<PAGE>

================================================================================

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

         [X] Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                  For the quarterly period ended: June 30, 2000

                                       or

         [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                For the transition period from _______ to _______

                          Commission File Number 1-6417

                             VERIZON CALIFORNIA INC.
                   (Former Name : GTE California Incorporated)


             CALIFORNIA                                  95-0510200
  (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
   INCORPORATION OR ORGANIZATION)

1255 Corporate Drive, SVC04C08, Irving, Texas               75038
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

    Registrant's telephone number, including area code 972-507-5000


THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF GTE CORPORATION, A WHOLLY-OWNED
SUBSIDIARY OF BELL ATLANTIC CORPORATION (D/B/A VERIZON COMMUNICATIONS), MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION (H)(2).

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                         YES  [X]    NO  [ ]

================================================================================
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                            VERIZON CALIFORNIA INC.
             Condensed Consolidated Statements of Income (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended                  Six Months Ended
                                                                June 30,                           June 30,
                                                     --------------------------------  ---------------------------------
                                                          2000            1999              2000             1999
                                                     --------------- ----------------  ---------------  ----------------
                                                                           (Dollars in Millions)
<S>                                                  <C>             <C>               <C>               <C>
REVENUES AND SALES
   Local services                                    $       408.6   $        375.2    $        804.0    $        757.3
   Network access services                                   306.5            296.0             603.0             577.4
   Other services and sales                                  119.4            152.4             247.1             316.1
                                                     -------------   --------------    --------------    --------------
      Total revenues and sales                               834.5            823.6           1,654.1           1,650.8
                                                     -------------   --------------    --------------    --------------

OPERATING COSTS AND EXPENSES
   Operations and support                                    299.6            344.3             559.8             695.7
   Depreciation and amortization                             162.9            147.4             320.0             298.5
                                                     -------------   --------------    --------------    --------------
      Total operating costs and expenses                     462.5            491.7             879.8             994.2
                                                     -------------   --------------    --------------    --------------

OPERATING INCOME                                             372.0            331.9             774.3             656.6

OTHER EXPENSE
   Interest - net                                             37.1             34.1              72.9              69.2
                                                     -------------   --------------    --------------    --------------
INCOME BEFORE INCOME TAXES                                   334.9            297.8             701.4             587.4
   Income taxes                                              149.0            120.9             299.4             238.6
                                                     -------------   --------------    --------------    --------------
NET INCOME                                           $       185.9   $        176.9    $        402.0    $        348.8
                                                     =============   ==============    ==============    ==============
</TABLE>




The accompanying notes are an integral part of these statements.

                                       1
<PAGE>

                            VERIZON CALIFORNIA INC.
                Condensed Consolidated Balance Sheets (Unaudited)


<TABLE>
<CAPTION>
                                                                            June 30,       December 31,
                                                                              2000             1999
                                                                        --------------    ------------
                                                                              (Dollars in Millions)
<S>                                                                     <C>               <C>
ASSETS
Current assets
    Cash and cash equivalents                                           $          0.7    $       11.6
    Receivables, less allowances of $63.5 million and $65.5 million              529.0           689.2
    Receivables from affiliates                                                    5.6            14.7
    Inventories and supplies                                                      57.7            45.2
    Net assets held for sale                                                      45.8            53.8
    Deferred income tax benefits                                                  85.7            68.7
    Prepayments and other                                                          8.3            50.2
                                                                        --------------    ------------
       Total current assets                                                      732.8           933.4
                                                                        --------------    ------------

Property, plant and equipment, at cost                                        10,523.6        10,324.4
Accumulated depreciation                                                      (6,777.8)       (6,576.6)
                                                                        --------------    ------------
       Total property, plant and equipment, net                                3,745.8         3,747.8
                                                                        --------------    ------------

Prepaid pension costs                                                          1,509.7         1,170.6
Other assets                                                                      18.0            15.5
                                                                        --------------    ------------
Total assets                                                            $      6,006.3    $    5,867.3
                                                                        ==============    ============
</TABLE>




The accompanying notes are an integral part of these statements.

                                       2
<PAGE>

                            VERIZON CALIFORNIA INC.
          Condensed Consolidated Balance Sheets (Unaudited) - Continued


<TABLE>
<CAPTION>
                                                                           June 30,        December 31,
                                                                             2000              1999
                                                                        -------------     -------------
                                                                             (Dollars in Millions)
<S>                                                                    <C>               <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
    Current maturities of long-term debt                                $       305.3     $         5.2
    Notes payable to affiliates                                                 161.5             204.1
    Accounts payable                                                            130.5             156.5
    Affiliate payables and accruals                                             133.5             122.3
    Taxes payable                                                               260.2              77.2
    Dividends payable                                                           200.0             185.5
    Other                                                                       386.2             355.2
                                                                        -------------     -------------
       Total current liabilities                                              1,577.2           1,106.0
                                                                        -------------     -------------

Long-term debt                                                                1,666.2           1,966.4
Deferred income taxes                                                           876.9             817.3
Employee benefit plans and other                                                149.2             202.9
                                                                        -------------     -------------
       Total liabilities                                                      4,269.5           4,092.6
                                                                        -------------     -------------

Shareholder's equity
    Preferred stock                                                                --              50.0
    Common stock (70,000,000 shares issued)                                   1,400.0           1,400.0
    Additional paid-in capital                                                  336.8              92.5
    Retained earnings                                                              --             232.2
                                                                        -------------     -------------
       Total shareholder's equity                                             1,736.8           1,774.7
                                                                        -------------     -------------
Total liabilities and shareholder's equity                              $     6,006.3     $     5,867.3
                                                                        =============     =============
</TABLE>




The accompanying notes are an integral part of these statements.

                                       3
<PAGE>

                            VERIZON CALIFORNIA INC.
           Condensed Consolidated Statements of Cash Flows (Unaudited)


<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                             June 30,
                                                                   ----------------------------
                                                                     2000                1999
                                                                   ------------     -----------
                                                                      (Dollars in Millions)
<S>                                                                <C>              <C>
OPERATIONS
       Net cash from operations                                    $      759.9     $     725.7
                                                                   ------------     -----------
INVESTING
    Capital expenditures                                                 (302.7)         (263.8)
    Other - net                                                             2.2             0.9
                                                                   ------------     -----------
       Net cash used in investing                                        (300.5)         (262.9)
                                                                   ------------     -----------
FINANCING
    Long-term debt issued                                                 273.6           222.4
    Preferred stock retired, including premiums paid
       on early retirement                                                (55.4)             --
    Dividends                                                            (371.0)         (353.2)
    Net change in affiliate notes                                        (317.5)         (345.5)
                                                                   ------------     -----------
       Net cash used in financing                                        (470.3)         (476.3)
                                                                   ------------     -----------
Decrease in cash and cash equivalents                                     (10.9)          (13.5)

Cash and cash equivalents:
    Beginning of period                                                    11.6            16.4
                                                                   ------------     -----------
    End of period                                                  $        0.7     $       2.9
                                                                   ============     ===========
</TABLE>




The accompanying notes are an integral part of these statements.

                                       4
<PAGE>

                            VERIZON CALIFORNIA INC.
           Consolidated Statement of Shareholder's Equity (Unaudited)

<TABLE>
<CAPTION>
                                                                           Additional
                                               Preferred       Common        Paid-In      Retained
                                                 Stock         Stock         Capital      Earnings        Total
                                               -----------   -----------   -----------   ------------  -----------
                                                                      (Dollars in Millions)

<S>                                            <C>           <C>           <C>           <C>           <C>
Shareholder's equity, December 31, 1999        $      50.0   $   1,400.0   $      92.5   $      232.2  $   1,774.7
Net income                                                                                      402.0        402.0
Redemption of preferred stock                        (50.0)                                      (5.4)       (55.4)
Tax benefit from exercise of stock options                                         1.1                         1.1
Dividends declared                                                                             (385.6)      (385.6)
Capital contributions from Parent                                                243.2                       243.2
Dividend paid to Parent                                                                        (243.2)      (243.2)
                                               -----------  ------------   -----------   ------------  -----------

Shareholder's equity, June 30, 2000            $        --   $   1,400.0   $     336.8   $         --  $   1,736.8
                                               ===========   ===========   ===========   ============  ===========
</TABLE>



The accompanying notes are an integral part of these statements.

                                       5
<PAGE>

                            VERIZON CALIFORNIA INC.
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1. BASIS OF PRESENTATION

Verizon California Inc. (the Company), formerly GTE California Incorporated, is
a wholly-owned subsidiary of GTE Corporation (GTE), which is a wholly-owned
subsidiary of Bell Atlantic Corporation (d/b/a Verizon Communications). The
accompanying unaudited condensed consolidated financial statements have been
prepared based upon Securities and Exchange Commission (SEC) rules that permit
reduced disclosure for interim periods. These financial statements include
certain reclassifications in presentation as a result of the merger of Bell
Atlantic Corporation (Bell Atlantic) and GTE (see Note 2). These financial
statements reflect all adjustments that are necessary for a fair presentation of
results of operations and financial position for the interim periods shown
including normal recurring accruals and other items (see Note 2). The results
for the interim periods are not necessarily indicative of results for the full
year. For a more complete discussion of significant accounting policies and
certain other information, please refer to the consolidated financial statements
included in the Company's 1999 Annual Report on Form 10-K.

NOTE 2. BELL ATLANTIC - GTE MERGER

On June 30, 2000, Bell Atlantic and GTE completed a merger of equals under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE became a wholly-owned subsidiary of Bell Atlantic. With the
closing of the merger, the combined company began doing business as Verizon
Communications. The merger has been accounted for as a pooling of interests.

Merger-Related and Severance Costs

Results of operations for June 30, 2000 include merger-related pre-tax costs
totaling approximately $83.8 million consisting of direct incremental costs and
employee severance costs. These costs include the Company's allocated share of
merger-related costs from Verizon Services Group (Verizon Services), an
affiliate that provides centralized services on a contract basis. Costs
allocated from Verizon Services are included in Operations and Support Expenses.

Direct incremental costs consist of the Company's proportionate share of
expenses associated with completing the merger transaction such as professional
and regulatory fees, compensation arrangements and shareowner-related costs.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the Company's proportionate share of
benefit costs for the separation of management employees who are entitled to
benefits under pre-existing Verizon Communications separation pay plans. The
separations are expected to occur as a result of consolidations and process
enhancements. Accrued postemployment benefit liabilities for those employees are
included in the Company's balance sheet as a component of "Employee benefit
plans and other."

Conforming Accounting Adjustments

Results of operations also include adjustments that were required to conform the
Company's accounting policies and presentation to that of Verizon
Communications. As a result of these adjustments, operating income was increased
by $9.1 million and $9.2 million for the six months ended June 30, 2000 and
1999, respectively.

                                       6
<PAGE>

                           VERIZON CALIFORNIA INC.
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

NOTE 3. DIVIDEND

On July 30, 2000, the Company declared and paid a dividend in the amount of
$200.0 million to Verizon Communications.

Prior to the closing of the GTE merger with Bell Atlantic, dividends that
equaled the retained earnings balance reflected on the Company's financial
statements were declared and paid to GTE. Upon the payment of these dividends, a
capital contribution in the same amount was made by GTE to the Company.

NOTE 4. DEBT

In March 2000, the Company issued $275.0 million of 7.65% Series H Debentures,
due 2007. The net proceeds were applied toward the repayment of short-term
borrowings used to finance the Company's construction program and for general
corporate purposes.

NOTE 5. PREFERRED STOCK

In March 2000, the Company redeemed all 2,499,174 outstanding shares of
preferred stock and paid premiums of $5.4 million pretax on the early
redemption.

NOTE 6. NET ASSETS HELD FOR SALE

During May 1999, the Company entered into an agreement to sell approximately
46,000 switched access lines located in California and Arizona to Citizens
Utilities Company. This agreement consummates the Company's previously announced
1998 plan to sell selected access lines located in California and Arizona. The
sale is contingent upon final agreements and regulatory approval and is expected
to close in 2000. The associated net assets, which approximate $45.8 million and
$53.8 million at June 30, 2000 and December 31, 1999, respectively, consist of
property, plant and equipment, and have been classified as "Net assets held for
sale" in the condensed consolidated balance sheets. The Company intends to
continue to operate all of these assets until sold. Based on the decision to
sell, however, the Company stopped recording depreciation expense for these
assets. Accordingly, depreciation expense was lowered by $2.1 million and $4.2
million for the three and six months ended June 30, 2000 and $1.8 million and
$3.7 million for the three and six months ended June 30, 1999, respectively. No
charges were recorded for the access lines to be sold because their estimated
fair values were in excess of their carrying values. The access line agreement
represents approximately 1% of the switched access lines that the Company had in
service at the end of 1999, and contributed approximately 1% to 1999
consolidated revenues and approximately 1% to 1999 consolidated operating
income.

NOTE 7. DIRECTORY PUBLISHING REVENUES

Consistent with industry practice, effective January 1, 2000, the Company
changed its method of recognizing directory publishing revenues. Verizon
Directories Corp., a wholly-owned subsidiary of GTE, publishes telephone
directories for which it receives advertising revenue. Under the previous method
of revenue recognition, approximately 60% of the advertising revenue for
directories published in the Company's operating areas was recognized as revenue
by the Company. The remaining 40% was recognized as revenue by Verizon
Directories Corp. Under the new method, Verizon Directories Corp. now
recognizes 100% of the directory publishing revenues. The Company, in-turn,
bills Verizon Directories Corp. for customer listing information and billing and
collection services. As a result, the Company's other services and sales
revenues and operating income for the six months ended June 30, 2000 decreased
$27.4 million and $25.0 million, respectively, compared to the first half of
1999.

NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS

FASB Accounting Standards - Derivatives and Hedging Activities

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement

                                       7
<PAGE>

                            VERIZON CALIFORNIA INC.
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

requires that all derivatives be measured at fair value and recognized as either
assets or liabilities on the Company's balance sheet. Changes in the fair values
of derivative instruments will be recognized in either earnings or comprehensive
income, depending on the designated use and effectiveness of the instruments.
The FASB amended this pronouncement in June 1999 to defer the effective date of
SFAS No. 133 for one year. The Company must adopt SFAS No. 133 no later than
January 1, 2001.

In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which amended SFAS No. 133. The
amendments in SFAS No. 138 address certain implementation issues and relate to
such matters as the normal purchases and normal sales exception, the definition
of interest rate risk, hedging recognized foreign-currency-denominated assets
and liabilities, and intercompany derivatives. SFAS No. 138 also amends SFAS No.
133 for decisions made by the FASB relating to the Derivatives Implementation
Group process.

The Company is currently evaluating the provisions of SFAS No. 133 and No. 138.
The impact of adoption will be determined by several factors, including the
specific hedging instruments in place and their relationships to hedged items,
as well as market conditions at the date of adoption.

FASB Interpretation - Stock Compensation

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation." Interpretation No. 44 was issued in
order to clarify certain issues arising from Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees," which was previously
issued in October 1972. Interpretation No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occur either after December 15,
1998 or January 12, 2000.

The main issues addressed by Interpretation No. 44 are: (a) the definition of an
employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination.

Interpretation No. 44 will not have a material impact on the Company's results
of operations or financial position.

SEC Staff Accounting Bulletin - Revenue Recognition

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which must be adopted by the
fourth quarter of 2000. SAB No. 101 provides additional guidance on revenue
recognition, as well as criteria for when revenue is generally realized and
earned, and also requires the deferral of incremental direct selling costs. The
Company is currently assessing the impact of SAB No. 101 on its results of
operations and financial position.

NOTE 9. COMMITMENTS AND CONTINGENCIES

The Company is subject to a number of proceedings arising out of the conduct of
its business, including those relating to regulatory actions, commercial
transactions and environmental, safety and health matters. Management believes
that the ultimate resolution of these matters will not have a materially adverse
effect on the results of operations or the financial position of the Company.

Federal and State regulatory conditions to the merger include certain
commitments to, among other things, promote competition and the widespread
deployment of advanced services, while helping ensure that consumers continue to
receive high-quality, low cost telephone services. In some cases, there are
significant penalties associated with not meeting these commitments. The cost of
satisfying these commitments is likely to impact the net income in future
periods. Over the remainder of 2000, based on preliminary estimates, the cost
of satisfying these commitments is likely to impact the net income of Verizon
Communications on a consolidated basis by approximately $275 to $325 million.
The estimated impact of each operating telephone subsidiary is still being
assessed.
                                       8
<PAGE>

                            VERIZON CALIFORNIA INC.

Item 2. Management's Discussion and Analysis of Results of Operations
       (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

RESULTS OF OPERATIONS

Net income increased $53.2 million or 15% for the six months ended June 30,
2000, compared to the same period in 1999, primarily due to overall lower
operating costs and expenses, partially offset by an increase in income taxes.

The Company's results for 2000 and 1999 were affected by special items. The
special items in both periods include the Company's allocated share of charges
from Verizon Services Group (Verizon Services), an affiliate that provides
centralized services on a contract basis.

The following table shows how special items are reflected in the Company's
condensed statements of income for each period:

(Dollars in Millions)
Six Months Ended June 30,                                 2000           1999
--------------------------------------------------------------------------------
Revenues and Sales
   Regulatory Contingency                              $   6.5       $     --
                                                       ----------    -----------
Operations and Support Expenses
  Bell Atlantic-GTE merger costs                          83.8             --
  Conforming accounting adjustments                       (9.1)          (9.2)
                                                       ----------    -----------
                                                          74.7           (9.2)
                                                       ----------    -----------
Interest Expense                                           0.4           --
                                                       ----------    -----------
Total                                                  $  81.6       $   (9.2)
                                                       ==========    ===========

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

On June 30, 2000, Bell Atlantic and GTE completed a merger of equals under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE became a wholly owned subsidiary of Bell Atlantic. With the
closing of the merger, the combined company began doing business as Verizon
Communications. The merger has been accounted for as a pooling of interests.

Merger-Related and Severance Costs

Results of operations for June 30, 2000 include merger-related pre-tax costs
totaling approximately $83.8 million consisting of direct incremental costs and
employee severance costs.

Direct incremental costs consist of the Company's proportionate share of
expenses associated with completing the merger transaction such as professional
and regulatory fees, compensation arrangements and shareowner-related costs.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the Company's proportionate share of
benefit costs for the separation of management employees who are entitled to
benefits under pre-existing Verizon Communications separation pay plans. The
separations are expected to occur as a result of consolidations and process
enhancements. Accrued postemployment benefit liabilities for those employees are
included in the Company's balance sheet as a component of "Employee benefit
plans and other."

                                       9
<PAGE>

                            VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

Conforming Accounting Adjustments

Results of operations also include adjustments that were required to conform the
Company's accounting policies and presentation to that of Verizon
Communications. As a result of these adjustments, operating income was increased
by $9.1 million and $9.2 million for the six months ended June 30, 2000 and
1999, respectively.

Regulatory Contingency

In the second quarter of 2000, the Company recognized a charge for a regulatory
matter totaling $6.9 million. The Company recorded a reduction in revenue of
$6.5 million and a charge to interest expense of $0.4 million. This matter
relates to a specific issue currently under investigation by federal regulatory
commissions. The Company believes it is probable that the ultimate resolution of
this matter will result in refunds to customers, including interest.

<TABLE>
<CAPTION>
REVENUES AND SALES
(Dollars in Millions)                                      Six Months Ended
                                                               June 30,
                                                    ----------------------------      Increase          Percent
                                                         2000            1999         (Decrease)        Change
                                                    -------------   -------------   -------------   --------------
<S>                                                <C>             <C>             <C>               <C>
    Local services                                  $       804.0   $       757.3   $        46.7              6%
    Network access services                                 603.0           577.4            25.6              4%
    Other services and sales                                247.1           316.1           (69.0)           (22)%
                                                    -------------   -------------   -------------
      Total revenues and sales                      $     1,654.1   $     1,650.8   $         3.3             --
                                                    =============   =============   =============
</TABLE>

Local Services Revenues

Local services revenues are earned from the provision of local exchange, local
private line, wire maintenance, voice messaging and value-added services.
Value-added services are a family of services that expand the utilization of the
network, including products such as Caller ID, Call Waiting and Return Call.
Cellular service providers also pay access charges for cellular calls
transported by Verizon California Inc. (the Company). Local services revenues
increased for the first half of 2000 compared to the first half of 1999
primarily due to 3% growth in switched access lines which generated $23.8
million from basic local services, CentraNet(R) services, Integrated Services
Digital Network and Digital Channel Services. Revenues from enhanced customer
calling services, such as SmartCall(R) and CLASS services, contributed $10.4
million to the year-to-date increase. In addition, operator and directory
assistance services generated $3.7 million in revenue growth.

Network Access Services Revenues

Network access services revenues are earned from end-user subscribers and
long-distance and other competing carriers who use the Company's local exchange
facilities to provide usage services to their customers. Switched access
revenues are derived from fixed and usage-based charges paid by carriers for
access to the local network. Special access revenues originate from carriers and
end-users that buy dedicated local exchange capacity to support their private
networks. End-user access revenues are earned from customers and from resellers
who purchase dial-tone services. Minutes of use increased 10%, generating
additional network access services revenues of $24.2 million for the six months
ending June 30, 2000 compared to the same period in 1999. Special access
revenues grew by $57.0 million as a result of greater demand for increased
bandwidth services by high-capacity users. These increases were partially offset
by the impact of mandated interstate and intrastate access price reductions and
rate

                                       10
<PAGE>

                            VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

element adjustments of $32.9 million. Further offsetting the increases were
declines of $7.6 million related to settlement activities. In addition, revenues
were reduced by a second quarter 2000 special charge for a contingency
associated with a regulatory matter (See "Results of Operations").

Other Services and Sales Revenues

Other services and sales revenues include such services as inventory management
and purchasing services, customer premises equipment sales, public telephone and
billing and collection provided to affiliates and third parties. In addition,
other services and sales revenues include revenues from toll services which are
earned primarily from calls made outside a customer's local calling area but
with in the same LATA (Local Access Transport Area) -(intraLATA). The decrease
in other services and sales revenues for the six-month period ended June 30,
2000 compared to the same period in 1999 was primarily the result of reduced
toll revenues of $29.5 million resulting from intraLATA toll competition. The
impact of a change in the recognition of directory publishing revenues resulted
in a decrease of $27.4 (for further information see "OTHER DEVELOPMENTS -
Directory Publishing Revenues"). Further impacting the decrease are reduced
public telephone revenues of $11.8 million due to decreased volumes associated
with wireless product substitution, and lower wireless and paging revenues of
$8.5 million. These declines are partially offset by increased E911 revenues of
$12.1 million.


<TABLE>
<CAPTION>
OPERATING COSTS AND EXPENSES
(Dollars in Millions)                                      Six Months Ended
                                                               June 30,
                                                    ----------------------------    Increase        Percent
                                                         2000           1999        (Decrease)      Change
                                                    -------------  -------------  -------------  ------------
<S>                                                <C>            <C>            <C>             <C>
    Operations and support                          $       559.8  $       695.7  $      (135.9)        (20)%
    Depreciation and amortization                           320.0          298.5           21.5           7%
                                                    -------------  -------------  -------------
      Total operating costs and expenses            $       879.8  $       994.2  $      (114.4)        (12)%
                                                    =============  =============  =============
</TABLE>

Operations and support expenses, representing employee costs and other operating
expenses, decreased in the first six months of 2000 compared to the same period
in 1999 primarily due to the recognition of a pretax gain of a $222.0 million
associated with lump-sum settlements of pension obligations for former employees
electing deferred vested pension cash-outs and for current employees who met
certain eligibility requirements. A charge of $19.9 million in the first quarter
of 1999, associated with an employee-reduction program, also contributed to the
decrease. Partially offsetting these decreases was a second quarter 2000 special
charge of $83.8 million for severance and direct incremental merger-related
costs (see "RESULTS OF OPERATIONS"). In addition, offsetting the decreases were
increased settlements of $17.2 million and higher access expenses of $4.4
million, primarily resulting from increased competitive local exchange carrier
(CLEC) activity.

Depreciation and amortization expense increased primarily due to continued
investment in the network to support access line growth due to higher demand
from Internet Service Providers (ISPs) and additional customer lines. Partially
offsetting the increase in depreciation and amortization expense were reductions
resulting from adjustments made to conform the accounting policies of Bell
Atlantic and GTE as a result of the merger (See "RESULTS OF OPERATIONS").


OTHER INCOME STATEMENT ITEMS

Income tax expense increased 25% or $60.8 million for the six months ended June
30, 2000 compared to the same period in 1999 primarily due to an increase in
pretax income.

                                       11
<PAGE>

                           VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

INTERSTATE REGULATORY DEVELOPMENTS

FCC Regulation and Interstate Rates

On May 31, 2000, the Federal Communications Commission (FCC) approved the
industry proposal to restructure access charges (known as the "CALLS plan").
Under the terms of the plan, direct end-user access charges are increased while
access charges to long distance carriers are reduced. While the plan continues
the 6.5% (less inflation) annual reductions for most interstate access charges,
it provides for a price freeze when switched access transport prices reach
$0.0055 per-minute. In addition, in conjunction with provisions that will allow
carriers to deaverage their subscriber line charges by geographic zones, the
plan establishes a new $650 million universal service fund to support interstate
access rates. Of that amount, Verizon Communications expects approximately $320
million to be used to support interstate access services in Verizon's service
territory. The price restructuring portions of the plan are mandatory for all
large local exchange carriers, including Verizon Communications' telephone
operating companies. The price level portions of the plan are mandatory only in
the initial year of the plan. Carriers have until September 14, 2000 to decide
whether to participate in the remaining four years of the plan, or whether to
submit cost studies as the basis of future price caps.

Consistent with the new access plan, Verizon Communications filed tariff
adjustments to take effect on July 1, 2000 (with modifications effective August
11, 2000). As a result of these tariff adjustments, former GTE carriers in ten
states, and former Bell Atlantic carriers in seven states reached the $0.0055
benchmark and, should Verizon Communications opt into the full five year CALLS
plan, they will not be subject to further annual interstate switched access
price reductions for the remaining life of the plan.

                                       12
<PAGE>

                           VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

INTRASTATE REGULATORY DEVELOPMENTS

California

Open Access and Network Architecture Development

In March 1996, the California Public Utilities Commission (CPUC) issued a
decision adopting an interim discount on resold services of 12% and indicated
that a permanent discount would be addressed in the Open Access and Network
Architecture Development (OANAD) proceeding. Hearings were held in November and
December 1997 on the permanent rate and the matter was submitted for a decision
in early 1998. A final order is anticipated during the fourth quarter of 2000.

A prehearing conference reopening the Company's Unbundled Network Element (UNE)
cost phase was held August 1, 2000. All parties except Verizon supported the
CPUC issuing a decision on the existing record. Verizon recommended that the
interim arbitrated rates remain in effect and updates to the existing cost study
be allowed once the effects are known of the recent U.S. Court of Appeals
decision invalidating certain FCC pricing guidelines. The Administrative Law
Judge will issue another ruling during the third quarter of 2000 seeking further
comments on the issues raised.

In January 2000, the CPUC issued a ruling directing the Company and Pacific Bell
to file an amendment to existing interconnection agreements to provide for line
sharing service, including interim prices. In a subsequent ruling, a new phase
of the OANAD proceeding was opened to address the interim and permanent line
sharing issues. Hearings were held in April 2000 and a final arbitrator report
was issued in May 2000. This report adopted a rate of $3.00 per month for access
to the high frequency portion of the loop; adopted the CLECs' proposal to reduce
the Incumbent Local Exchange Carrier's (ILECs') proposed rates for
semi-mechanized and manual systems by 50%; and adopted the Company's price of
$5.00 when the ILEC owns the splitter. A final CPUC decision is expected in

                                       13
<PAGE>

                           VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

the third quarter of 2000. The scope and schedule to address final prices and
other issues of line sharing will be set after interim contract language is
adopted.

Operations Support Systems

The CPUC issued an order in April 2000 adopting line sharing performance
measurements for the Company and Pacific Bell in compliance with the FCC's
line-sharing order and California law.

Open Market Transition

In July 1999, the CPUC denied in part and granted in part several applications
for rehearing of the decision that ordered an interim surcharge to recover costs
associated with the implementation of local competition. The CPUC concluded that
certain fundamental aspects of the surcharge require rehearing and that it
should also conduct a comprehensive reasonableness review in order to reach a
final rather than an interim implementation cost recovery surcharge. The Company
submitted its implementation costs for 1996 through 1998 in August 1999 and
filed testimony in December 1999 requesting recovery for $12.3 million. To
facilitate further negotiations, the CPUC granted the CLECs an extension of time
to September 22, 2000 to reply to the Company's reasonableness report.

ISP Reciprocal Compensation

In February 2000, the CPUC opened a rulemaking into reciprocal compensation for
telephone traffic originating from customers' telephone stations and transmitted
to ISPs' modems. The rulemaking identified six major policy issues addressing
reciprocal compensation for ISP traffic. Evidentiary hearings have been
scheduled for August 14-25, 2000. The Company is seeking to have the CPUC revise
its current policy by ruling that reciprocal compensation is inappropriate for
ISP traffic. A final decision is expected in the fourth quarter of 2000.


OTHER DEVELOPMENTS

Net Assets Held for Sale

During May 1999, the Company entered into an agreement to sell approximately
46,000 switched access lines located in California and Arizona to Citizens
Utilities Company. This agreement consummates the Company's previously announced
1998 plan to sell selected access lines located in California and Arizona. The
sale is contingent upon final agreements and regulatory approval and is expected
to close in 2000. The associated net assets, which approximate $45.8 million and
$53.8 million at June 30, 2000 and December 31, 1999, respectively, consist of
property, plant and equipment, and have been classified as "Net assets held for
sale" in the condensed consolidated balance sheets. The Company intends to
continue to operate all of these assets until sold. Based on the decision to
sell, however, the Company stopped recording depreciation expense for these
assets. Accordingly, depreciation expense was lowered by $2.1 million and $4.2
million for the three and six months ended June 30, 2000 and $1.8 million and
$3.7 million for the three and six months ended June 30, 1999, respectively. No
charges were recorded for the access lines to be sold because their estimated
fair values were in excess of their carrying values. The access line agreement
represents approximately 1% of the switched access lines that the Company had in
service at the end of 1999, and contributed approximately 1% to 1999
consolidated revenues and approximately 1% to 1999 consolidated operating
income.

                                       14
<PAGE>

                           VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

Directory Publishing Revenues

Consistent with industry practice, effective January 1, 2000, the Company
changed its method of recognizing directory publishing revenues. Verizon
Directories Corp., a wholly-owned subsidiary of GTE, publishes telephone
directories for which it receives advertising revenue. Under the previous method
of revenue recognition, approximately 60% of the advertising revenue for
directories published in the Company's operating areas was recognized as revenue
by the Company. The remaining 40% was recognized as revenue by Verizon
Directories Corp. Under the new method, Verizon Directories Corp. now recognizes
100% of the directory publishing revenues. The Company, in-turn, bills Verizon
Directories Corp. for customer listing information and billing and collection
services. As a result, the Company's other services and sales revenue and
operating income for the six months, ended June 30, 2000 decreased $27.4 million
and $25.0 million respectively, compared to the first half of 1999.


RECENT ACCOUNTING PRONOUNCEMENTS

FASB Accounting Standards - Derivatives and Hedging Activities

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all
derivatives be measured at fair value and recognized as either assets or
liabilities on the Company's balance sheet. Changes in the fair values of
derivative instruments will be recognized in either earnings or comprehensive
income, depending on the designated use and effectiveness of the instruments.
The FASB amended this pronouncement in June 1999 to defer the effective date of
SFAS No. 133 for one year. The Company must adopt SFAS No. 133 no later than
January 1, 2001.

In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which amended SFAS No. 133. The
amendments in SFAS No. 138 address certain implementation issues and relate to
such matters as the normal purchases and normal sales exception, the definition
of interest rate risk, hedging recognized foreign-currency-denominated assets
and liabilities, and intercompany derivatives. SFAS No. 138 also amends SFAS No.
133 for decisions made by the FASB relating to the Derivatives Implementation
Group process.

The Company is currently evaluating the provisions of SFAS No. 133 and No. 138.
The impact of adoption will be determined by several factors, including the
specific hedging instruments in place and their relationships to hedged items,
as well as market conditions at the date of adoption.

FASB Interpretation - Stock Compensation

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation." Interpretation No. 44 was issued in
order to clarify certain issues arising from Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees," which was previously
issued in October 1972. Interpretation No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occur either after December 15,
1998 or January 12, 2000.

The main issues addressed by Interpretation No. 44 are: (a) the definition of an
employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination.

Interpretation No. 44 will not have a material impact on the Company's results
of operations or financial position.

                                       15
<PAGE>

                           VERIZON CALIFORNIA INC.

   Management's Discussion and Analysis of Results of Operations - Continued
        (Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)

SEC Staff Accounting Bulletin - Revenue Recognition

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which must be adopted by the
fourth quarter of 2000. SAB No. 101 provides additional guidance on revenue
recognition, as well as criteria for when revenue is generally realized and
earned, and also requires the deferral of incremental direct selling costs. The
Company is currently assessing the impact of SAB No. 101 on its results of
operations and financial position.

                                       16
<PAGE>

PART II. OTHER INFORMATION

                           VERIZON CALIFORNIA INC.

Item 1. Legal Proceedings

     There were no proceedings reportable under this Item.

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits:

          3.1* Articles of Incorporation and Bylaws (Exhibit 3.1 of the 1998
               Form 10-K)

          3.2* Certificate of Amendment of the Articles of Incorporation dated
               March 26, 1998 (Exhibit 3.2 of the March 31, 1998 Form 10-Q)

          3.4* Certificate of Amendment of the Articles of Incorporation dated
               April 21, 1998 (Exhibit 3.3 of the March 31, 1998 Form 10-Q)

          3.6  Amended Articles of Incorporation of Verizon California Inc.,
               filed with the Secretary of State of California on June 30, 2000

          27   Financial Data Schedule

     (b)  The Company filed a report on Form 8-K dated June 30, 2000 under Item
          1, "Changes in Control of Registrant."


     *    Denotes exhibits incorporated herein by reference to previous filings
          with the Securities and Exchange Commission as designated.

                                       17
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                                 Verizon California Inc.
                                                 ----------------------------
                                                      (Registrant)

  Date:   August 14, 2000                            /s/  Edwin F. Hall
        --------------------                    -----------------------------
                                                          Edwin F. Hall
                                                            Controller
                                                (Principal Accounting Officer)





      UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 10, 2000.

                                       18
<PAGE>

                                  EXHIBIT INDEX

    Exhibit
    Number                          Description
    -------                         -----------

     3.6              Amended Articles of Incorporation of Verizon California
                      Inc., filed with the Secretary of State of California on
                      June 30, 2000

      27              Financial Data Schedule