our network. Additionally, we
incurred amortization costs related to the capitalization of internal use
software in accordance with SOP 98-1 and reduced the useful lives of certain
assets due to changes in technology, both of which caused greater depreciation
expense. Partially offsetting the increases was the cessation of depreciation
associated with access lines that are intended to be sold.

<TABLE>
<CAPTION>
                                                    1999       1998          INCREASE
                                                  --------   --------   -------------------
<S>                                               <C>        <C>        <C>        <C>
Other expense--net..............................   $1,435      $630       $805      127.8%
                                                   ======      ====       ====      =====
</TABLE>

    OTHER EXPENSE--NET.  Interest expense was $736 for 1999 compared to $543 for
1998. The increase in interest expense for 1999 was primarily attributable to
debt incurred to acquire 39 million shares of Global Crossing common stock and
the $3,900 in debt assumed in the Separation as part of the Dex Alignment.

    We incurred a one-time charge in 1999 of $282 to dissolve the proposed
merger with Global Crossing. The charge included a cash payment of $140 to
Global Crossing, the transfer of $140 of Global Crossing common stock, we had
previously purchased, to Global Crossing and $2 of miscellaneous merger-related
costs.

    We incurred a $367 loss in 1999 on the sale of 24 million shares of Global
Crossing common stock. In connection with this transaction, we entered into an
equity return swap which is reflected at market value. In 1999, the market value
of the swap declined by $56.

    Also included in other expense--net was other income of $6 in 1999, compared
to other expense of $87 in 1998. The decrease in other expense was due to a
reduction in regulatory interest expense, a reduction in interest expense on a
federal income tax audit, gains on sales of real estate, net gains on sales of
marketable securities, reduced contributions to an affiliated foundation and
interest earned on a gross receipts tax settlement.

    SEGMENT RESULTS.  Segment results represent margins which, for segment
reporting purposes, exclude certain costs and expenses, including depreciation
and amortization, corporate expenses and taxes other than income. See Note 12 to
the consolidated financial statements on pages F-24 through F-26.

<TABLE>
<CAPTION>
                                                                           INCREASEE
                                                  1999       1998         (DECREASE)
                                                --------   --------   -------------------
<S>                                             <C>        <C>        <C>        <C>
Segment results:
Retail services segment.......................  $ 6,111    $ 6,194      $(83)      (1.3)%
Wholesale services segment....................    2,157      1,908       249       13.1
Network services segment......................   (2,793)    (2,776)      (17)      (0.6)
Directory services segment....................      741        657        84       12.8
                                                =======    =======      ====       ====
</TABLE>

                                       42
<PAGE>
    Margin from the retail services segment decreased from 1998 due to operating
expenses increasing at a greater rate than revenue growth. Revenues from the
retail services segment increased 5.4% for 1999 over 1998, primarily due to
growth in local services revenues which include wireless services, calling
services and Megabit-TM- data services. The revenue increase was more than
offset by higher operating expenses driven by growth initiatives and costs
associated with enhancing customer service. Margin from the wholesale services
segment increased as a result of greater demand for access and interconnect
services, partially offset by price reductions as mandated by both federal and
state regulatory authorities and higher access charge expenses. Margin from the
network services segment decreased due to increased volumes, service initiatives
and year 2000 costs. Margin from the directory services segment increased due to
changing the manner in which revenues and expenses are recognized and due to
growth in directory services revenue partially offset by increased sales support
costs.

<TABLE>
<CAPTION>
                                                     1999       1998          DECREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Provision for income taxes.......................    $800       $911      $(111)     (12.2)%
                                                     ====       ====      =====      =====
</TABLE>

    PROVISION FOR INCOME TAXES.  The effective tax rate for 1999 was 42.1%
compared to 37.7% for 1998. The increase in the effective tax rate in 1999 was
primarily attributable to the exclusion of the tax benefit for terminated
merger-related expenses. Excluding the effects of terminated merger-related
expenses, the effective tax rate for 1999 was 36.6% compared to 37.7% for 1998.
The decrease from the 1998 effective tax rate resulted primarily from certain
non-deductible Separation costs in 1998 and the increase in tax-exempt dividend
income for 1999.

1998 COMPARED WITH 1997

    Several non-recurring and non-operating items impacted net income in 1998
and 1997. Results of operations for the two years, normalized to exclude the
effects of such items, are as follows:

<TABLE>
<CAPTION>
                                                                             INCREASE
                                                    1998       1997         (DECREASE)
                                                  --------   --------   -------------------
<S>                                               <C>        <C>        <C>        <C>
Net income......................................   $1,508     $1,524     $  (16)     (1.0)%
Pro forma adjustment(1).........................      (72)      (162)        90      55.6
                                                   ------     ------     ------     -----
Pro forma net income............................    1,436      1,362         74       5.4
Non-recurring and non-operating items...........       89        (77)       166     215.6
                                                   ------     ------     ------     -----
Normalized pro forma income.....................   $1,525     $1,285     $  240      18.7%
                                                   ======     ======     ======     =====
Pro forma diluted earnings per share(2).........   $ 2.84     $ 2.70     $ 0.14       5.2%
Non-recurring and non-operating items...........     0.17      (0.16)      0.33     206.3
                                                   ------     ------     ------     -----
Normalized pro forma diluted earnings per
 share..........................................   $ 3.01     $ 2.55*    $ 0.46*     18.0%
                                                   ======     ======     ======     =====
</TABLE>

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

*   Amount does not foot due to the rounding of individual components.

(1) Reflects incremental (after-tax) interest expense associated with the Dex
    Indebtedness for the full year 1997 and from the beginning of 1998 up to the
    Separation.

(2) Reflects the issuance of approximately 16,341,000 shares of common stock
    (net of the redemption of approximately 305,000 fractional shares) issued in
    connection with the Dex Alignment as if the shares had been issued as of the
    beginning of each period indicated.

    Non-recurring and non-operating items in 1998 include:

    - an after-tax charge of $68 or $0.13 per diluted share for Separation
      costs, and

    - an after-tax charge of $21 or $0.04 per diluted share related to the
      impairment of certain long-lived assets.

                                       43
<PAGE>
    Non-recurring and non-operating items in 1997 include:

    - an after-tax charge of $3 or $0.01 per diluted share relating to the early
      extinguishment of debt, and

    - an after-tax gain of $80 or $0.17 per diluted share relating to the sales
      of local telephone exchanges and our investment in Bellcore.

    The following sections provide a more detailed discussion of the changes in
revenues and expenses.

REVENUES

<TABLE>
<CAPTION>
                                                       1998       1997          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Local services revenues............................   $7,104     $6,276      $828       13.2%
                                                      ======     ======      ====       ====
</TABLE>

    LOCAL SERVICES REVENUES.  Local service revenues increased in 1998 due
largely to access line growth and increased sales of calling services. Second
line additions by residential and small business customers contributed to access
line growth due to continuing demand for Internet access and data transport
capabilities. In 1998, we provided a total of 568,000 additional access lines,
an increase of 3.5% over 1997. Of this increase, second line installations
accounted for 241,000 lines, an increase of 18.0% compared with 1997. In
addition, regulatory rate increases in various jurisdictions accounted for $53
of the increase in local service revenues in 1998. Unfavorable regulatory rate
adjustments and other provisions for estimated state regulatory liabilities
decreased $122 in 1998 compared to 1997, due in part to a state of Washington
rate order ("Washington Rate Order") issued in 1997.

    Additionally, revenues from calling services, wireless services and
subscriber line charges also contributed to the increase in revenues. Lastly,
the work stoppage in the third quarter of 1998 negatively impacted revenue
growth.

<TABLE>
<CAPTION>
                                                        1998       1997          INCREASE
                                                      --------   --------   -------------------
<S>                                                   <C>        <C>        <C>        <C>
Access services revenues............................   $2,660     $2,645      $15        0.6%
                                                       ======     ======      ===        ===
</TABLE>

    ACCESS SERVICES REVENUES.  In 1998, access services revenues were affected
by a change in the classification of fees paid into the universal service funds.
In 1997 and prior years, fees paid into the universal service funds were netted
against access services revenues. In 1998, with the advent of the FCC's new
universal service fund structure and funding mechanism, these fees were recorded
as access expense within other operating expenses. Excluding the effects of the
reclassification, access services revenues decreased $70 or 2.6% in 1998. The
volume of access minutes billed increased 6.3% in 1998. The increase in demand
was substantially offset by price reductions as mandated by the FCC.
Additionally, a $68 charge recognized in 1997 resulting from the Washington Rate
Order also contributed to the increase in revenues in 1998.

<TABLE>
<CAPTION>
                                                        1998       1997          INCREASE
                                                      --------   --------   -------------------
<S>                                                   <C>        <C>        <C>        <C>
Directory services revenues.........................   $1,318     $1,236      $82        6.6%
                                                       ======     ======      ===        ===
</TABLE>

    DIRECTORY SERVICES REVENUES.  The increase in directory services revenues
was primarily attributable to increased sales of premium advertisements and
price changes.

<TABLE>
<CAPTION>
                                                        1998       1997          DECREASE
                                                      --------   --------   -------------------
<S>                                                   <C>        <C>        <C>        <C>
Long-distance services revenues.....................    $795       $897      $(102)     (11.4)%
                                                        ====       ====      =====      =====
</TABLE>

    LONG-DISTANCE SERVICES REVENUES.  The decrease in long-distance services
revenues was attributable to greater competition and regulatory rate reductions
in 1998, offset by a $51 charge recognized in 1997 resulting from the Washington
Rate Order. As of December 31, 1998, in five of the 14 states in which we

                                       44
<PAGE>
operate, customers were able to choose an alternative provider for intraLATA
calls without dialing a special access code when placing a call. Additionally,
contributing to the revenue decline was the expansion of multiple toll carrier
plans in 1997, whereby other telephone companies provide toll services
previously provided by us. Although we no longer receive these revenues, the
revenue loss has been offset with increased access services revenues and lower
access expenses.

<TABLE>
<CAPTION>
                                                           1998       1997          INCREASE
                                                         --------   --------   -------------------
<S>                                                      <C>        <C>        <C>        <C>
Other services revenues................................    $518       $467       $51        10.9%
                                                           ====       ====       ===        ====
</TABLE>

    OTHER SERVICES REVENUES.  Other services revenues increased primarily as a
result of increased revenues for customer equipment sales, the national
expansion of our data business and U S WEST.net-Registered Trademark-.

EXPENSES

<TABLE>
<CAPTION>
                                                       1998       1997          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Employee-related expenses..........................   $4,312     $3,953      $359       9.1%
                                                      ======     ======      ====       ===
</TABLE>

    EMPLOYEE-RELATED EXPENSES.  Employee-related expenses in 1998 included $21
of costs incurred in connection with the third-quarter work stoppage, including
incremental travel costs, contract labor costs and bonuses paid to management
for work performed during the strike. Partially offsetting these additional
costs were lower salaries and wages for occupational employees not working
during the strike. Excluding the work stoppage costs, employee-related expenses
increased $338 or 8.6%.

    Employee-related expenses increased because of growth in several sectors of
the business, primarily wireless and data communications, resulting in increased
employee levels. Across-the-board wage increases also contributed to the
increase in employee-related expenses. The number of employees increased from
51,110 at the end of 1997 to 54,483 at December 31, 1998. We also incurred
higher contract labor costs for systems development, including interconnection
and Year 2000 costs and marketing and sales efforts. Additionally, approximately
530 employees were transferred from Old U S WEST as part of the Separation.
Prior to the Separation, these costs were allocated to us and included in other
operating expenses. Partially offsetting these increases was a $101 pension
credit in 1998 compared to a $33 pension credit in 1997.

    At December 31, 1998, 33,000 of our telephone company employees were
represented by the Communications Workers of America. In October 1998, members
of the union ratified a three-year contract providing for salary increases of
10.9% over three years, effective in August of each year, and a cumulative
pension increase of 21% over three years.

<TABLE>
<CAPTION>
                                                       1998       1997          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Other operating expenses...........................   $2,835     $2,629      $206       7.8%
                                                      ======     ======      ====       ===
</TABLE>

    OTHER OPERATING EXPENSES.  As discussed in "access service revenues,"
universal service funding expenses were netted against revenues in 1997 and
prior years and were reclassified as other operating expenses in 1998. Excluding
the effects of the reclassification, other operating expenses increased $121 or
4.6% in 1998. The increase was primarily attributable to the following:

    - increased costs associated with growth initiatives, including wireless
      handset costs and related marketing and advertising;

    - higher interconnection and LNP costs;

                                       45
<PAGE>
    - costs of $94 that were directly attributable to the Separation, including
      executive severance, legal and financial advisory fees, securities
      registration fees, printing and mailing costs and internal systems and
      rearrangement costs; and

    - an asset impairment charge of $35 related to certain long-lived assets
      used in our video operations in Omaha, Nebraska. Technological advances
      permitted us to pursue and use more economical DSL (Digital Subscriber
      Line) technology in cable overbuild situations. Because the projected
      future cash flows were less than the assets' carrying values, an
      impairment loss was recognized.

    Partially offsetting the increase in other operating expenses was the effect
of transferring approximately 530 employees from Old U S WEST as part of the
Separation. Costs related to these employees were reclassified to
employee-related expenses. Previously, these costs were allocated from Old
U S WEST and included in other operating expenses.

<TABLE>
<CAPTION>
                                                       1998       1997          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Depreciation and amortization expense..............   $2,199     $2,163      $ 36       1.7%
                                                      ======     ======      ====       ===
</TABLE>

    DEPRECIATION AND AMORTIZATION EXPENSE.  Depreciation and amortization
expense increased primarily due to higher overall property, plant and equipment
balances resulting from continued investment in our network.

<TABLE>
<CAPTION>
                                                          1998       1997          INCREASE
                                                        --------   --------   -------------------
<S>                                                     <C>        <C>        <C>        <C>
Other expense--net....................................    $630       $347       $283       81.6%
                                                          ====       ====       ====       ====
</TABLE>

    OTHER EXPENSE--NET.  Interest expense was $543 in 1998 compared to $405 in
1997. The increase was primarily attributable to the Dex Indebtedness. On a pro
forma basis, assuming the Dex Indebtedness had occurred at the beginning of each
year presented, interest expense would have been $660 in 1998 compared to $667
in 1997. The decline in pro forma interest expense was attributable to overall
lower average pro forma debt balances in 1998 compared to 1997.

    Also included in other expense--net, were other expenses of $87 in 1998
compared to other income of $58 in 1997. The 1998 other expenses resulted
primarily from interest expense on state regulatory liabilities whereas 1997
other income was derived primarily from sales of local telephone exchanges and
our investment in Bellcore, offset by interest expense on state regulatory
liabilities.

    SEGMENT RESULTS.  Segment results represent margins which, for segment
reporting purposes, exclude certain costs and expenses, including depreciation
and amortization, corporate expenses, taxes other than income and other
non-recurring charges. See Note 12 to the consolidated financial statements on
pages F-24 through F-26.

<TABLE>
<CAPTION>
                                                                             INCREASE
                                                    1998       1997         (DECREASE)
                                                  --------   --------   -------------------
<S>                                               <C>        <C>        <C>        <C>
Segment results:
Retail services segment.........................  $ 6,194    $ 5,940     $ 254        4.3%
Wholesale services segment......................    1,908      2,176      (268)     (12.3)
Network services segment........................   (2,776)    (2,738)      (38)      (1.4)
Directory services segment......................      657        615        42        6.8
                                                  =======    =======     =====      =====
</TABLE>

    Margin from the retail services segment increased due to revenue growth,
primarily from local services revenues. The revenue increase was partially
offset by higher operating expenses driven by growth initiatives. Margin from
the wholesale services segment decreased as a result of price reductions as
mandated by the FCC and higher operating costs, primarily interconnection costs,
partially offset by

                                       46
<PAGE>
greater demand for interstate access services. Margin from the network services
segment decreased as a result of additional expenditures to support growth in
the retail services segment. Margin from the directory services segment
increased due to growth in directory services revenues partially offset by
increased printing, paper and sales support costs.

<TABLE>
<CAPTION>
                                                           1998       1997          INCREASE
                                                         --------   --------   -------------------
<S>                                                      <C>        <C>        <C>        <C>
Provision for income taxes.............................    $911       $902        $9        1.0%
                                                           ====       ====        ==        ===
</TABLE>

    PROVISION FOR INCOME TAXES.  On a pro forma basis assuming the Dex
Indebtedness had occurred at the beginning of each year presented, the effective
tax rate was 37.7% for 1998 compared to 37.1% for 1997. The increase in the
effective tax rate was primarily attributable to the non-deductibility of
certain Separation costs and lower amortization of investment tax credits.

LIQUIDITY AND CAPITAL RESOURCES

    OPERATING ACTIVITIES.  Cash provided by operations was $4,546, $3,927 and
$4,191 in 1999, 1998 and 1997, respectively. The increase in operating cash flow
in 1999 resulted from growth in operating income and changes in working capital.
The decrease in operating cash flow in 1998 resulted from a reduction in
payables, the effects of refunds paid relating to regulatory rulings and an
increase in accounts receivable. Partially offsetting these items were the
effects of growth in both the communications and directories businesses and
lower income tax payments.

    Future cash needs could increase with the pursuit of new business
opportunities, including the acceleration of the deployment of additional and/or
advanced new services to customers, such as broadband data, wireless (including
the purchase of spectrum licenses) and video services, and may additionally be
impacted by continued implementation of the requirements of the
Telecommunications Act of 1996 (the "Act"). The acceleration of such additional
and/or advanced new services could have a material adverse effect on our
financial condition or results of operations. Interconnection, LNP, universal
service and access charge reform will negatively impact cash flows to the extent
recovery mechanisms provided by the FCC and state PUCs are inadequate. We would
expect that such cash needs will be funded through operations and, when
necessary, the issuance of securities.

    INVESTING ACTIVITIES.  Total capital expenditures, on a cash basis, were
$3,944, $2,672 and $2,168 in 1999, 1998 and 1997, respectively. Capital
expenditures have primarily been, and continue to be, focused on expanding
access line growth, modernization of the telecommunications network and meeting
the requirements of the Act, including interconnection services such as LNP,
operational support systems, collocation and trunking. We continue to expand our
investment to compete in the wireless, data communications and video markets. In
addition to investments in property, plant and equipment, we paid $18 in 1998
and $73 in 1997 to purchase wireless PCS licenses in connection with our launch
of PCS in various markets.

    In connection with our proposed merger agreement with Global Crossing, we
invested $2,464 to purchase approximately 39 million shares of Global Crossing
common stock in a tender offer during 1999. As a result of our subsequent merger
agreement with Qwest, we entered into a termination agreement with Global
Crossing under which we were required to pay Global Crossing $140 and
approximately 2.2 million shares of Global Crossing common stock for which we
paid $140. We obtained a $140 loan from Qwest to satisfy the cash portion of the
termination fee. In 1999, we closed on the sale of 24 million shares of Global
Crossing common stock and settled, receiving gross proceeds of $1,140 in January
2000. As of December 31, 1999, the remaining Global Crossing shares we held had
a cost basis of $818 and a market value of $651. This market decline, which we
believe to be temporary, has been reflected in accumulated other comprehensive
income in the stockholders' equity section of the consolidated balance sheets.

                                       47
<PAGE>
    We received cash proceeds of $67 in 1997 from the sale of local telephone
exchanges. Also during 1997, we sold our equity interest in Bellcore for
proceeds of $65.

    FINANCING ACTIVITIES.  Cash provided by financing activities was $1,945 in
1999. Cash used for financing activities was $1,136 and $2,157 in 1998 and 1997,
respectively. The net proceeds from short-term and long-term debt in 1999 were,
in part, utilized to finance the Global Crossing tender offer. In 1998, total
debt increased by $4,204 to $9,919 at December 31, 1998, of which approximately
$3,900 was attributable to the Dex Indebtedness. The Dex Indebtedness was
incurred at the Separation date to repay Old U S WEST debt.

    Historically, prior to the Separation, Old U S WEST funded our nonregulatory
activities, including Dex, with short-term advances. The net (repayments of)
proceeds from such Old U S WEST short-term advances were $(198) and $153 during
1998 and 1997, respectively.

    We paid dividends on our common shares totaling $1,187, $1,056 and $992 in
1999, 1998 and 1997, respectively.

    We maintain commercial paper programs to finance short-term cash flow
requirements, as well as to maintain a presence in the short-term debt market.
As of December 31, 1999, we had lines of credit with a total borrowing capacity
of $4,050.

RISK MANAGEMENT

    Over time, we are exposed to market risks arising from changes in interest
rates. The objective of our interest rate risk management program is to manage
the level and volatility of our interest expense. We may employ derivative
financial instruments to manage our interest rate risk exposure. We have also
employed financial derivatives to hedge interest rate and foreign currency
exposures associated with particular debt issues to synthetically obtain below
market interest rates.

    As of December 31, 1999 and 1998, approximately $2,265 and $951,
respectively, of floating-rate debt was exposed to changes in interest rates.
This exposure was primarily linked to commercial paper rates and changes in
3-month LIBOR. A hypothetical increase of one-percentage point in commercial
paper rates and 3-month LIBOR would increase annual pre-tax interest expenses by
$23. As of December 31, 1999 and 1998, we also had $522 and $228, respectively,
of long-term fixed rate debt obligations maturing in the following 12 months.
Any new debt obtained to refinance this debt would be exposed to changes in
interest rates. A hypothetical 10% change in the interest rates on this debt
would not have had a material effect on our earnings.

    As of December 31, 1999, all outstanding interest rate swaps and the
associated debt instruments have matured. As of December 31, 1998, we had
interest rate swaps with notional amounts of $155. The swaps synthetically
transformed certain of the Company's floating rate issues into fixed rate
obligations.

    As of December 31, 1999 and 1998, we had also entered into cross-currency
swaps with notional amounts of $133 and $204, respectively. The cross-currency
swaps synthetically transform $94 and $182 of Swiss Franc borrowings at December
31, 1999 and 1998, respectively, into U.S. dollar obligations. Any gains
(losses) on the cross-currency swaps would be offset by losses (gains) on the
Swiss Franc debt obligations.

    As of December 31, 1999, we had entered into equity swaps with a notional
amount of $1,140 relating to the sale of 24 million shares of Global Crossing
common stock. In connection with the equity swaps, we entered into several
equity collars on certain shares. The equity collars restrict the magnitude of
any gains or losses generated by the equity swaps. A hypothetical 10% reduction
in the market price of Global Crossing common shares would decrease the market
value of our net position by $72. A hypothetical increase of one-percentage
point in interest rates would decrease the market value of our net position by
$16.

    Other assets at December 31, 1999 included marketable equity securities
recorded at a fair value of $1,206 including net unrealized gains of $222. The
securities have exposure to price risk. The estimated potential loss in fair
value resulting from a hypothetical 10% decrease in prices quoted by stock
exchanges would decrease the fair value of our equity securities by $121.

                                       48
<PAGE>
CONTINGENCIES

    We have certain pending regulatory actions. See Note 15 to the consolidated
financial statements on pages F-27 through F-28.

OTHER ITEMS

    From time to time, we engage in discussions regarding restructurings,
dispositions, acquisitions and other similar transactions. Any such transaction
could include, among other things, the transfer, sale or acquisition of
significant assets, businesses or interests, including joint ventures, or the
incurrence, assumption or refinancing of indebtedness, and could be material to
our financial condition and results of operations. There is no assurance that
any such discussions will result in the consummation of any such transaction.

COMPETITION

    When Congress passed the Act, its primary purpose was to open the local
markets of the telecommunications industry to competition. Now, four years
later, the Act's impact on the industry and on us can be seen. We face
increasing competition from a variety of sources, including other local service
providers, long-distance service providers, cable TV companies, wireless service
providers, Internet service providers and other entrants from closely-related
industries. As a result of these competitors' efforts, we are experiencing an
erosion of our market share as well as pressure on our profit margins which
could have a material adverse effect on our operations going forward.

    To date, the most significant competition has developed in the business
market where competitors have targeted high-volume business customers in densely
populated urban centers and selected businesses in smaller communities. In the
residential market, competitors are focusing on areas of highly concentrated
customers, such as multiple dwelling units. We are facing competition in
virtually all areas of our business: local calling, intraLATA long-distance,
wireless, Internet and data services. Our directory business is facing
competition from services provided by web-based electronic providers and
traditional directory publishers. We are also encountering competition from at
least two cellular providers as well as other PCS companies in each market where
we offer wireless service.

    As part of the Act, we must provide interconnection to our network for
competitors and furnish number portability to our customers. Both of these areas
have, and will continue to increase our cost structure while providing others
with the means to effectively compete with us. We must meet all parts of a
14-point checklist and then receive FCC approval before we are allowed to enter
the in-Region interLATA long-distance market. The Act, as well as other state
regulatory proceedings, have also significantly impacted pricing and the speed
with which we may bring new products and services to market. For a further
discussion of regulatory matters, you should read the section entitled
"Regulation" below.

    Technological advancements will help to shape the competitive landscape of
the future. Examples include the wireless replacement of wireline capabilities,
migration from circuit-switched to packet-switched technology such as IP
telephony, the capabilities associated with DSL services versus hybrid fiber/
coax abilities and the analog conversions to digital. Also, the
telecommunication-related mega-mergers announced and consummated in
recent years will give competitors greater access to our markets and provide
increased financial resources that can be used to fund projects that will
compete directly with us.

    We are countering the competition by expanding and improving our product and
service offerings. In addition to enhancing and possibly accelerating current
service offerings, including PCS, high-speed data, Internet access,
interconnection services and video transmission, we will be investigating other
services. Our proposed merger with Qwest will also provide additional resources
to compete in an expanded geographic marketplace. We are also working to ease
the regulatory barriers we face for entry into the interLATA long-distance
market as well as addressing our needs to have increased pricing flexibility for

                                       49
<PAGE>
our products and services. Finally, we believe that our ability to bundle and
integrate a comprehensive telecommunications package that can be made available
through one-stop shopping will provide a significant competitive advantage. For
factors which could cause actual results to differ from expectations, refer to
"Special Note Regarding Forward-Looking Statements" on page 1.

REGULATION

    INTERCONNECTION.  The FCC issued an order (the "Order") in 1996 relating to
the Act that established interconnection costing and pricing rules which, from
our perspective, significantly impeded negotiations with new entrants to the
local exchange market, state PUC interconnection rulemakings and interconnection
arbitration proceedings.

    On January 25, 1999, the U.S. Supreme Court ("Supreme Court") issued a
ruling on our appeal of the Order. The Supreme Court affirmed in part and
reversed in part the FCC Order and ruled that:

    - the FCC has authority to set pricing methodology;

    - unbundled network elements ("UNEs") must be provided in cases where it is
      necessary or the lack of availability would impair competition, but not
      otherwise;

    - Incumbent local exchange carriers ("ILECs") must sell on a bundled basis,
      at the competitive local exchange carriers' ("CLECs") request, network
      elements the ILEC uses itself on a bundled basis; and

    - CLECs may pick and choose pricing or other terms and conditions from
      multiple contracts within certain bounds.

    The ultimate impact of the Supreme Court ruling remains unclear since state
PUCs have generally followed the FCC's pricing and unbundling requirements in
setting UNE prices and in conducting interconnection arbitrations. Over time,
market forces and CLEC demand for UNEs will provide additional clarity.

    On November 5, 1999, the FCC released its order responding to the Supreme
Court's directive that it can order UNEs only where the failure to do so would
impair competition. The order largely reaffirms, and in some instances expands,
the earlier decision made by the Supreme Court. It is anticipated that there
will be an ILEC appeal of this order. See "Special Note Regarding Forward
Looking Statements" on page 1.

    As part of the November 5th order, the FCC issued a further notice of
proposed rulemaking. In this further notice, the FCC is considering whether to
allow all interexchange carriers to substitute UNEs for existing special access
circuits. Since UNEs are priced at substantial discounts using pricing which is
much lower than current tariffed rates, this creates a potential arbitrage
situation that could substantially reduce existing private line and special
access revenues.

    On interconnection pricing, we and other ILECs have challenged the FCC's
pricing methodology at the Eighth Circuit Court of Appeals. This case was argued
in September 1999 and is awaiting decision.

    ACCESS REFORM.  In its access reform order, the FCC mandated a substantial
restructuring of interstate access pricing. A significant portion of the
services that have been sold using minutes-of-use pricing are now being charged
using a combination of minutes-of-use rates, flat-rate presubscribed
interexchange carrier charges ("PICCs") and subscriber line charges ("SLCs").
Although an increase in the SLC to multi-line business users occurred on
July 1, 1997, the bulk of the mandated pricing changes occurred on January 1,
1998. Additional mandated pricing changes occurred on January 1, 1999 and
July 1, 1999 and further changes will be implemented in 2000 and 2001. The net
effect of these changes will be to decrease minutes-of-use charges and increase
flat-rate charges (i.e., PICCs and SLCs). These changes generally improve the
pricing structure for our competitive services.

                                       50
<PAGE>
    The access reform order also continued the exemption regarding the
application of interstate access charges on information service providers and
purchasers of UNEs. This remains a problem as the volume of information
service-related usage continues to increase without an associated increase in
revenues.

    In February 1999, the FCC issued an order declaring that Internet traffic is
interstate and opened a proceeding to determine the appropriate regulatory
structure. The FCC required no change in the current agreements for reciprocal
compensation for local access expense with CLECs until it rules on this matter.
This order has been appealed by the ILECs and MCI. Until this is resolved there
will remain uncertainty regarding the Company's payment obligation for Internet
traffic.

    Pending before the FCC are several proposals for access reform including the
reduction of interstate rates to reflect the removal of universal service
support, changing the rate structure for switched access to a flat rated
structure, an industry proposal for changing the general access structure
including the removal of the productivity factor and elimination of the PICC for
single line customers, and a court remanded review of the productivity factor.
Action on these items is expected by mid-2000. Adoption of access reform
proposals pending at the FCC could result in significant reductions in the
Company's interstate revenues. There is no assurance such reductions would be
offset by increases in other rates.

    COURT REMAND OF 6.5% PRODUCTIVITY FACTOR.  On May 21, 1999, the District of
Columbia U.S. Court of Appeals issued a ruling reversing and remanding back to
the FCC its order requiring ILECs to retroactively increase the productivity
offset to price caps to 6.5% in their annual price cap filings. The Court found
that the FCC's order did not justify the increase. In December 1999, the FCC
issued a notice of proposed rulemaking responding to the issues raised in the
Court's remand. The FCC proposed three alternative approaches to determining a
new productivity factor and asked whether it should be applied retroactively.
The FCC must issue its order by April 2000. This issue is also being addressed
in conjunction with the access reform proposals. If the FCC does not resolve
this issue in conjunction with access reform, it may adopt a new higher
productivity factor or modified formula which could materially reduce the
Company's interstate access charges.

    ACCESS PRICING FLEXIBILITY.  The FCC issued an order granting some pricing
flexibility on August 27, 1999. The FCC removed many vestiges of regulation
including price caps for intraLATA interstate toll because long distance parity
has been achieved for all 14 states. Various levels of pricing flexibility, up
to and including the removal of Price Cap regulation, are possible when
competitive triggers are reached within geographic areas for special access and
switched access transport. Some pricing flexibility is granted for switched
access and SLCs when certain levels of competition are demonstrated by
geographic area. Although this order provides some relief, it is unlikely to
have substantial impact until the FCC removes the uncertainty around access
reform and network unbundling.

    ADVANCED TELECOMMUNICATIONS SERVICES.  On March 31, 1999, the FCC issued an
order establishing expanded collocation requirements for both conventional voice
and advanced services. On December 9, 1999, the FCC further required that line
sharing be provided as an UNE. Line sharing allows a CLEC to provide advanced
services over the same loop that the ILEC uses to provide analog voice service.
Previously, CLECs purchased a separate loop to provision advanced services. The
ILECs have six months to negotiate agreements with CLECs and resolve operational
issues. It is anticipated that line sharing will be available by mid-2000 and
will reduce revenues from the sale of unbundled loops and may reduce demand for
second lines. In its November 1999 interconnection remand decision, the FCC
limited the scope of its unbundling decision and generally excluded facilities
used for advanced services other than local loops and collocation space.

    INTERLATA LONG-DISTANCE ENTRY.  Several regional Bell operating companies
have filed for entry into the interLATA long-distance business. Although many of
these applications have been approved by state PUCs, the FCC had rejected all
applications until its December 1999 approval of Bell Atlantic Corporation's
application in New York. AT&T and other carriers have appealed that decision.

                                       51
<PAGE>
    We filed applications to enter the interLATA long-distance business in
Arizona, Colorado and Nebraska in 1999 and continue to work with the PUCs in
those states to gain approval. In April 1999, the Nebraska Public Service
Commission approved eight of the fourteen checklist items but indicated it
needed additional information before making a recommendation to the FCC. We are
addressing operational support system issues on a regional basis and have agreed
to participate in regional testing. In February 2000, we filed notices of our
intention to file entry applications with our remaining state PUCs for their
review and expect to file actual applications in all states by the end of 2000,
with FCC filings following favorable state action. See "Special Note Regarding
Forward-Looking Statements " on page 1.

    LONG-TERM NUMBER PORTABILITY TARIFFS.  In July 1999, the FCC issued an order
on our LNP tariff that was originally effective in February 1999. The FCC's
order approved a monthly cost recovery surcharge of $0.43 per access line. We
estimate the surcharge will facilitate the recovery of approximately $407 of LNP
implementation costs over five years. The Company successfully defended its
tariffs against AT&T's objections.

    UNIVERSAL SERVICE FEES.  On October 8, 1999, the FCC issued orders in
response to the Fifth Circuit Court of Appeals' mandate on universal service.
These orders were effective on November 1, 1999. The FCC will allow the fees the
ILECs pay to support universal service to be recovered in access charges
indefinitely. ILECs that wish to do so may remove the fees from access and
establish a separate end user charge. The FCC also changed the rules to remove
certain revenues from the base for calculating the fees. A tariff filing,
effective November 1, 1999, reduced the access rates which recover these fees.

    On October 21, 1999, the FCC adopted two companion orders implementing a new
universal service fund for non-rural ILECs. The orders adopted a forward-looking
cost model and determined that an ILEC's costs at a study area (usually
statewide) level must be greater than 135% of the nationwide average to collect
from the federal fund. Under this new methodology, we will receive federal high
cost funding (both rural and non-rural) for only four states versus funding for
seven states in 1999. As a part of these orders, the FCC included a "hold
harmless" provision. This provision allows ILECs whose collections would
otherwise decrease, to continue collecting support using current methods for an
indefinite period of time. The FCC will determine the phase-out period for these
collections in 2000. We collected $15 in total high cost support (rural and
non-rural) in 1999, which will eventually be reduced to approximately $13 under
the FCC's new methodology. Because of regulatory uncertainty regarding, among
other things, the duration of the "hold harmless" provision, we are currently
unable to accurately estimate our federal high cost support for 2000. In 2000,
we will receive federal high cost support for six states under the hold harmless
provisions. The FCC has stated that non-rural carriers should look to the states
to make up some or all of the shortfall in universal service support. We are in
the process of seeking additional support from the states, but the likelihood of
success and the amount of state support are as yet uncertain.

YEAR 2000 COSTS

    BACKGROUND.  We conducted a comprehensive review of our computer-based
systems and related software and took measures to ensure that such systems would
properly recognize the year 2000 and continue to process beyond December 31,
1999. The systems we evaluated include systems within (i) the Public Switched
Telephone Network (the "Network"), (ii) Information Technologies ("IT"), and
(iii) individual Business Units (the "Business Units").

    The Network, which processes voice and data information relating to our core
communications business, relies on remote switches, central office equipment,
interoffice equipment and loop transport equipment that is predominantly
provided to us by telecommunications network vendors. IT is comprised of our
internal business systems that employ hardware and software on an
enterprise-wide basis, including operational, financial and administrative
functions. The Business Units, which include internal organizations such as
finance, procurement, directory services, operator services, wireless, data
networks, real estate, etc., employ systems that support desktop and
departmental applications, as well as embedded

                                       52
<PAGE>
computer chip technologies, which relate specifically to each of our Business
Unit's functions and generally are not part of the Network or IT.

    COSTS RELATING TO YEAR 2000.  We spent approximately $271 from the beginning
of 1997 through the end of 1999 on year 2000 projects and activities. Virtually
all year 2000 related expenditures were funded through operations.

    SUMMARY.  As of January 26, 2000, our Network, IT and Business Unit systems
have not experienced any critical failures. To date, we have not experienced any
disruption in our operations or impairment in our ability to bill or collect
revenues relating to the year 2000. We do not expect to incur any additional
year 2000 costs in 2000.

NEW ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. FAS
No. 133 requires, among other things, that all derivative instruments be
recognized at fair value as assets or liabilities on the balance sheet and that
changes in fair value generally be recognized currently in earnings unless
specific hedge accounting criteria are met. The standard is effective for our
2001 fiscal year though earlier adoption is permitted. Financial statement
impacts of adopting the new standard depend upon the amount and nature of the
future use of derivative instruments and their relative changes in valuation
over time. Had we adopted FAS No. 133 in 1999, its impact on the current year
consolidated financial statements would not have been material.

    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 (the "Bulletin") "Revenue Recognition in
Financial Statements," which addresses revenue recognition issues. The Bulletin
requires, in certain cases, nonrefundable up-front fees for services to be
deferred and recognized over the expected period of performance. The Bulletin
also requires that incremental direct costs incurred in obtaining the up-front
fees be deferred and recognized over the same period as the up-front fees. The
Bulletin is required to be adopted for the quarter ending March 31, 2000. We are
assessing the types of transactions that may be impacted by this pronouncement.
The impact of the Bulletin on the consolidated financial statements is not yet
known.

                                       53
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To U S WEST, Inc.:

    We have audited the accompanying consolidated balance sheets of U S WEST,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U S WEST, Inc. and
subsidiaries as of December 31, 1999 and 1998 and the results of their
operations, changes in stockholders' equity and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

    As explained in Note 2 to the consolidated financial statements, effective
January 1, 1999, the Company changed its method of accounting for directory
publishing revenues and expenses.

ARTHUR ANDERSEN LLP

Denver, Colorado,
  January 26, 2000.

                                      F-1
<PAGE>
                                 U S WEST, INC.

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                              (DOLLARS IN MILLIONS, EXCEPT PER
                                                                       SHARE AMOUNTS)
<S>                                                           <C>         <C>         <C>
Revenues:
  Local services............................................   $ 7,746     $ 7,104     $ 6,276
  Access services...........................................     2,729       2,660       2,645
  Directory services........................................     1,436       1,318       1,236
  Long-distance services....................................       584         795         897
  Other services............................................       687         518         467
                                                               -------     -------     -------
    Total operating revenues................................    13,182      12,395      11,521

Operating expenses:
  Employee-related expenses.................................     4,733       4,312       3,953
  Other operating expenses..................................     2,745       2,835       2,629
  Depreciation and amortization.............................     2,367       2,199       2,163
                                                               -------     -------     -------
    Total operating expenses................................     9,845       9,346       8,745
                                                               -------     -------     -------
Operating income............................................     3,337       3,049       2,776

Other expense (income):
  Interest expense..........................................       736         543         405
  Terminated merger--related expenses.......................       282          --          --
  Loss on sale of Global Crossing common stock..............       367          --          --
  Decline in market value of derivative financial
    instruments.............................................        56          --          --
  Other (income) expense--net...............................        (6)         87         (58)
                                                               -------     -------     -------
    Total other expense--net................................     1,435         630         347
                                                               -------     -------     -------
Income before income taxes, extraordinary item and
  cumulative effect of change in accounting principle.......     1,902       2,419       2,429
Provision for income taxes..................................       800         911         902
                                                               -------     -------     -------
Income before extraordinary item and cumulative effect of
  change in accounting principle............................     1,102       1,508       1,527
Extraordinary item--early extinguishment of debt--net of
  tax.......................................................        --          --          (3)
                                                               -------     -------     -------
Income before cumulative effect of change in accounting
  principle.................................................     1,102       1,508       1,524
Cumulative effect of change in accounting principle--net of
  tax.......................................................       240          --          --
                                                               -------     -------     -------
Net income..................................................   $ 1,342     $ 1,508     $ 1,524
                                                               =======     =======     =======
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-2
<PAGE>
                                 U S WEST, INC.

                 CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                              (DOLLARS IN MILLIONS, EXCEPT PER
                                                                       SHARE AMOUNTS)
<S>                                                           <C>         <C>         <C>
Basic earnings per share:
  Income before extraordinary item and cumulative effect of
    change in accounting principle..........................  $   2.18    $   3.05    $   3.16
  Extraordinary item--early extinguishment of debt..........        --          --       (0.01)
  Cumulative effect of change in accounting principle.......      0.48          --          --
                                                              --------    --------    --------
Basic earnings per share....................................  $   2.66    $   3.05    $   3.16(#)
                                                              ========    ========    ========
Basic average shares outstanding (in 000's).................   504,423     494,395     482,751
                                                              ========    ========    ========

Diluted earnings per share:
  Income before extraordinary item and cumulative effect of
    change in accounting principle..........................  $   2.16    $   3.02    $   3.13
  Extraordinary item--early extinguishment of debt..........        --          --       (0.01)
  Cumulative effect of change in accounting principle.......      0.47          --          --
                                                              --------    --------    --------
Diluted earnings per share..................................  $   2.63    $   3.02    $   3.12
                                                              ========    ========    ========
Diluted average shares outstanding (in 000's)...............   509,306     498,798     491,232
                                                              ========    ========    ========
Dividends per share.........................................  $   2.36    $   2.14    $   2.14
                                                              ========    ========    ========

Pro forma basic earnings per share:
  Income before extraordinary item..........................  $   2.18    $   3.05    $   3.16
  Pro forma adjustment(1)...................................        --        0.02        0.03
  Extraordinary item--early extinguishment of debt..........        --          --       (0.01)
                                                              --------    --------    --------
Basic earnings per share....................................  $   2.18    $   3.07    $   3.18
                                                              ========    ========    ========

Pro forma diluted earnings per share:
  Income before extraordinary item..........................  $   2.16    $   3.02    $   3.13
  Pro forma adjustment(1)...................................        --        0.02        0.03
  Extraordinary item--early extinguishment of debt..........        --          --       (0.01)
                                                              --------    --------    --------
Diluted earnings per share..................................  $   2.16    $   3.04    $   3.15
                                                              ========    ========    ========
</TABLE>

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

(1) Reflects the after-tax effect of the change in accounting method for
    directory revenues and expenses.

#  Does not foot due to rounding of individual components.

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-3
<PAGE>
                                 U S WEST, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
                                                              (DOLLARS IN MILLIONS,
                                                                EXCEPT PER SHARE
                                                                    AMOUNTS)
<S>                                                           <C>         <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................   $    78     $    49
  Accounts receivable less allowance for uncollectibles
    of $88 and $69, respectively............................     2,455       1,743
  Receivable from sale of Global Crossing Ltd. common
    stock...................................................     1,140          --
  Inventories and supplies..................................       272         197
  Deferred directory costs..................................        85         274
  Deferred tax assets.......................................        46         151
  Prepaid and other.........................................       116          78
                                                               -------     -------
Total current assets........................................     4,192       2,492

Property, plant and equipment--net..........................    16,404      14,908
Investments.................................................     1,234          63
Other assets--net...........................................     1,386         944
                                                               -------     -------
Total assets................................................   $23,216     $18,407
                                                               =======     =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt...........................................   $ 2,882     $ 1,277
  Accounts payable..........................................     1,700       1,347
  Accrued expenses..........................................     1,840       1,702
  Advance billings and customer deposits....................       344         370
                                                               -------     -------
Total current liabilities...................................     6,766       4,696

Long-term debt..............................................    10,189       8,642
Postretirement and other postemployment benefit
  obligations...............................................     2,890       2,643
Deferred income taxes.......................................     1,191         786
Unamortized investment tax credits..........................       161         159
Deferred credits and other..................................       764         726

Commitments and Contingencies (Note 15)

Stockholders' equity:
  Preferred stock--$1.00 par value, 190,000,000 shares
    authorized, none issued and outstanding.................        --          --
  Series A junior preferred stock--$1.00 par value
    10,000,000 shares authorized, none issued and
    outstanding.............................................        --          --
  Common stock--$0.01 par value, 2,000,000,000 shares
    authorized, 506,554,982 and 503,207,058 issued,
    506,250,979 and 502,903,055 outstanding.................       656         532
  Retained earnings.........................................       377         223
  Accumulated other comprehensive income....................       222          --
                                                               -------     -------
Total stockholders' equity..................................     1,255         755
                                                               -------     -------
Total liabilities and stockholders' equity..................   $23,216     $18,407
                                                               =======     =======
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-4
<PAGE>
                                 U S WEST, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                  (DOLLARS IN MILLIONS)
<S>                                                           <C>        <C>        <C>
OPERATING ACTIVITIES
Net income..................................................  $ 1,342    $ 1,508    $ 1,524
  Adjustments to net income:
    Depreciation and amortization...........................    2,367      2,199      2,163
    Loss on sale of Global Crossing common stock............      367         --         --
    Loss on change in market value of derivatives...........       56         --         --
    Gains on sales of local telephone exchanges.............       --         --        (77)
    Gain on sale of investment in Bellcore..................       --         --        (53)
    Asset impairment........................................       --         35         --
    Cumulative effect of change in accounting principle.....     (240)        --         --
    Deferred income taxes and amortization of investment tax
      credits...............................................      225        106        (15)
  Changes in operating assets and liabilities:
    Accounts receivable.....................................     (126)       (26)       (60)
    Inventories, supplies and other current assets..........     (106)       (12)       (63)
    Accounts payable, accrued expenses and advance
      billings..............................................      345        (13)       487
    Other...................................................      316        130        285
                                                              -------    -------    -------
  Cash provided by operating activities.....................    4,546      3,927      4,191
                                                              -------    -------    -------

INVESTING ACTIVITIES
  Expenditures for property, plant and equipment............   (3,944)    (2,672)    (2,168)
  Proceeds from (payments on) disposals of property, plant
    and equipment...........................................      (49)       (30)        22
  Investment in Global Crossing Ltd. common stock...........   (2,464)        --         --
  Proceeds from sales of local telephone exchanges..........       --         --         67
  Proceeds from sale of investment in Bellcore..............       --         --         65
  Other.....................................................       (5)       (67)       (73)
                                                              -------    -------    -------
  Cash used for investing activities........................   (6,462)    (2,769)    (2,087)
                                                              -------    -------    -------

FINANCING ACTIVITIES
  Net proceeds from (repayments of) short-term debt.........    1,304        887       (640)
  Proceeds from issuance of long-term debt..................    2,062      3,781         29
  Repayments of long-term debt..............................     (336)      (442)      (446)
  Dividends paid on common stock............................   (1,187)    (1,056)      (992)
  Proceeds from issuance of common stock....................      102         88         75
  Repayment of Old U S WEST debt in connection with the Dex
    Alignment...............................................       --     (3,829)        --
  Net (repayments of) proceeds from issuance of Old
    U S WEST short-term debt................................       --       (198)       153
  Dividends paid to Old U S WEST............................       --       (194)      (336)
  Payment to Old U S WEST for debt refinancing costs........       --       (140)        --
  Return of capital from Old U S WEST.......................       --         13         --
  Purchases of treasury stock...............................       --        (46)        --
                                                              -------    -------    -------
  Cash provided by (used for) financing activities..........    1,945     (1,136)    (2,157)
                                                              -------    -------    -------

CASH AND CASH EQUIVALENTS
  Increase (decrease).......................................       29         22        (53)
  Beginning balance.........................................       49         27         80
                                                              -------    -------    -------
  Ending balance............................................  $    78    $    49    $    27
                                                              =======    =======    =======
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-5
<PAGE>
                                 U S WEST, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                   RETAINED
                                            U S WEST       PRE-                 EARNINGS/OTHER
                                             COMMON     SEPARATION    COMMON    COMPREHENSIVE
                                             STOCK        EQUITY      STOCK         INCOME        TOTAL
                                           ----------   ----------   --------   --------------   --------
                                           (SHARES IN
                                           THOUSANDS)
<S>                                        <C>          <C>          <C>        <C>              <C>
BALANCE, JANUARY 1, 1997.................    480,457      $ 4,085    $    --       $    --       $ 4,085
  Net income.............................         --        1,524         --            --         1,524
  Dividends declared on common stock.....         --       (1,034)        --            --        (1,034)
  Dividends declared to Old U S WEST.....         --         (347)        --            --          (347)
  Common stock issuances.................      4,058          138         --            --           138
  Other..................................         --            1         --            --             1
                                             -------      -------    -------       -------       -------
BALANCE, DECEMBER 31, 1997...............    484,515        4,367         --            --         4,367
  Net income from January 1 to June 12,
    1998.................................         --          747         --            --           747
  Dividends declared on common stock.....         --         (528)        --            --          (528)
  Dividends declared to Old U S WEST.....         --         (159)        --            --          (159)
  Common stock issuances.................      1,100           55         --            --            55
  Return of capital from Old
    U S WEST.............................         --           13         --            --            13
  Treasury stock purchases...............       (574)         (32)        --            --           (32)
  Other..................................         --            2         --            --             2
JUNE 12, 1998 SEPARATION:
  Contributed capital from Old U S WEST
    upon Separation, excluding assumption
    of debt..............................         --       (4,465)     4,465            --            --
  Repayment of Dex Indebtedness to
    MediaOne.............................         --           --     (3,829)           --        (3,829)
  Issuance of common stock to MediaOne
    stockholders net of repurchases......     16,646           --        850            --           850
  Distribution to MediaOne stockholders
    for Dex Dividend.....................         --           --       (850)           --          (850)
  Dividend to MediaOne for share of Old
    U S WEST's debt refinancing costs....         --           --       (140)           --          (140)
  Common stock issuances.................      1,521           --         58            --            58
  Treasury stock purchases...............       (305)          --        (15)           --           (15)
  Net income from June 13 to
    December 31, 1998....................         --           --         --           761           761
  Dividends declared on common stock.....         --           --         --          (538)         (538)
  Other..................................         --           --         (7)           --            (7)
                                             -------      -------    -------       -------       -------
BALANCE, DECEMBER 31, 1998...............    502,903           --        532           223           755
  Net income.............................         --           --         --         1,342         1,342
  Other comprehensive income:
    Unrealized gains on securities.......         --           --         --           222           222
                                             -------      -------    -------       -------       -------
  Total comprehensive income.............         --           --         --         1,564         1,564
  Dividends declared on common stock.....         --           --         --        (1,187)       (1,187)
  Common stock issuances.................      3,348           --        124            --           124
  Other..................................         --           --         --            (1)           (1)
                                             -------      -------    -------       -------       -------
BALANCE, DECEMBER 31, 1999...............    506,251      $    --    $   656       $   599       $ 1,255
                                             =======      =======    =======       =======       =======
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                      F-6
<PAGE>
                                 U S WEST, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 1: U S WEST SEPARATION

    On June 12, 1998, our former parent company ("Old U S WEST"), separated into
two independent companies (the "Separation"). Old U S WEST conducted its
businesses through two groups: (i) the U S WEST Communications Group (the
"Communications Group"), which included the communications businesses of Old
U S WEST, and (ii) the U S WEST Media Group (the "Media Group"), which included
the multimedia and directories businesses of Old U S WEST. As part of the
Separation, Old U S WEST contributed to us the businesses of the Communications
Group and the domestic directories business of the Media Group known as
U S WEST Dex, Inc. ("Dex"). The alignment of Dex with U S WEST, Inc. (the
"Company" or "U S WEST") is referred to in this document as the "Dex Alignment."
Old U S WEST continues to operate as an independent public company comprised of
the businesses of the Media Group other than Dex and has been renamed MediaOne
Group, Inc.

    In connection with the Dex Alignment, (i) Old U S WEST distributed to
holders of Media Group common stock, approximately 16,341,000 shares of our
common stock (net of the redemption of approximately 305,000 fractional shares)
with an aggregate value of $850 (the "Dex Dividend"); and (ii) we refinanced
$3,900 of Old U S WEST debt (the "Dex Indebtedness"), formerly allocated to
Media Group.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION.  The consolidated financial statements include the
consolidated historical results of operations, financial position and cash flows
of the businesses that comprise the Communications Group and Dex, as if such
businesses operated as a separate entity for all periods and as of all dates
presented. However, certain financial effects of the Separation and the Dex
Alignment, including interest expense associated with refinancing the Dex
Indebtedness and the dilutive effect of the Dex Dividend, are not reflected in
the accompanying historical consolidated statements of income prior to the
Separation.

    For periods prior to the Separation, the consolidated financial statements
include an allocation of certain costs, expenses, assets and liabilities from
Old U S WEST to us. We believe the allocations were reasonable; however the
amount of costs allocated to us were not necessarily indicative of the costs
that would have been incurred if we had operated as a stand-alone company. The
consolidated financial statements may not necessarily reflect the financial
position, results of operations or cash flows in the future or what they would
have been had we been a separate, stand-alone company during such periods.

    We are incorporated under the laws of the State of Delaware. The
consolidated financial statements include the accounts of U S WEST and its
majority-owned subsidiaries. All significant intercompany amounts and
transactions have been eliminated.

    Certain reclassifications of prior year amounts within the consolidated
financial statements have been made to conform to the current year presentation.

    USE OF ESTIMATES.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts and disclosures reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

    CHANGE IN ACCOUNTING METHOD.  Prior to 1999, Dex recognized revenues and
expenses related to publishing directories using the "deferral method," under
which revenues and expenses were recognized

                                      F-7
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
over the lives of the directories, generally one year. Effective the fourth
quarter of 1999, Dex changed to the "point of publication" method of accounting,
which recognizes revenues and expenses at the time the related directory is
published. The change in methodology was made to align our revenue and expense
policy with the earnings process and to better reflect the operating activity of
the business. The accounting change resulted in a one-time increase in net
income of $240 (net of income tax of $153), or $0.47 per diluted share, which is
reported as a cumulative effect (as of January 1, 1999) of a change in
accounting principle. We restated our 1999 quarterly results of operations to
give effect to the point of publication method (see Note 16) which increased net
income by $13 or $0.03 per diluted share as compared to results that would have
been reported under the deferral method. On a restated basis, use of the point
of publication method would have increased net income in 1998 and 1997, by $12
and $16, respectively.

    CASH AND CASH EQUIVALENTS.  Cash and cash equivalents include highly liquid
investments with original maturities of three months or less that are readily
convertible into cash and are not subject to significant risk from fluctuations
in interest rates.

    INVENTORIES AND SUPPLIES.  New and reusable materials of our regulated
business are carried at average cost, except for significant individual items
that are valued based on specific costs. Non-reusable material is carried at its
estimated salvage value. Inventories of our nonregulated businesses are carried
at the lower of cost or market on a first-in, first-out basis.

    PROPERTY, PLANT AND EQUIPMENT.  Property, plant and equipment is carried at
cost. The majority of property, plant and equipment is depreciated using
straight-line group methods. Under the group method, when an asset is sold or
retired, the cost is deducted from property, plant and equipment and charged to
accumulated depreciation without recognition of a gain or loss. Certain
unregulated assets are depreciated using straight-line unit methods. When such
depreciable property is retired or sold, the resulting gain or loss is included
in income. The depreciable lives used for the major categories of property,
plant and equipment are as follows:

<TABLE>
<CAPTION>
CATEGORY                                                      LIFE (YEARS)
--------                                                      ------------
<S>                                                           <C>
Buildings...................................................    19-40
Telecommunications network equipment........................     8-14
Telecommunications outside plant............................     8-57
General purpose computers and other.........................     2-17
</TABLE>

    Interest related to qualifying construction projects is capitalized and
reflected as a reduction of interest expense. Amounts capitalized were $27, $25
and $20 in 1999, 1998 and 1997, respectively.

    VALUATION OF LONG-LIVED ASSETS.  We assess the impairment of long-lived
assets such as property, plant and equipment, goodwill and software when changes
in circumstances indicate that their carrying value may not be recoverable. If
the total expected future cash flows or salvage value is less than the carrying
value of the asset, a loss is recognized.

    COMPUTER SOFTWARE.  On January 1, 1999, we adopted the accounting provisions
required by the American Institute of Certified Public Accountants' Statement of
Position ("SOP") 98-1, "Accounting for

                                      F-8
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Costs of Computer Software Developed or Obtained for Internal Use." SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of the SOP resulted in an
increase in net income for 1999 of $180, or $0.35 per diluted share.

    Capitalized computer software costs of $618 and $196 at December 31, 1999
and 1998, respectively, are recorded in property, plant and equipment and other
assets--net. Amortization of capitalized computer software costs totaled $108,
$84 and $78 in 1999, 1998 and 1997, respectively.

    MARKETABLE SECURITIES.  All marketable securities are classified as
available-for-sale securities under the provisions of Statement of Financial
Accounting Standards ("FAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Unrealized holding gains and losses are determined
on the specific identification method and presented as a component of
accumulated other comprehensive income within stockholders' equity.

    FINANCIAL INSTRUMENTS.  The objective of our interest rate risk management
program is to obtain the minimum total cost of debt over time consistent with an
acceptable level of interest rate volatility. This objective is achieved through
the type of debt issued, interest rate swaps that adjust the ratio of fixed- to
variable-rate debt, cross-currency swaps that convert foreign-denominated debt
to dollar-denominated debt and forward contracts to hedge future debt issues.

    Under an interest rate swap, we agree with another party to exchange
interest payments, based on a notional amount, at specified intervals over a
defined term. Interest rate swaps are accounted for under the synthetic
instruments accounting model if the index, maturity and amount of the instrument
match the terms of the underlying debt. Net interest accrued is recognized over
the life of the instruments as an adjustment to interest expense and is a
component of cash provided by operating activities. Any gain or loss on the
termination of an instrument that qualifies for synthetic instrument accounting
would be deferred and amortized over the remaining life of the original
instrument.

    Under a cross-currency swap, we agree with another party to exchange U. S.
dollars for foreign currency based on a notional amount, at specified intervals
over a defined term. Cross-currency swaps are accounted for under the synthetic
instruments accounting model if the index, maturity and amount of the
instruments match the terms of the underlying debt. The cross-currency swaps and
the foreign currency debt are combined and accounted for as if
dollar-denominated debt was issued directly.

    Under a forward contract, we agree with another party to sell a specified
amount of U. S. Treasuries to hedge the treasury-rate component of future debt
issues. The gain or loss on the forward contract is recorded as part of the
carrying value of the related debt and is amortized as a yield adjustment.

    Equity swaps are used to tailor our risk exposure to changes in the market
price of Global Crossing Ltd. ("Global Crossing") common stock. Under equity
swaps, we agree with another party to exchange payments based on a notional
amount, at specific intervals over a defined term. In exchange, for making
payments based upon an interest rate index we receive (render) payments based
upon increases (decreases) in the market price of Global Crossing common stock.
Collar agreements have been secured

                                      F-9
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
which limit the magnitude of the payments we receive (render) if the market
price of Global Crossing common stock increases (decreases).

    REVENUE RECOGNITION.  Local telephone, wireless and Internet services are
generally billed in advance with revenues recognized when services are provided.
Revenues derived from exchange access, long-distance services and wireless
airtime usage are recognized as services are provided.

    ADVERTISING COSTS.  Costs related to advertising are expensed as incurred.
Advertising expense was $308, $263 and $214 in 1999, 1998 and 1997,
respectively.

    INCOME TAXES.  The provision for income taxes consists of an amount for
taxes currently payable and an amount for tax consequences deferred to future
periods. For financial statement purposes, investment tax credits are amortized
over the lives of the related property, plant and equipment.

    STOCK OPTIONS.  Stock incentive plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," under which no compensation expense is recognized for options
granted to employees at fair market value, except when the plan is determined to
be variable in nature.

    NEW ACCOUNTING STANDARDS.  On June 15, 1998, the Financial Accounting
Standards Board issued FAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. FAS No. 133
requires, among other things, that all derivative instruments be recognized at
fair value as assets or liabilities in the consolidated balance sheets and
changes in fair value are generally recognized currently in earnings unless
specific hedge accounting criteria are met. This standard is effective for our
2001 fiscal year, although earlier adoption is permitted. Financial statement
impacts of adopting the new standard depend upon the amount and nature of the
future use of derivative instruments and their relative changes in valuation
over time. Had we adopted FAS No. 133 in 1999, its impact on the financial
statements would not have been material.

    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 (the "Bulletin"), "Revenue Recognition in
Financial Statements," which addresses revenue recognition issues. The Bulletin
requires, in certain cases, nonrefundable up-front fees for services to be
deferred and recognized over the expected period of performance. The Bulletin
also requires that incremental direct costs incurred in obtaining the up-front
fees be deferred and recognized over the same period as the up-front fees. The
Bulletin is required to be adopted for the quarter ending March 31, 2000. We are
assessing the types of transactions that may be impacted by this pronouncement.
The impact of the Bulletin on the consolidated financial statements is not yet
known.

                                      F-10
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 3: PROPERTY, PLANT AND EQUIPMENT

    The components of property, plant and equipment are as follows:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Land and buildings........................................  $ 2,535    $ 2,491
Telecommunications network equipment......................   15,828     14,750
Telecommunications outside plant..........................   15,021     14,342
General purpose computers and other.......................    3,396      3,374
Construction in progress..................................    1,346        681
                                                            -------    -------
                                                            $38,126    $35,638
                                                            -------    -------
Less accumulated depreciation:
  Buildings...............................................  $   771    $   748
  Telecommunications network equipment....................    9,059      8,950
  Telecommunications outside plant........................    9,642      9,151
  General purpose computers and other.....................    2,250      1,881
                                                            -------    -------
                                                             21,722     20,730
                                                            -------    -------
Property, plant and equipment--net........................  $16,404    $14,908
                                                            =======    =======
</TABLE>

    ASSET IMPAIRMENT.  During 1998, we recorded a non-cash charge of $21 (net of
a $14 income tax benefit) related to the impairment of certain long-lived assets
associated with our video operations in Omaha, Nebraska. The impaired assets
primarily consisted of underground cable and hardware. Technological advances
permitted us to pursue and use more economical digital subscriber line ("DSL")
technology in cable overbuild situations. Because the projected future cash
flows were less than the assets' carrying values, an impairment loss was
recognized in accordance with FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The amount of
impairment was determined based on the net present value of the expected future
cash flows of the video operations, discounted at our cost of capital. The
pretax charge is recorded in "other operating expenses" within the consolidated
statements of income.

    LEASING ARRANGEMENTS.  Certain office facilities, real estate and equipment
are used in operations under operating leases. Rent expense under operating
leases for 1999, 1998 and 1997 was $269, $210 and $235, respectively. At
December 31, 1999, the future minimum rental payments under noncancelable
operating leases for the years 2000 through 2004 and thereafter are $190, $191,
$147, $132, $146 and $663, respectively.

    SALE OF EXCHANGES.  In June 1999, we entered into a series of definitive
agreements to sell local-exchange telephone properties serving approximately
530,000 access lines in nine states for approximately $1,650 in cash, subject to
adjustment. Approval of the sale is subject to review by federal and state
regulatory agencies. The transfer of ownership, which will occur on a
state-by-state basis, is expected to be completed over the next two years. We
are planning the sale of approximately 270,000 additional access

                                      F-11
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 3: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
lines in New Mexico and Washington. In accordance with FAS No. 121, we ceased
depreciation on the access lines in 1999.

NOTE 4: ACCRUED EXPENSES

    Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Employee compensation.......................................   $  439     $  434
Dividends payable...........................................      271        269
Accrued property taxes......................................      218        190
Other.......................................................      912        809
                                                               ------     ------
Total accrued expenses......................................   $1,840     $1,702
                                                               ======     ======
</TABLE>

NOTE 5: DEBT

SHORT-TERM DEBT

    The components of short-term debt were as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Commercial paper............................................   $1,265     $  951
Current portion of long-term debt...........................    1,617        326
                                                               ------     ------
Total.......................................................   $2,882     $1,277
                                                               ======     ======
</TABLE>

    The weighted-average interest rate on commercial paper was 6.53% and 5.70%
at December 31, 1999 and 1998, respectively.

    We maintain commercial paper programs to finance short-term cash flow
requirements, as well as to maintain a presence in the short-term debt market.
We enter into lines of credit as backup facilities in issuing commercial paper.
At December 31, 1999, we have lines of credit totaling $3,050, which expire in
2000. Commitment fees on the unused portion of the lines range from 0.06% to
0.25%. As of December 31, 1999, there was no outstanding balance. To the extent
we continue our commercial paper programs, we plan to renew our lines of credit.

                                      F-12
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 5: DEBT (CONTINUED)
LONG-TERM DEBT

    Interest rates and maturities of long-term debt at December 31 were as
follows:

<TABLE>
<CAPTION>
                                                              MATURITIES
                                        ------------------------------------------------------    TOTAL      TOTAL
INTEREST RATES                            2001       2002       2003       2004     THEREAFTER     1999       1998
--------------                          --------   --------   --------   --------   ----------   --------   --------
<S>                                     <C>        <C>        <C>        <C>        <C>          <C>        <C>
Up to 5%..............................   $   --      $100       $ 50       $ --       $   --     $   150     $  240
Above 5% to 6%........................       50        --         --         99          430         579        578
Above 6% to 7%........................    1,427       749         43         --        4,392       6,611      5,575
Above 7% to 8%........................       --        --         62        749        1,556       2,367      1,618
Above 8% to 9%........................       --        --         --         --          243         243        243
Above 9% to 10%.......................       --        --         --         --           --          --        175
                                         ------      ----       ----       ----       ------     -------     ------
                                         $1,477      $849       $155       $848       $6,621       9,950      8,429
                                         ======      ====       ====       ====       ======
Capital lease obligations.............                                                               115        122
Other.................................                                                               124         91
                                                                                                 -------     ------
Total.................................                                                           $10,189     $8,642
                                                                                                 =======     ======
</TABLE>

    Long-term debt consists principally of debentures and medium-term notes.

    In June 1998, U S WEST Capital Funding, Inc., a wholly-owned financing
subsidiary, issued approximately $4,100 in new debt securities, of which
approximately $1,000 was short-term commercial paper. Approximately $3,830 in
proceeds from the issuance of these securities were used to repay Old U S WEST
debt in connection with the Dex Alignment. The remaining proceeds were primarily
used to fund our share of operating expenses and debt refinancing costs incurred
by Old U S WEST that were directly attributable to the Separation. In addition,
we refinanced approximately $200, including $70 of Dex debt, assumed in the Dex
Alignment.

    Interest paid by us, net of amounts capitalized, was $595, $640, and $394 in
1999, 1998 and 1997, respectively.

    At December 31, 1999, we have a $1,000 line of credit which expires in 2003.
The line has a commitment fee on the unused portion of the line of 0.15%. As of
December 31, 1999, there was no outstanding balance.

FINANCIAL CONTRACTS

    The following table summarizes the terms of outstanding interest rate,
cross-currency and equity swaps at December 31, 1999 and 1998. Variable rates
are indexed to two- and ten-year constant maturity U. S. Treasuries.
Cross-currency swaps are tied to the Swiss Franc. Rates received in the equity
swaps are

                                      F-13
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 5: DEBT (CONTINUED)
tied to LIBOR. Equity collars have been entered into in conjunction with equity
swaps to limit the magnitude of any gains or losses on the equity swaps.

<TABLE>
<CAPTION>
                                          DECEMBER 31, 1999                             DECEMBER 31, 1998
                             -------------------------------------------   -------------------------------------------
                                                          WEIGHTED-                                     WEIGHTED-
                                                           AVERAGE                                       AVERAGE
                                                            RATE                                          RATE
                             NOTIONAL                -------------------   NOTIONAL                -------------------
                              AMOUNT    MATURITIES   RECEIVE      PAY       AMOUNT    MATURITIES   RECEIVE      PAY
                             --------   ----------   --------   --------   --------   ----------   --------   --------
<S>                          <C>        <C>          <C>        <C>        <C>        <C>          <C>        <C>
Variable to fixed..........   $   --         --         --%         --%      $155          1999      5.16%      6.24%
Cross-currency.............      133       2001         --        6.51        204     1999-2001        --       6.55
Equity.....................    1,140       2001         --        6.41         --            --        --         --
</TABLE>

    At December 31, 1999, deferred credits of $7 and deferred charges of $49 on
closed forward contracts are included as part of the carrying value of the
underlying debt. The deferred credits and charges are recognized as yield
adjustments over the life of the debt that matures at various dates through
2043.

    In the event we are owed money under the swap agreements, we could be
exposed to risk in the event of nonperformance by counterparties. We manage this
exposure by monitoring the credit standing of the counterparties and
establishing dollar and term limitations that correspond to the respective
credit rating of each counterparty. As of December 31, 1999, we do not believe
that we have any exposure to any individual counterparty.

NOTE 6: FAIR VALUES OF FINANCIAL INSTRUMENTS

    Fair values of cash equivalents and current amounts receivable and payable
approximate carrying values due to their short-term nature.

    The fair values of interest rate, total return and cross-currency swaps are
based on estimated amounts we would receive or pay to terminate such agreements
allowing for current interest/foreign exchange rates, market price of Global
Crossing common shares and creditworthiness of the counterparties.

    The fair values of long-term debt are based on quoted market prices where
available or, if not available, based on discounting future cash flows using
current interest rates. Fair value of equity investments is based on market
prices quoted by stock exchanges.

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                         ---------------------------------------------
                                                 1999                    1998
                                         ---------------------   ---------------------
                                         CARRYING                CARRYING
                                          VALUE     FAIR VALUE    VALUE     FAIR VALUE
                                         --------   ----------   --------   ----------
<S>                                      <C>        <C>          <C>        <C>
Debt (includes short-term portion).....  $13,071      $12,112     $9,919      $10,342
Swap agreements--liabilities...........       --          (36)        --           24
Equity swaps/collars...................      (56)         (56)        --           --
Equity investments.....................      868        1,234         --           --
</TABLE>

                                      F-14
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 7: STOCKHOLDERS' EQUITY

    COMMON STOCK.  Prior to the Separation, Old U S WEST had two separate
classes of outstanding common stock; U S WEST Communications Group common stock
(the "Communications Stock") and U S WEST Media Group common stock (the "Media
Stock"). In conjunction with the Separation, on June 12, 1998, Old U S WEST
redeemed each issued and outstanding share of Communications Stock (other than
shares of Communications Stock held as treasury stock) for one share of
U S WEST common stock. Each share of Communications Stock held as treasury stock
by Old U S WEST was cancelled. For presentation purposes, Communications Stock
shares outstanding prior to June 12, 1998 are shown as U S WEST shares.

    DIVIDENDS.  We declared dividends of $2.36 and $2.14 per share of common
stock during 1999 and 1998, respectively. Prior to the Separation date, we paid
dividends monthly to Old U S WEST based on Dex's net income adjusted for the
amortization of intangibles.

    OTHER COMPREHENSIVE INCOME.  Components of other comprehensive income
consist of the following:

<TABLE>
<CAPTION>
                                                                1999
                                                              --------
<S>                                                           <C>
Unrealized gains on marketable securities...................   $ 366
Income tax expense..........................................    (144)
                                                               -----
Other comprehensive income..................................   $ 222
                                                               =====
</TABLE>

    Unrealized gains on marketable securities include reclassification
adjustments of $454 pertaining to net realized losses from the sale of
securities. The income tax expense includes net reclassification adjustments of
$176 related to the sale of securities.

    LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN ("LESOP").  Prior to the Separation,
we participated in the defined contribution savings plan sponsored by Old
U S WEST (the "Old U S WEST Savings Plan") which covered substantially all
employees. Old U S WEST matched a percentage of the eligible employee
contributions with shares of Communications Stock and/or Media Stock in
accordance with participant elections. Old U S WEST maintained a LESOP to
provide shares of common stock for matching contributions. During 1998, prior to
the Separation, the outstanding debt of the LESOP which was used to acquire
common stock, was fully paid down. Contributions to the LESOP as well as
dividends on unallocated shares of common stock held by the LESOP were used for
debt service.

    In connection with the Separation, the unallocated shares in the LESOP as of
June 12, 1998, were split between us and MediaOne. We received 342,814 and
196,014 shares of U S WEST and MediaOne common stock, respectively. We sold the
MediaOne common stock in the open market, the proceeds of which were used to
acquire shares of our common stock for matching contributions. As of
December 31, 1999, all of such unallocated shares received by us from the LESOP
had been allocated to participant accounts.

    As a result of the Separation, we assumed sponsorship of the Old U S WEST
Savings Plan which covers substantially all our employees (the "U S WEST Savings
Plan"), and MediaOne adopted a new plan ("MediaOne Savings Plan"), covering
eligible employees of MediaOne. Existing account balances of such

                                      F-15
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 7: STOCKHOLDERS' EQUITY (CONTINUED)
MediaOne employees were transferred from the Old U S WEST Savings Plan to the
MediaOne Savings Plan.

    As of October 1998, we had utilized all the unallocated shares of the LESOP
for purposes of making matching contributions. Through this time period, we
recognized contribution expense based upon the cash payments method as specified
in SOP 76-3, "Accounting Practices for Certain Employee Stock Ownership Plans."

    Subsequent to October 1998, for the remainder of 1998, we made $14 of cash
contributions to the U S WEST Savings Plan, which utilized the cash to purchase
shares of common stock in the open market. Compensation expense for this period
was equal to our cash contributions. The following LESOP information applies to
the time period contributions were accounted for under SOP 76-3.

<TABLE>
<CAPTION>
                                                                         YEAR ENDED
                                                                        DECEMBER 31,
                                                              --------------------------------
                                                                 1999        1998       1997
                                                              ----------   --------   --------
<S>                                                           <C>          <C>        <C>
Benefit expense.............................................  $      --      $84        $74
Interest expense............................................         --        3          6
                                                              ----------     ---        ---
Total expense...............................................  $      --      $87        $80
                                                              ==========     ===        ===
Dividends for debt service..................................  $      --      $ 1        $ 3
                                                              ==========     ===        ===
</TABLE>

    STOCKHOLDERS' RIGHTS PLAN.  Our board of directors has adopted a
stockholders' rights plan which, in the event of a takeover attempt, would
entitle existing stockholders to certain preferential rights. These rights
expire on June 1, 2008 and are redeemable by us at any time prior to the date
they become effective.

NOTE 8: EARNINGS PER SHARE

    Certain of the financial effects of the Separation and the Dex Alignment,
including interest expense associated with the refinancing of the Dex
Indebtedness and the dilutive effects of the Dex Dividend, are not reflected in
the historical consolidated statements of income prior to the Separation. As a
result, earnings per share for 1998 are presented on both a pro forma and
historical basis. The pro forma earnings per share amounts give effect to the
Dex Indebtedness and the issuance of approximately 16,341,000 shares (net of the
redemption of 305,000 fractional shares) of common stock in connection with the
Dex Alignment as if such transactions had been consummated as of January 1,
1998.

    The following reflects the computation of diluted earnings per share on a
historical basis for 1999, 1998 and 1997 and basic and diluted earnings per
share for 1998 on a pro forma basis. Income and earnings per share are before an
extraordinary item and the cumulative effect of change in accounting principle.

                                      F-16
<PAGE>
                                 U S WEST, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 8: EARNINGS PER SHARE (CONTINUED)
The earnings per share amounts presented on the consolidated statements of
income may not foot due to rounding of individual components.

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                   ------------------------------
HISTORICAL DILUTED EARNINGS PER SHARE                1999       1998       1997
-------------------------------------              --------   --------   --------
                                                       (SHARES IN THOUSANDS)
<S>                                                <C>        <C>        <C>
Income...........................................  $ 1,102    $ 1,508    $ 1,527
Interest on convertible zero coupon subordinated
  notes, net of tax..............................       --         --          9
                                                   -------    -------    -------
Income used for diluted earnings per share.......  $ 1,102    $ 1,508    $ 1,536
                                                   =======    =======    =======
Basic weighted average shares....................  504,423    494,395    482,751
Effect of dilutive securities:
  Stock options..................................    4,883      4,403      2,386
  Convertible zero coupon subordinated notes.....       --         --      6,095
                                                   -------    -------    -------
Diluted weighted average shares..................  509,306    498,798    491,232
                                                   =======    =======    =======
Diluted earnings per share.......................  $  2.16    $  3.02    $  3.13
                                                   =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
PRO FORMA BASIC EARNINGS PER SHARE                            DECEMBER 31, 1998
----------------------------------                          ---------------------
                                                            (SHARES IN THOUSANDS)
<S>                                                         <C>
Income....................................................          $ 1,508
Pro forma adjustment(1)...................................              (72)
                                                                    -------
Pro forma income..........................................          $ 1,436
                                                                    =======
Basic weighted average shares(2)..........................          494,395
Pro forma adjustment(3)...................................            7,432
                                                                    -------
Pro forma basic weighted average shares...................          501,827
                                                                    =======
Pro forma basic earnings per share........................          $  2.86
                                                                    =======
</TABLE>

                                      F-17
<PAGE>
NOTE 8: EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
PRO FORMA DILUTED EARNINGS PER SHARE                          DECEMBER 31, 1998
------------------------------------                        ---------------------
                                                            (SHARES IN THOUSANDS)
<S>                                                         <C>
Pro forma income..........................................          $ 1,436
                                                                    =======
Basic weighted average shares(2)..........................          494,395
Effect of dilutive securities:
  Stock options...........................................            4,403
Pro forma adjustment(3)...................................            7,432
                                                                    -------
Pro forma diluted weighted average shares.................          506,230
                                                                    =======
Pro forma diluted earnings per share......................          $  2.84
                                                                    =======
</TABLE>

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

(1) Reflects incremental (after-tax) interest expense associated with the Dex
    Indebtedness from the beginning of the year through the Separation.

(2) Historical average shares assume a one-for-one conversion of historical
    Communications Stock outstanding into shares of U S WEST as of the
    Separation.

(3) Reflects the issuance of approximately 16,341,000 shares of common stock
    (net of the redemption of approximately 305,000 fractional shares) issued in
    connection with the Dex Alignment as if the shares had been issued at the
    beginning of the year.

NOTE 9: STOCK INCENTIVE PLANS

   We maintain stock incentive plans for employees and nonemployees, primarily
members of the board of directors. The 1998 U S WEST Stock Plan (the "Plan"),
under which we may grant awards in the form of stock options, stock appreciation
rights, restricted stock and phantom units, as well as substitute stock options
and restricted stock awards, was approved by stockholders on June 12, 1998, in
connection with the Separation. The Plan is a successor plan to the Amended 1994
Stock Plan (the "Predecessor Plan"), under which shares of Communications Stock
were previously issued. No further grants may be made under the Predecessor
Plan.

    Effective June 12, 1998, each outstanding Communications Group stock option
was converted into one U S WEST stock option, whether held by U S WEST or
MediaOne employees. Each option granted under the Plan has the same terms,
conditions, exercise price, vesting and restrictions as the Communications Group
stock awards it replaced.

    Under the Plan, a maximum of 4.8 million shares could be granted in 1998.
Thereafter, the maximum aggregate number of shares of stock granted in any
calendar year for all purposes under the Plan is one percent (1.00%) of the
shares outstanding (excluding shares held in our treasury) on the first day of
such year. For 1999, a maximum of 5.0 million shares could be granted. In the
event that fewer than the full aggregate number of shares available for issuance
in any year are issued in any calendar year, the shares not issued shall be
added to the shares available for issuance in any subsequent year or years. The
options' exercise price is equal to the fair market value of the common stock on
the date of the grant. Options granted vest over periods up to five years and
may be exercised no later than 10 years after the grant date.

    In June 1999, the U S WEST board of directors approved the 1999 U S WEST
Stock Plan for Non-Executives. Under this plan, we may grant awards in the form
of stock options, stock appreciation rights, common stock, restricted common
stock and phantom units. A total of 12 million shares were registered.

                                      F-18
<PAGE>
NOTE 9: STOCK INCENTIVE PLANS (CONTINUED)
    FAS No. 123, "Accounting for Stock-Based Compensation," requires the fair
value of stock options to be calculated using an option pricing model. We have
elected the "pro forma, disclosure only" option permitted under FAS No. 123,
instead of recording a charge to operations, as shown below:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                      ------------------------------
                                                        1999       1998       1997
                                                      --------   --------   --------
<S>                                                   <C>        <C>        <C>
Net income:
  As reported.......................................   $1,342     $1,508     $1,524
  Adjusted for FAS No. 123..........................    1,293      1,479      1,511
Earnings per share:
  As reported--basic................................   $ 2.66     $ 3.05     $ 3.16
  As reported--diluted..............................     2.63       3.02       3.12
  Adjusted for FAS No. 123--basic...................     2.56       2.99       3.13
  Adjusted for FAS No. 123--diluted.................     2.54       2.97       3.10
</TABLE>

    Because the FAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the pro forma compensation cost may not
represent that expected in future years.

    Following are the weighted-average assumptions used with the Black-Scholes
option-pricing model to estimate the fair value of options granted during 1999,
1998 and 1997:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                      ------------------------------
                                                        1999       1998       1997
                                                      --------   --------   --------
<S>                                                   <C>        <C>        <C>
Risk-free interest rate.............................      5.6%       5.5%       6.4%
Expected dividend yield.............................      0.0%       4.2%       5.8%
Expected option life (years)........................      4.0        4.0        4.0
Expected stock price volatility.....................     57.0%      22.9%      25.0%
Weighted average grant date fair value..............   $27.87     $ 8.75     $ 5.70
</TABLE>

    The expected dividend yield for the 1999 assumptions was primarily based
upon the proposed merger with Qwest Communications International Inc. ("Qwest")
and the dividend policy following the close of the Qwest merger as stipulated in
the Agreement and Plan of Merger between U S WEST and Qwest (the "Merger
Agreement"). According to the Merger Agreement, the combined company will pay
initial quarterly dividends of $0.0125 per share. However, we may change our
dividend policy before the merger.

    Information on outstanding options is summarized as follows (shares in
thousands):

<TABLE>
<CAPTION>
                                                       NUMBER OF   WEIGHTED AVG.
                                                        SHARES     EXERCISE PRICE
                                                       ---------   --------------
<S>                                                    <C>         <C>
Outstanding January 1, 1997..........................   11,413         $26.67
  Granted............................................    9,492          34.87
  Exercised..........................................   (2,649)         25.41
  Canceled or expired................................     (637)         27.54
                                                        ------
Outstanding December 31, 1997........................   17,619          31.23
  Granted............................................    9,589          50.81
  Exercised..........................................   (2,480)         23.03
  Canceled or expired................................     (700)         36.99
                                                        ------
Outstanding December 31, 1998........................   24,028          38.45
  Granted............................................   12,569          53.96
  Exercised..........................................   (3,010)         32.20
  Canceled or expired................................   (1,189)         40.43
                                                        ------
Outstanding December 31, 1999........................   32,398         $44.14
                                                        ======
</TABLE>

                                      F-19
<PAGE>
NOTE 9: STOCK INCENTIVE PLANS (CONTINUED)
    The outstanding options at December 31, 1999, have the following
characteristics (shares in thousands):

<TABLE>
<CAPTION>
                                   OUTSTANDING OPTIONS              EXCERCISABLE OPTIONS
                          --------------------------------------   -----------------------
                                         WEIGHTED-     WEIGHTED-                 WEIGHTED-
                                          AVERAGE       AVERAGE                   AVERAGE
                            NUMBER       REMAINING     EXERCISE      NUMBER      EXERCISE
RANGE OF EXERCISE PRICES  OUTSTANDING   LIFE (YEARS)     PRICE     EXERCISABLE     PRICE
------------------------  -----------   ------------   ---------   -----------   ---------
<S>                       <C>           <C>            <C>         <C>           <C>
$0.00 - $33.25..........   9,747,164        6.33        $26.64      8,630,916     $29.56
$33.63 - $51.31.........   8,715,254        7.84         45.13      4,315,642      43.43
$51.38 - $54.31.........   9,758,454        9.38         53.54         96,400      52.58
$54.38 - $72.63.........   4,177,142        9.29         60.94         92,488      58.56
                          ----------        ----        ------     ----------     ------
  Total.................  32,398,014        8.04        $44.14     13,135,446     $34.49
                          ==========        ====        ======     ==========     ======
</TABLE>

    Options to purchase 5,924,251 and 5,299,955 shares of common stock at
weighted-average exercise prices of $30.15 and $25.72 were exercisable at
December 31, 1998 and 1997, respectively.

    Approximately 8 million shares of common stock were available for grant at
December 31, 1999. Approximately 32 million shares of common stock were reserved
for issuance at December 31, 1999.

NOTE 10: EMPLOYEE BENEFITS

PENSION, POSTRETIREMENT AND OTHER POST EMPLOYMENT BENEFITS

    We have a noncontributory defined benefit pension plan (the "Pension Plan")
for substantially all management and occupational employees and postretirement
healthcare and life insurance plans for retirees. We also provide post
employment benefits for certain former employees.

    Prior to the Separation, we participated in the defined benefit pension plan
and postretirement healthcare and life insurance plans sponsored by Old
U S WEST. Accordingly, our financial statements for periods prior to the
Separation reflect an allocation of costs from Old U S WEST for its employees
and retirees while they were included in Old U S WEST's plans.

    On June 12, 1998, we assumed sponsorship of the Old U S WEST pension plan
and MediaOne established a new defined benefit pension plan for eligible
MediaOne employees (the "MediaOne Pension Plan"). In connection with the
Separation, a portion of the existing assets of the Old U S WEST pension plan
were transferred at fair value to the MediaOne Pension Plan such that the ratio
of plan assets to plan liabilities, calculated on a projected benefit obligation
basis as determined by independent actuaries, was the same for the Pension Plan
and the MediaOne Pension Plan. The pension benefit obligation and plan assets
transferred to the MediaOne Pension Plan at June 12, 1998 were approximately
$150 and $200, respectively.

    In addition, on June 12, 1998, the three funded retiree medical and life
insurance benefits trusts, maintained by Old U S WEST under an employee welfare
benefit program for its employees, were split between us and MediaOne. One of
the trusts covered hourly employees only and was transferred in its entirety to
us. The remaining two trusts were transferred to us, and MediaOne established
new trusts. A portion of the assets of the latter two trusts was transferred to
MediaOne's trusts based upon the same methodology used to transfer assets of the
Pension Plan to the MediaOne Pension Plan, except that the liabilities were
calculated by independent actuaries using the accumulated postretirement benefit
obligation method. The accumulated postretirement benefit obligation and plan
assets transferred to MediaOne's trusts at June 12, 1998 were approximately $20
and $5, respectively.

                                      F-20
<PAGE>
NOTE 10: EMPLOYEE BENEFITS (CONTINUED)
    Pension benefits for management employees are based upon their salary and
years of service while occupational employee benefits are based upon job
classification and years of service. Pension and postretirement costs are
recognized over the period in which the employee renders services and becomes
eligible to receive benefits as determined by using the projected unit credit
method. Our funding policy is to make contributions with the objective of
accumulating sufficient assets to pay all benefits when due. No pension funding
was required in 1999, 1998 or 1997.

    Since plan assets for pension and postretirement benefits were not
historically segregated into separate accounts or restricted to providing
benefits to employees of U S WEST, assets of the plan were used to provide
benefits to employees of both U S WEST and MediaOne. Therefore, the following
pension and postretirement benefits plan information for periods prior to
June 12, 1998, reflects the pension cost (credit), postretirement benefit cost,
benefit obligation, assets and funded status of the Old U S WEST plans.

    The portion of the pension credit applicable to U S WEST was $33 in 1997.
The components of the pension credit are as follows:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
Details of pension cost (credit):
  Service cost........................................   $ 203      $ 189      $ 176
  Interest cost.......................................     658        639        625
  Expected return on plan assets......................    (935)      (852)      (759)
  Amortization of transition asset....................     (79)       (79)       (80)
  Amortization of prior service cost..................       2          2          2
                                                         -----      -----      -----
Net pension credit....................................   $(151)     $(101)     $ (36)
                                                         =====      =====      =====
</TABLE>

    The portion of the postretirement benefit cost applicable to U S WEST was
$179 in 1997. The components of the postretirement benefit cost are as follows:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
Details of postretirement benefit cost:
  Service cost........................................   $  70      $  72      $  66
  Interest cost.......................................     326        319        296
  Expected return on plan assets......................    (229)      (213)      (174)
  Amortization of prior service cost..................      20         19         19
  Recognized actuarial gain...........................     (28)       (30)       (28)
                                                         -----      -----      -----
Total postretirement benefit cost.....................   $ 159      $ 167      $ 179
                                                         =====      =====      =====
</TABLE>

    Since plan assets for pension and postretirement benefits were not
historically segregated into separate accounts or restricted to providing
benefits to employees of U S WEST, assets of the plan were used to provide
benefits to employees of both U S WEST and MediaOne. Therefore, the following
pension and postretirement benefit plan information for periods prior to
June 12, 1998, reflects the benefit obligation, assets and funded status of the
Old U S WEST plans.

                                      F-21
<PAGE>
NOTE 10: EMPLOYEE BENEFITS (CONTINUED)
    Following is a reconciliation of the benefit obligation for the pension and
postretirement plans:

<TABLE>
<CAPTION>
                                                                     POSTRETIREMENT
                                                   PENSION              BENEFITS
                                             -------------------   -------------------
                                                 YEAR ENDED            YEAR ENDED
                                                DECEMBER 31,          DECEMBER 31,
                                             -------------------   -------------------
                                               1999       1998       1999       1998
                                             --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>
Benefit obligation at beginning of year....  $ 9,622     $9,167     $4,825     $4,406
Service cost...............................      203        189         70         72
Interest cost..............................      658        639        326        319
Actuarial (gain) loss......................     (884)       499       (690)       297
Plan amendments............................       --         --          4       (105)
Divestitures...............................       --       (224)        --        (23)
Benefits paid..............................     (722)      (648)      (191)      (141)
                                             -------     ------     ------     ------
Benefit obligation at end of year..........  $ 8,877     $9,622     $4,344     $4,825
                                             =======     ======     ======     ======
</TABLE>

    Following is a reconciliation of the change in the fair value of plan assets
for the pension and postretirement plans:

<TABLE>
<CAPTION>
                                                                    POSTRETIREMENT
                                                  PENSION              BENEFITS
                                            -------------------   -------------------
                                                YEAR ENDED            YEAR ENDED
                                               DECEMBER 31,          DECEMBER 31,
                                            -------------------   -------------------
                                              1999       1998       1999       1998
                                            --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>
Fair value of plan assets at beginning of
  year....................................  $12,925    $12,260     $2,604     $2,413
Actual return on plan assets..............    2,509      1,579        575        264
Employer contributions/(withdrawals)......       --         --       (212)        18
Divestitures..............................       (8)      (212)        (1)        (4)
Section 420 transfer......................     (111)       (54)       111         54
Benefits paid.............................     (722)      (648)      (191)      (141)
                                            -------    -------     ------     ------
Fair value of plan assets at end of
  year....................................  $14,593    $12,925     $2,886     $2,604
                                            =======    =======     ======     ======
</TABLE>

    In December 1999 and 1998, under provisions of section 420 of the Internal
Revenue Code, $111 and $54, respectively, of pension assets were transferred to
the postretirement benefit plan to pay for current year retiree health care
benefits. In 1999, $230 of Life Insurance and Welfare Trust assets were
transferred to the Company to pay for employee welfare benefits.

    The following table represents the funded status of the pension and
postretirement plans:

<TABLE>
<CAPTION>
                                                                   POSTRETIREMENT
                                                 PENSION              BENEFITS
                                           -------------------   -------------------
                                               YEAR ENDED            YEAR ENDED
                                              DECEMBER 31,          DECEMBER 31,
                                           -------------------   -------------------
                                             1999       1998       1999       1998
                                           --------   --------   --------   --------
<S>                                        <C>        <C>        <C>        <C>
Funded (unfunded) status.................  $ 5,716    $ 3,303    $(1,458)   $(2,221)
Unrecognized net actuarial gain..........   (4,640)    (2,195)    (1,479)      (482)
Unamortized prior service cost...........        2          4        125        140
Balance of unrecognized transition
  asset..................................     (387)      (466)        --         --
                                           -------    -------    -------    -------
Prepaid (accrued) benefit cost...........  $   691    $   646    $(2,812)   $(2,563)
                                           =======    =======    =======    =======
</TABLE>

                                      F-22
<PAGE>
NOTE 10: EMPLOYEE BENEFITS (CONTINUED)
    The actuarial assumptions used to account for the plans are as follows:

<TABLE>
<CAPTION>
                                                                       POSTRETIREMENT
                                                     PENSION              BENEFITS
                                               -------------------   -------------------
                                                   YEAR ENDED            YEAR ENDED
                                                  DECEMBER 31,          DECEMBER 31,
                                               -------------------   -------------------
                                                 1999       1998       1999       1998
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
Weighted-average discount rate...............   8.00%      6.75%      8.00%      6.75%
Expected long-term rate of return on plan
  assets(*)..................................   9.40%      8.80%      9.40%      8.80%
Weighted-average rate of compensation
  increase...................................   4.65%      4.65%        N/A        N/A
</TABLE>

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

*   The expected long-term rate of return on plan assets for the pension and
    postretirement plans was 8.5% for 1997.

    For measurement purposes, an 8% annual rate of increase in the healthcare
cost trend rate for 1999 is assumed. The healthcare cost trend rate is assumed
to gradually decline to an ultimate rate of 5% in 2011.

    A 1% change in the assumed healthcare cost trend rate would have had the
following effects in 1999:

<TABLE>
<CAPTION>
                                                             ONE-PERCENT CHANGE
                                                             -------------------
                                                             INCREASE   DECREASE
                                                             --------   --------
<S>                                                          <C>        <C>
Effect on the aggregate of the service and interest cost
  components of net periodic postretirement benefit cost...    $ 53      $ (43)
Effect on accumulated postretirement benefit obligation....     557       (464)
</TABLE>

    In October 1998, the Communications Workers of America voting members (who
are our employees), ratified new three-year contracts. These contracts provide
for both salary increases of 10.9% and pension increases totaling 21% over three
years. These benefit changes are reflected in the above calculations.

    We provide other post employment benefits, such as worker's compensation and
disability to former or inactive employees who are not eligible for retirement.

NOTE 11: INCOME TAXES

    The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                          ------------------------------
                                                            1999       1998       1997
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>
FEDERAL:
  Current...............................................    $530       $685       $798
  Deferred..............................................     171        103        (10)
  Investment tax credits--net...........................     (15)       (13)       (16)
                                                            ----       ----       ----
                                                             686        775        772
                                                            ----       ----       ----
STATE AND LOCAL:
  Current...............................................      45        108        119
  Deferred..............................................      69         28         11
                                                            ----       ----       ----
                                                             114        136        130
                                                            ----       ----       ----
Provision for income taxes..............................    $800       $911       $902
                                                            ====       ====       ====
</TABLE>

                                      F-23
<PAGE>
NOTE 11: INCOME TAXES (CONTINUED)

    We paid $472, $678 and $906 for income taxes in 1999, 1998 and 1997,
respectively.

    The effective tax rate differs from the statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED
                                                                     DECEMBER 31,
                                                            ------------------------------
                                                              1999       1998       1997
                                                            --------   --------   --------
                                                                     (IN PERCENT)
<S>                                                         <C>        <C>        <C>
Federal statutory tax rate................................    35.0       35.0       35.0
Investment tax credit amortization........................    (0.5)      (0.4)      (0.4)
State income taxes--net of federal effect.................     3.9        3.7        3.5
Terminated merger-related charges.........................     5.2         --         --
Other.....................................................    (1.5)      (0.6)      (1.0)
                                                              ----       ----       ----
Effective tax rate........................................    42.1       37.7       37.1
                                                              ====       ====       ====
</TABLE>

    The components of the net deferred tax liability are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Property, plant and equipment...............................   $1,966     $1,633
State deferred taxes--net of federal effect.................      266        205
Investments.................................................      128         --
Deferred directory costs....................................      137         --
Other.......................................................       27         40
                                                               ------     ------
  Deferred tax liabilities..................................    2,524      1,878
                                                               ------     ------
Postretirement benefits, net of pension.....................      776        701
Unamortized investment tax credit...........................       56         56
State deferred taxes--net of federal effect.................      151        135
Other.......................................................      396        351
                                                               ------     ------
  Deferred tax assets.......................................    1,379      1,243
                                                               ------     ------
Net deferred tax liability..................................   $1,145     $  635
                                                               ======     ======
</TABLE>

NOTE 12: SEGMENT INFORMATION

    We operate in four segments: retail services, wholesale services, network
services and directory services. The retail services segment provides local
telephone services, long-distance services, wireless services and data services.
The wholesale services segment provides exchange access services that connect
customers to the facilities of interexchange carriers and interconnection to our
telecommunications network to competitive local exchange carriers. Our network
services segment provides access to our telecommunications network, including
our information technologies, primarily to our retail services and wholesale
services segments. The directory services segment publishes White and Yellow
Pages telephone directories and provides electronic directory and other
information services. We provide our services to more than 25 million
residential and business customers in Arizona, Colorado, Idaho, Iowa, Minnesota,
Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah,
Washington and Wyoming.

                                      F-24
<PAGE>
NOTE 12: SEGMENT INFORMATION (CONTINUED)
    Following is a breakout of our segments. Because significant expenses of
operating the retail services and wholesale services segments are not allocated
to the segments for decision making purposes, management does not believe the
segment margins are representative of the actual operating results of the
segments. The margin for the retail services and wholesale services segments
excludes network and corporate expenses. The margin for the network services
segment and the directory services segment excludes corporate expenses. The
"other" category includes our corporate expenses. The communications and related
services column represents a total of the retail services, wholesale services
and network services segments. As a result of regulatory actions and changes in
internal reporting, the classification of certain operating revenues and
expenses has changed during 1999, 1998 and 1997. It has not been practicable to
restate 1997 results to conform to the current year's presentation. Accordingly,
the operating revenues and margins may not be comparable for each year.
<TABLE>
<CAPTION>
                                                                              TOTAL
                                                                         COMMUNICATIONS
                                   RETAIL     WHOLESALE      NETWORK       AND RELATED     DIRECTORY               RECONCILING
                                  SERVICES     SERVICES     SERVICES        SERVICES       SERVICES      OTHER        ITEMS
                                 ----------   ----------   -----------   ---------------   ---------   ---------   -----------
<S>                              <C>          <C>          <C>           <C>               <C>         <C>         <C>
1999
Revenues.......................  $ 9,022      $ 2,871      $    242        $ 12,135         $1,446     $   --      $   (399)(1)
Margin.........................    6,111        2,157        (2,793)          5,475            741       (116)       (4,198)
Assets.........................       -- (3)       -- (3)        -- (3)          -- (3)        819         -- (3)    22,397 (3)
Capital expenditures...........      587 (4)      111         3,473           4,171             48         (1)           --

1998
Revenues.......................    8,556        2,590           214          11,360          1,277         --          (242)(1)
Margin.........................    6,194        1,908        (2,776)          5,326            657       (234)       (3,330)
Assets.........................       -- (3)       -- (3)        -- (3)          -- (3)        524         -- (3)    17,883 (3)
Capital expenditures...........      362 (4)       --         2,376           2,738             42        125            --

1997
Revenues.......................    7,893        2,609           163          10,665          1,190         --          (334)(1)
Margin.........................    5,940        2,176        (2,738)          5,378            615       (396)       (3,168)
Assets.........................       -- (3)       -- (3)        -- (3)          -- (3)        516         -- (3)    17,151 (3)
Capital expenditures...........      340 (4)       --         2,214           2,554             29         89            --

<CAPTION>

                                 CONSOLIDATED
                                    TOTAL
                                 ------------
<S>                              <C>
1999
Revenues.......................  $ 13,182
Margin.........................     1,902 (2)
Assets.........................    23,216
Capital expenditures...........     4,218
1998
Revenues.......................    12,395
Margin.........................     2,419 (2)
Assets.........................    18,407
Capital expenditures...........     2,905
1997
Revenues.......................    11,521
Margin.........................     2,429 (2)
Assets.........................    17,667
Capital expenditures...........     2,672
</TABLE>

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

(1) Represents primarily intersegment charges. The 1997 amount also includes
    $230 of regulatory charges, primarily attributable to the state of
    Washington.

(2) Represents income before income taxes, extraordinary item and cumulative
    effect of change in accounting principle. Adjustments that are made to the
    total of the segments' income in order to arrive at income before income
    taxes, extraordinary item and cumulative effect of change in accounting
    principle include the following:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Costs and adjustments to reconcile segment data to the
  consolidated total:
Terminated merger-related expenses..........................   $  282     $   --     $   --
Loss on sale of Global Crossing common stock................      367         --         --
Decline in market value of derivative.......................       56         --         --
Separation costs............................................       --         94         --
Asset impairment charge.....................................       --         35         --
Regulatory charges..........................................       --         --        230
Other expense--net..........................................      730        630        347
Taxes other than income taxes...............................      396        372        428
Depreciation and amortization...............................    2,367      2,199      2,163
                                                               ------     ------     ------
                                                               $4,198     $3,330     $3,168
                                                               ======     ======     ======
</TABLE>

                                      F-25
<PAGE>
NOTE 12: SEGMENT INFORMATION (CONTINUED)
(3) A breakout of assets for all segments is not provided to our chief operating
    decision maker. The reconciling items column represents the amount to
    reconcile to the consolidated total.

(4) Capital expenditures reported for the retail services segment include only
    expenditures for wireless services and certain data services. Additional
    capital expenditures relating to these services are included in network
    services capital expenditures.

    In addition to the operating revenues disclosed above, intersegment
operating revenues of the retail services segment were $87, $28 and $30 for
1999, 1998 and 1997, respectively. Intersegment operating revenues of the
network services segment were $60, $70 and $64 for 1999, 1998 and 1997,
respectively. Intersegment operating revenues of the directory services segment
were $10, $10 and $6 for 1999, 1998 and 1997, respectively.

    SIGNIFICANT CONCENTRATIONS.  At December 31, 1999, we had 58,272 employees,
of which 46,352 are employees of U S WEST Communications, Inc., a wholly owned
subsidiary ("USWC") and 3,787 are employees of Dex. Approximately 74% of USWC
employees and 62% of Dex employees are represented by unions.

NOTE 13: RELATED PARTY TRANSACTIONS

    BELL COMMUNICATIONS RESEARCH, INC. ("BELLCORE").  Charges relating to
research, development and maintenance of existing technologies performed by
Bellcore, in which we had a one-seventh ownership interest, were $118 in 1997.

    In 1997, we sold our interest in Bellcore. We received cash proceeds of $65
and recorded an after-tax gain of $32. Bellcore, now named Telcordia, continues
to provide research and development and other services to us on a contract
basis.

NOTE 14: MERGER AGREEMENTS

    In May 1999, we entered into an agreement to merge with Global Crossing. In
connection with the Global Crossing merger agreement, in June 1999, we completed
a cash tender offer for approximately 39 million shares of Global Crossing
common stock at a price of $62.75 per share for an aggregate purchase price of
$2,464.

    In July 1999, we entered into an agreement to merge with Qwest. Under the
terms of the merger agreement, Qwest will issue shares of its common stock
having a value of $69.00 for each share of our common stock, subject to a
"collar" on Qwest's Average Price (as defined below) between $28.26 and $39.90
per share. The exchange ratio, and accordingly, the number of Qwest shares to be
issued for each U S WEST share will be determined by dividing $69.00 by the
average of the volume weighted averages of the trading prices of Qwest common
stock for the 15 trading days randomly selected by lot, by Qwest and us together
from the 30 consecutive trading days ending on the third trading day preceding
the closing of the transaction (the "Average Price"). If Qwest's Average Price
is less than $28.26, the exchange ratio will be 2.44161. If Qwest's Average
Price is greater than $39.90, the exchange ratio will be 1.72932.

    The obligation, if necessary, under the "collar" may be satisfied in whole
or in part with cash if Qwest's Average Price is below $38.70 per share. In
determining the cash amount for the "collar," Qwest and our Company will
consider Qwest's desire to reduce dilution to its stockholders, our desire to
provide a cash element to our stockholders and both companies' desire to
maintain the merged company's strong financial condition. We may terminate the
merger agreement if the closing price of Qwest's shares is below $22.00 for 20
consecutive trading days before the closing, or if the Average Price of Qwest
shares during the measurement period is less than $22.00. The Boards of
Directors of both Qwest and our Company and their and our stockholders approved
the proposed merger. The merger is subject to federal and state

                                      F-26
<PAGE>
NOTE 14: MERGER AGREEMENTS (CONTINUED)
regulatory approvals without significant conditions and other customary closing
conditions. Closing of the merger is expected by mid-2000.

    In connection with the Qwest/U S WEST merger, our Company and Global
Crossing agreed to terminate the merger agreement between us. In consideration
for terminating the merger agreement, we paid Global Crossing $140 in cash and
2,231,076 shares that we previously purchased in the open market of Global
Crossing common stock valued at $140. Qwest provided us a $140 loan to pay for
the cash portion of the termination fee. The loan bears interest at LIBOR plus
0.15% and is due December 31, 2001. If our merger with Qwest is terminated
because we change our recommendation for the merger, we will be obligated to
repay $70 in cash to Qwest and we will receive from Qwest 1,115,538 shares of
Global Crossing common stock or the market value in cash at the time of the
termination. If termination is not caused by our changing our recommendation,
Qwest will not receive reimbursement for its $140 loan and will have to deliver
to us the same number of shares of Global Crossing common stock delivered to
Global Crossing by us or pay us the market value in cash at the time of the
termination. In December 1999, we sold 24 million shares of Global Crossing
common stock resulting in a pre-tax loss of $367.

NOTE 15: COMMITMENTS AND CONTINGENCIES

COMMITMENTS

    We have entered into an agreement with Olympic Properties of the United
States to sponsor the 2002 Salt Lake City Winter Olympics and the U.S. Olympic
Teams through 2004. As of December 31, 1999, we have a remaining commitment of
$48 to be paid in a combination of cash and services through 2004.

CONTINGENCIES

    REGULATORY CONTINGENCIES.  On May 1, 1996, the Oregon Public Utilities
Commission ("OPUC") approved a stipulation terminating prematurely USWC's
alternative form of regulation ("AFOR") plan and it then undertook a review of
USWC's earnings. In May 1997, the OPUC ordered USWC to reduce its annual
revenues by $97, effective May 1, 1997, and to issue a one-time refund,
including interest, of approximately $102 to reflect the revenue reduction for
the period May 1, 1996 through April 30, 1997. This one-time refund for interim
rates became subject to refund when USWC's AFOR plan was terminated on May 1,
1996.

    USWC filed an appeal of the order and asked for an immediate stay of the
refund with the Oregon Circuit Court which granted USWC's request for a stay,
pending a full review of the OPUC's order. On February 19, 1998, the Oregon
Circuit Court entered a judgment in USWC's favor on most of the appealed issues.
The OPUC appealed to the Oregon Court of Appeals on March 19, 1998. In light of
the settlement discussed below, the appellate court remanded the matter back to
the OPUC.

    On September 9, 1999, USWC and the OPUC staff reached a tentative settlement
agreement whereby USWC would refund approximately $247 and provide ongoing rate
reductions of $63. A hearing on the propriety of the proposed settlement was
held by the OPUC, and that agency is expected to issue its decision sometime
during March, 2000. We have reserved for the proposed refunds.

    In December 1999, the Colorado Public Utilities Commission decided to fine
USWC $13 for violations of service quality rules between January 1998 and April
1999, although a written order has not yet been issued. USWC has reserved for
this fine.

                                      F-27
<PAGE>
NOTE 15: COMMITMENTS AND CONTINGENCIES (CONTINUED)
    USWC has pending regulatory actions in local regulatory jurisdictions which
call for price decreases, refunds or both. These actions are generally routine
and incidental to USWC's business. USWC will continue to monitor and evaluate
the risks associated with its local regulatory jurisdictions.

    OTHER CONTINGENCIES.  In 1999, twelve complaints were filed against us and
our directors in the following jurisdictions: California Superior Court, Los
Angeles County (1); New York Supreme Court, New York County (1); Colorado
District Court, City and County of Denver (2); Delaware Court of Chancery (8).
These actions are purported class actions brought on behalf of all persons,
other than the defendants, who own our common stock against us and our
directors. Each of the complaints makes substantially similar allegations that
the defendants breached their fiduciary duties to the class members by refusing
to seek all bona fide offers for the Company and refusing to consider the Qwest
proposal, resulting in the stockholders being prevented from maximizing the
value of their common stock. The complaints seek various injunctive and monetary
relief, including orders: a) requiring defendants to act in accordance with
their fiduciary duties by considering any bona fide proposal which would
maximize stockholder value; b) requiring the directors to undertake an
evaluation of our Company as a merger/ acquisition candidate and take steps to
enhance that value and create an active auction for our Company; c) preventing
defendants from using a stockholder rights plan to impede any bona fide offer
for our Company; d) enjoining the consummation of the then proposed Global
Crossing-U S WEST merger until all alternatives are explored; e) requiring
defendants to account for all damages suffered by plaintiffs as a result of
defendants' actions with respect to the tender offer for the shares of Global
Crossing common stock by us and the then proposed Global Crossing-U S WEST
merger; and f) requiring defendants to pay damages to plaintiffs. We intend to
vigorously defend these actions.

    On October 1, 1999, a Fifth Amended Class Action Complaint was filed against
U S WEST and USWC purportedly on behalf of 220,000 customers in the State of
Colorado. The complaint alleges, inter alia, that from 1993 to the present,
U S WEST and USWC, in violation of alleged statutory and common law obligations,
willfully delayed the provision of local telephone service to the purported
class members. In addition, the complaint alleges that U S WEST and USWC
misrepresented the date on which such local telephone service was to be provided
to the purported class members. The complaint seeks compensatory damages for
purported class members, disgorgement of profits and punitive damages.
U S WEST and USWC intend to vigorously defend this action.

    The New Mexico Public Regulatory Commission has ordered an interim rate
reduction of $29, but the Commission stayed the implementation of its order.
Permanent resolution of this matter is expected during 2000.

    We are subject to other legal proceedings and claims that arise in the
ordinary course of business. Although there can be no assurance of the ultimate
disposition of these matters, it is management's opinion, based upon the
information available at this time, that the expected outcome, individually or
in the aggregate, will not have a material adverse effect on our consolidated
results of operations or financial position.

                                      F-28
<PAGE>
NOTE 16: QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      QUARTERLY FINANCIAL DATA
                                                              -----------------------------------------
                                                               FIRST      SECOND     THIRD      FOURTH
                                                              QUARTER    QUARTER    QUARTER    QUARTER
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
1999
Revenues....................................................   $3,168     $3,227     $3,296     $3,491
Net income..................................................      634        406        136        166
Earnings per share:
  Basic.....................................................     0.78       0.81       0.27       0.80
  Diluted...................................................     0.78       0.80       0.27       0.79
1998
Revenues....................................................   $3,015     $3,057     $3,114     $3,209
Net income..................................................      434        327        379        368
Pro forma net income(1).....................................      393        296        379        368
Earnings per share:
  Basic.....................................................     0.89       0.67       0.76       0.73
  Diluted...................................................     0.89       0.67       0.75       0.73
  Pro forma basic(1)........................................     0.78       0.59        N/A        N/A
  Pro forma diluted(1)......................................     0.78       0.59        N/A        N/A
</TABLE>

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

(1) 1998 first and second quarter include pro forma adjustments for the
    assumption of indebtedness and the issuance of shares in connection with the
    alignment of the directory business with New U S WEST, as if the Separation
    had been consummated as of the beginning of the year.

    1999 quarterly data has been restated to give effect for the change in
accounting principle associated with Dex's change to the "point of publication"
method. See Note 2. 1999 first quarter net income includes the cumulative effect
of change in accounting principle of $240 ($0.47 per diluted share). 1999 third
quarter net income includes terminated merger-related expenses of $282 ($0.56
per diluted share). 1999 fourth quarter net income includes the loss on the sale
of 24 million shares of Global Crossing common stock of $367 ($0.44 per diluted
share) and decline in the market value of derivative financial instruments of
$56 ($0.07 per diluted share).

    1998 second quarter net income includes Separation expenses of $68 ($0.13
per diluted share) and a $21 ($0.04 per diluted share) charge related to the
impairment of certain long-lived assets associated with our video operations.

<TABLE>
<CAPTION>
                                                                MARKET PRICE
                                                       ------------------------------
PER SHARE MARKET AND DIVIDEND DATA                       HIGH       LOW       CLOSE     DIVIDENDS
----------------------------------                     --------   --------   --------   ---------
<S>                                                    <C>        <C>        <C>        <C>
1999
  First quarter......................................  $65.6250   $53.3125   $55.0625    $0.5350
  Second quarter.....................................   62.2500    51.5625    58.7500     0.7500
  Third quarter......................................   60.2500    51.7500    57.0625     0.5350
  Fourth quarter.....................................   73.0000    57.0000    72.0000     0.5350
1998
  First quarter......................................  $56.3125   $45.3750   $54.6250    $0.5350
  Second quarter.....................................   57.4375    46.8125    46.8125     0.5350
  Third quarter......................................   54.9375    48.4375    52.5000     0.5350
  Fourth quarter.....................................   65.0000    51.8750    64.6250     0.5350
</TABLE>

    Per share market and dividend data prior to June 12, 1998 represents data of
Communications Stock. Per share market and dividend data as of and subsequent to
June 12, 1998 represents data of U S WEST.

                                      F-29
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To U S WEST, Inc.:

    We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in U S WEST, Inc.'s (the
"Company") Annual Report on Form 10-K for the year ended December 31, 1999, and
have issued our report thereon dated January 26, 2000 appearing on page F-1. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule appearing on page F-31 of this Form 10-K is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Denver, Colorado,
  January 26, 2000.

                                      F-30
<PAGE>
                                 U S WEST, INC.
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                                        BALANCE AT   CHARGED                  BALANCE
                                                        BEGINNING       TO                   AT END OF
                                                        OF PERIOD    EXPENSE    DEDUCTIONS    PERIOD
                                                        ----------   --------   ----------   ---------
<S>                                                     <C>          <C>        <C>          <C>
Allowance for uncollectibles:
  1999................................................      $69        $158        $139(a)      $88
  1998................................................       72         141         144(a)       69
  1997................................................       60         126         114(a)       72
</TABLE>

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

(a) Represents credit losses written off during the period, less collection of
    amounts previously written off.

<TABLE>
<CAPTION>
                                                        BALANCE AT   CHARGED                  BALANCE
                                                        BEGINNING       TO                   AT END OF
                                                        OF PERIOD    EXPENSE    DEDUCTIONS    PERIOD
                                                        ----------   --------   ----------   ---------
<S>                                                     <C>          <C>        <C>          <C>
Allowance for obsolete inventory:
  1999................................................      $6          $8          $4          $10
  1998................................................       8           1           3            6
  1997................................................       7           2           1            8
</TABLE>

                                      F-31
<PAGE>
                                     [LOGO]

                                                                    WSTNC-10K-00