<PAGE>

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

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

                                    FORM 10-Q

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

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

                                       OR

    [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     For the transition period from     to


                         Commission file number 2-36292


                               VERIZON SOUTH INC.

      A Virginia Corporation     I.R.S. Employer Identification No. 56-0656680


        1095 Avenue of the Americas, Room 3868, New York, New York 10036


                        Telephone Number (212) 395-2121

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


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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---    ---

<PAGE>

                               Verizon South Inc.

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>


                                                             Three Months Ended September 30,     Nine Months Ended September 30,
                                                            ---------------------------------------------------------------------
(Dollars in Millions) (Unaudited)                                   2001            2000              2001            2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>              <C>               <C>
OPERATING REVENUES
   (including $8.4, $.5, $25.2 and $1.9 from affiliates)        $   400.9         $   422.4         $1,223.2        $1,172.4
                                                            ---------------------------------------------------------------------
OPERATING EXPENSES
Operations and support  (including  $42.1,  $85.9,  $109.5
 and $169.6 to affiliates)                                          175.6             191.8            522.7           585.7
Depreciation and amortization                                        52.4              79.9            204.7           237.4
                                                            ---------------------------------------------------------------------
                                                                    228.0             271.7            727.4           823.1
                                                            ---------------------------------------------------------------------
OPERATING INCOME                                                    172.9             150.7            495.8           349.3

OTHER INCOME AND (EXPENSE), NET
  (including $(.3), $.1, $(2.8), and $.2 from affiliates)             (.3)               .3             (2.7)             .3

INTEREST EXPENSE
  (including $.2, $2.2, $2.9 and $6.3 to affiliate)                  19.6              16.0             54.1            81.4
                                                            ---------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES
     AND EXTRAORDINARY ITEM                                         153.0             135.0            439.0           268.2

PROVISION FOR INCOME TAXES                                           60.6              47.9            174.8           105.1
                                                            ---------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM                                     92.4              87.1            264.2           163.1

EXTRAORDINARY ITEM
   Early extinguishment of debt, net of tax                           ---               ---              (.3)            ---
                                                            ---------------------------------------------------------------------
NET INCOME                                                       $   92.4          $   87.1        $   263.9       $   163.1
                                                            =====================================================================
</TABLE>


                  See Notes to Condensed Financial Statements.

                                       1
<PAGE>

                               Verizon South Inc.

                            CONDENSED BALANCE SHEETS

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

 (Dollars in Millions)                                                               September 30, 2001       December 31, 2000
 -------------------------------------------------------------------------------------------------------------------------------
                                                                                            (Unaudited)
<S>                                                                                          <C>                   <C>
CURRENT ASSETS
Cash                                                                                            $     .4               $   25.6
Short-term investments                                                                               7.7                   30.0
Accounts receivable:
    Trade and other, net of allowances for uncollectibles of $21.9 and $22.3                       267.3                  263.0
    Affiliates                                                                                      25.5                   14.9
Note receivable from affiliate                                                                      73.8                    ---
Material and supplies                                                                               13.8                   11.6
Prepaid expenses                                                                                     6.4                   17.1
Net assets held for sale                                                                           666.1                    ---
Other                                                                                               30.9                   17.2
                                                                                    ---------------------------------------------
                                                                                                 1,091.9                  379.4
                                                                                    ---------------------------------------------

PLANT, PROPERTY AND EQUIPMENT                                                                    3,130.4                4,909.1
Less accumulated depreciation                                                                    1,877.7                3,064.0
                                                                                    ---------------------------------------------
                                                                                                 1,252.7                1,845.1
                                                                                    ---------------------------------------------

PREPAID PENSION ASSET                                                                              378.5                  349.8
                                                                                    ---------------------------------------------

OTHER ASSETS                                                                                        58.3                   72.1
                                                                                    ---------------------------------------------

TOTAL ASSETS                                                                                    $2,781.4               $2,646.4
                                                                                    =============================================

</TABLE>



                  See Notes to Condensed Financial Statements.

                                       2
<PAGE>

                               Verizon South Inc.

                            CONDENSED BALANCE SHEETS

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

(Dollars in Millions, Except Per Share Amount)                                       September 30, 2001    December 31, 2000
-------------------------------------------------------------------------------------------------------------------------------
                                                                                            (Unaudited)
<S>                                                                                          <C>                  <C>
CURRENT LIABILITIES
Debt maturing within one year:
    Note payable to affiliate                                                                   $    ---              $   87.1
    Other                                                                                          152.5                  14.8
Accounts payable and accrued liabilities:
    Affiliates                                                                                      36.7                  39.0
    Other                                                                                          200.0                 178.3
Other liabilities                                                                                  146.8                 342.8
                                                                                    ---------------------------------------------
                                                                                                   536.0                 662.0
                                                                                    ---------------------------------------------

LONG-TERM DEBT                                                                                     915.4                 774.5
                                                                                    ---------------------------------------------

EMPLOYEE BENEFIT OBLIGATIONS                                                                       199.8                 150.3
                                                                                    ---------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes                                                                              221.6                 207.4
Unamortized investment tax credits                                                                    .3                    .8
Other                                                                                               63.9                  70.4
                                                                                    ---------------------------------------------
                                                                                                   285.8                 278.6
                                                                                    ---------------------------------------------
SHAREOWNER'S INVESTMENT
Common stock  - $25 par value per share                                                            525.0                 525.0
  Authorized shares:   25,000,000
  Outstanding shares:  21,000,000
Contributed capital                                                                                 63.8                  63.3
Reinvested earnings                                                                                255.6                 192.7
                                                                                    ---------------------------------------------
                                                                                                   844.4                 781.0
                                                                                    ---------------------------------------------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT                                                   $2,781.4              $2,646.4
                                                                                    =============================================
</TABLE>


                  See Notes to Condensed Financial Statements.

                                       3
<PAGE>

                               Verizon South Inc.

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                    ---------------------------------------------
(Dollars in Millions) (Unaudited)                                                              2001                  2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                   <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                    $ 311.0                $ 544.6
                                                                                    ---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments                                                            22.3                    ---
Capital expenditures                                                                          (274.6)                (309.4)
Net change in note receivable from affiliate                                                   (73.8)                   ---
Other, net                                                                                       (.2)                   (.3)
                                                                                    ---------------------------------------------
Net cash used in investing activities                                                         (326.3)                (309.7)
                                                                                    ---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings                                                                       290.6                     ---
Principal repayments of borrowings                                                             (12.4)                    ---
Preferred stock retired, including premiums paid on early retirement                              ---                   (.4)
Net change in note payable to affiliate                                                        (87.1)                 (29.6)
Dividends paid                                                                                (201.0)                (218.0)
                                                                                    ---------------------------------------------
Net cash used in financing activities                                                           (9.9)                (248.0)
                                                                                    ---------------------------------------------
NET CHANGE IN CASH                                                                             (25.2)                 (13.1)

CASH, BEGINNING OF PERIOD                                                                       25.6                   13.4
                                                                                    ---------------------------------------------

CASH, END OF PERIOD                                                                          $    .4                $    .3
                                                                                    =============================================

</TABLE>


                  See Notes to Condensed Financial Statements.

                                       4
<PAGE>

                               Verizon South Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   Basis of Presentation

     Verizon South Inc. is a wholly owned subsidiary of GTE Corporation (GTE),
which is a wholly owned subsidiary of Verizon Communications Inc. (Verizon
Communications). The accompanying unaudited condensed financial statements have
been prepared based upon Securities and Exchange Commission rules that permit
reduced disclosure for interim periods. These financial statements reflect all
adjustments that are necessary for a fair presentation of results of operations
and financial position for the interim periods shown including normal recurring
accruals. The results for the interim periods are not necessarily indicative of
results for the full year. The balance sheet at December 31, 2000 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For a more complete discussion of
significant accounting policies and certain other information, you should refer
to the financial statements included in our 2000 Annual Report on Form 10-K.

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

2.   Revenue Recognition

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

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

3.   Long-Lived Assets

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

4.   Dividend

     On November 1, 2001, we declared and paid a dividend in the amount of $66.0
million to GTE.

5.   Derivatives and Hedging Activities

     Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." SFAS No. 133
requires that all derivatives, including derivatives embedded in other financial
instruments, be measured at fair value and recognized as either assets or
liabilities on our balance sheet. Changes in the fair values of derivative
instruments not qualifying as hedges under SFAS No. 133 or any ineffective
portion of hedges are recognized in earnings in the current period. Changes in
the fair values of derivative instruments used effectively as fair value hedges
are recognized in earnings, along with changes in the fair value of the hedged
item. Changes in the fair value of the effective portions of cash flow hedges
are reported in other comprehensive income (loss), and recognized in earnings
when the hedged item is recognized in earnings. We presently do not have any
derivative instruments or hedging activities and, consequently, SFAS No. 133 did
not have an impact on our financial statements.

                                       5
<PAGE>

                               Verizon South Inc.

6.   Recent Accounting Pronouncements

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

     SFAS No. 141, which applies to business combinations occurring after June
30, 2001, requires that the purchase method of accounting be used and includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in the combination.

     SFAS No. 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121. The new statement also applies to goodwill and indefinite-lived intangible
assets of investments accounted for under the equity method of accounting.
Intangible assets that do not have indefinite lives will continue to be
amortized over their useful lives and reviewed for impairment in accordance with
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
We are required to adopt SFAS No. 142 effective January 1, 2002. We are
currently evaluating our intangible assets to determine the impact, if any, the
adoption of SFAS No. 142 will have on our results of operations or financial
position.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard provides the accounting for the cost of
legal obligations associated with the retirement of long-lived assets. SFAS No.
143 requires that companies recognize the fair value of a liability for asset
retirement obligations in the period in which the obligations are incurred and
capitalize that amount as a part of the book value of the long-lived asset. That
cost is then depreciated over the remaining life of the underlying long-lived
asset. We are required to adopt SFAS No. 143 effective January 1, 2003. We are
currently evaluating the impact this new standard will have on our future
results of operations or financial position.

     In August 2001, the FASB issued SFAS No. 144. This standard supersedes SFAS
No. 121 and the provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," with regard to reporting the effects of a disposal of
a segment of a business. SFAS No. 144 establishes a single accounting model for
assets to be disposed of by sale and addresses several SFAS No. 121
implementation issues. We are required to adopt SFAS No. 144 effective January
1, 2002. We do not expect the impact of the adoption of SFAS No. 144 to have a
material effect on our results of operations or financial position.

7.   Merger Charges

     In connection with the merger of Bell Atlantic and GTE on June 30, 2000, we
incurred charges associated with employee severance of $25.7 million pre-tax.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the benefit costs for the separation of
management employees who were entitled to benefits under pre-existing separation
plans, as well as an accrual for ongoing SFAS No. 112 obligations for former GTE
employees. During the second quarter of 2000, in connection with the merger, we
also recorded a pre-tax charge of $16.1 million for direct, incremental
merger-related costs, including compensation, professional services and other
direct costs.

     In addition, we recorded pre-tax merger-related transition costs of $14.9
million in the first nine months of 2001. Transition costs consisted of costs to
integrate systems, consolidate real estate, relocate employees and meet certain
regulatory conditions of the merger. They also included costs for advertising
and other costs to establish the Verizon brand. Transition costs since the date
of the merger totaled $19.0 million. Transition costs are expensed as incurred.
During the second quarter of 2000, we also recorded a $98.6 million pre-tax
charge in relation to the Bell Atlantic - GTE merger. This item relates to a
state regulatory matter.

     Results of operations for the first nine months of 2000 also included
adjustments that were required to conform our accounting methods and
presentation to that of Verizon Communications. These conforming adjustments are
differences in capitalization policies. As a result of these adjustments,
depreciation and amortization expense decreased $3.3 million for the nine month
period ended September 30, 2000.

                                       6
<PAGE>

                               Verizon South Inc.

8.    Shareowner's Investment

<TABLE>
<CAPTION>
                                                                                                Contributed          Reinvested
(Dollars in Millions)                                                     Common Stock              Capital            Earnings
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                  <C>                   <C>
Balance at December 31, 2000                                                    $525.0                $63.3             $ 192.7
Net income                                                                                                                263.9
Dividends declared                                                                                                       (201.0)
Other                                                                                                    .5
                                                                      ---------------------------------------------------------
Balance at September 30, 2001                                                   $525.0                $63.8             $ 255.6
                                                                      =========================================================
</TABLE>

     Net income and comprehensive income were the same for the nine months ended
September 30, 2001 and 2000.

9.   Net Assets Held for Sale

     During the third quarter of 2001, we announced that we were exploring the
sale of approximately 774,000 access lines in the states of Alabama and
Kentucky, and during the quarter committed to sell those access lines.
Consequently, as of September 30, 2001 the net assets pertaining to those access
lines, principally plant, property and equipment, were classified in the
condensed balance sheet as net assets held for sale. We intend to continue to
operate all of these assets until sold. Given the decision to sell, no
depreciation expense was recorded for these assets during the three months ended
September 30, 2001 in accordance with SFAS No. 121. Accordingly, depreciation
expense was lowered by $26.8 million for both the three and nine months ended
September 30, 2001. See Note 12 for additional information on agreements to sell
these access lines.

10.  Debt

     During the first half of 2001, we redeemed $12.4 million of 10.54% twenty
year first mortgage bonds due in 2008. As a result of this early extinguishment
of debt, we recorded an extraordinary charge that reduced net income by $.3
million (net of an income tax benefit of $.2 million).

     In April 2001, we issued $300 million of 7% Series F Debentures due on
April 30, 2041. Proceeds from this sale were used to repay short-term borrowings
and for general corporate purposes.

11.   Commitments and Contingencies

      Various legal actions and regulatory proceedings are pending to which we
are a party and claims which, if asserted, may lead to other legal actions. We
have established reserves for specific liabilities in connection with regulatory
and legal matters that we currently deem to be probable and estimable. We do not
expect that the ultimate resolution of pending regulatory and legal matters in
future periods will have a material effect on our financial condition, but it
could have a material effect on our results of operations.

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

     Regulatory conditions to the Bell Atlantic - GTE merger include certain
commitments to, among other things, promote competition and the widespread
deployment of advanced services, while helping to ensure that consumers continue
to receive high-quality, low cost telephone services. In some cases, there are
significant penalties associated with not meeting these commitments. The cost of
satisfying these commitments could have a significant impact on net income in
future periods.

12.  Subsequent Event - Potential Sale of Access Lines

     During the third quarter of 2001, we announced that we were exploring the
sale of approximately 774,000 access lines in the states of Alabama and
Kentucky.

       In October 2001, Verizon Communications agreed to sell all 675,000 of its
switched access telephone lines in Alabama and Missouri to CenturyTel Inc. for
$2.159 billion. We own and operate approximately 175,000 of these switched
access lines, all of which are located in Alabama. The sale must be approved by
the Alabama and Missouri public service commissions, the

                                       7
<PAGE>

                               Verizon South Inc.


Federal Communications Commission (FCC) and the U.S. Department of Justice
(DOJ). We expect to close the sale and transfer our operations to CenturyTel
during the second half of 2002.

       Also in October 2001, we agreed to sell approximately 600,000 local
telephone lines in Kentucky to ALLTEL Corporation for $1.9 billion. The sale
must be approved by the Kentucky public service commission, the FCC and the DOJ.
We expect to close the sale and transfer our operations to ALLTEL during the
second half of 2002.

       These two access line agreements represent approximately 37% of the
switched access lines that we had in service at September 30, 2001. Due to the
centralized manner in which Verizon Communications manages its operating
telephone companies, operating revenues and operating income applicable to these
access lines are not readily determinable.

                                       8
<PAGE>

                               Verizon South Inc.

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

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


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

      We reported net income of $263.9 million for the nine month period ended
September 30, 2001, compared to net income of $163.1 million for the same period
in 2000.

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

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

<TABLE>
<CAPTION>

                                                                                                    (Dollars in Millions)
Nine Months Ended September 30,                                                                    2001                 2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                     <C>
Operating Revenues
   Other charges and special items                                                              $  ---                $  1.4
   Regulatory contingency                                                                          ---                   1.0
   Bell Atlantic-GTE merger related                                                                ---                  69.0
                                                                                       ---------------------------------------
                                                                                                   ---                  71.4
                                                                                       ---------------------------------------
Operations and Support Expenses
  Bell Atlantic-GTE merger direct incremental costs                                                ---                  16.1
  Bell Atlantic-GTE merger severance costs                                                         ---                  25.7
  Bell Atlantic-GTE merger transition costs                                                       14.9                   ---
  Other charges and special items                                                                  ---                    .4
                                                                                       ---------------------------------------
                                                                                                  14.9                  42.2
                                                                                       ---------------------------------------
Depreciation and Amortization Expenses
   Bell Atlantic-GTE merger accounting conformity adjustments                                      ---                  (3.3)
                                                                                       ---------------------------------------
Interest Expense
   Regulatory contingency                                                                          ---                    .2
   Bell Atlantic-GTE merger related                                                                ---                  29.6
                                                                                       ---------------------------------------
                                                                                                   ---                  29.8
                                                                                       ---------------------------------------

Net impact on income before provision for income taxes and extraordinary item                   $ 14.9                $140.1
                                                                                       =======================================
</TABLE>

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

Merger Charges

      In connection with the merger of Bell Atlantic and GTE on June 30, 2000,
we incurred charges associated with employee severance of $25.7 million pre-tax.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the benefit costs for the separation of
management employees who were entitled to benefits under pre-existing separation
plans, as well as an accrual for ongoing SFAS No. 112 obligations for former GTE
employees. During the second quarter of 2000, in connection with the merger, we
also recorded a pre-tax charge of $16.1 million for direct, incremental
merger-related costs, including compensation, professional services and other
direct costs.

      In addition, we recorded pre-tax merger-related transition costs of $14.9
million in the first nine months of 2001. Transition costs consisted of costs to
integrate systems, consolidate real estate, relocate employees and meet certain
regulatory conditions of the merger. They also included costs for advertising
and other costs to establish the Verizon brand. Transition costs are expensed as
incurred. During the second quarter of 2000, we also recorded a $98.6 million
charge in relation to the Bell Atlantic - GTE merger for a state regulatory
matter. We recorded a reduction to operating revenue in the amount of $69.0
million and a charge to interest expense of $29.6 million.

      Results of operations for the first nine months of 2000 also included
adjustments that were required to conform our accounting methods and
presentation to that of Verizon Communications. These conforming adjustments are
differences in

                                       9
<PAGE>

                               Verizon South Inc.

capitalization policies. As a result of these adjustments, depreciation and
amortization expense decreased $3.3 million for the nine month period ended
September 30, 2000.

Other Charges and Special Items

      In the second quarter of 2000, we recognized a pre-tax charge for a
regulatory matter totaling $1.2 million. We recorded a reduction to operating
revenue in the amount of $1.0 million and a charge to interest expense of $.2
million. This matter relates to a specific issue currently under investigation
by the Federal Communications Commission (FCC). We believe that it is probable
that the ultimate resolution of this matter will result in refunds to customers,
including interest. In the second quarter of 2000, we also recorded other
charges and special items totaling approximately $1.8 million pre-tax. Of this
amount, $1.4 million was recorded as a reduction to operating revenue and $.4
million was recorded as a charge to operations and support expenses.

Sale of Non-strategic Access Lines

      During 2000, we sold selected switched access lines in Illinois. The net
assets held for sale were $3.5 million at September 30, 2000 and no assets
remained held for sale at December 31, 2000. The operating revenues and net
income contributed by these properties in the first nine months of 2000 were
approximately $3.8 million and $1.6 million, respectively. On an annual basis,
the total operating revenues and net income contributed by the sold properties
were approximately $4.3 million and $1.8 million, respectively, for the year
ended December 31, 2000. The pre-tax gain on the sale totaled $15.4 million for
the year ended December 31, 2000 and the cash proceeds from the sale totaled
$20.0 million at December 31, 2000.

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

OPERATING REVENUES
------------------
(Dollars in Millions)

Nine Months Ended September 30,                     2001                 2000
--------------------------------------------------------------------------------
Local services                                  $  647.5             $  508.6
Network access services                            457.8                521.2
Long distance services                              24.3                 31.1
Other services                                      93.6                111.5
                                       -----------------------------------------
Total                                           $1,223.2             $1,172.4
                                       =========================================


LOCAL SERVICES

      2001 - 2000                                        Increase
--------------------------------------------------------------------------------
      Nine Months                                 $138.9          27.3%
--------------------------------------------------------------------------------

      Local service revenues are earned from the provision of local exchange,
local private line, wire maintenance, voice messaging and value-added services.
Value-added services are a family of services that expand the utilization of the
network, including products such as Caller ID, Call Waiting and Return Call. The
provision of local exchange services not only includes retail revenues, but also
includes local wholesale revenues from unbundled network elements (UNEs),
interconnection revenues from competitive local exchange carriers, certain data
transport revenues and wireless interconnection revenues.

      Local service revenues were affected by the settlement of a state
regulatory matter in the state of Virginia. This settlement resulted in refunds
to customers in both local service revenues and network access revenues in the
first quarter of 2001. The effect of these refunds was entirely offset by the
reversal of an accrual recorded in local service revenues. Higher payments from
competitive local exchange carriers for the connection of their network with our
network and for the purchase of unbundled network elements, as well as higher
customer demand and usage of our value-added services also contributed to the
increase, but to a lesser extent.

      These increases were partially offset by price reductions and the effects
of an economic slowdown and competition, as reflected by a decline in our
switched access lines in service from September 30, 2000. In addition, the
effect of technology is increasing as more customers are choosing wireless and
Internet services in place of certain basic wireline services.


                                      10
<PAGE>

                               Verizon South Inc.

NETWORK ACCESS SERVICES

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                         $(63.4)      (12.2)%
--------------------------------------------------------------------------------

      Network access revenues are earned from end-user subscribers and from long
distance and other competing carriers who use our local exchange facilities to
provide usage services to their customers. Switched access revenues are derived
from fixed and usage-based charges paid by carriers for access to our local
network. Special access revenues originate from carriers and end-users that buy
dedicated local exchange capacity to support their private networks. End-user
access revenues are earned from our customers and from resellers who purchase
dial-tone services.

      The decrease in network access revenues in the first nine months of 2001
was primarily due to the effect of the settlement of a regulatory matter in the
state of Virginia in the first quarter of 2001. This settlement resulted in
refunds to customers which was entirely offset by the reversal of an accrual
recorded in local service revenues, as described above. The effect of mandated
price reductions on certain interstate access services and other regulatory
decisions also contributed to the decline in network access revenues. State
public utility commissions regulate us with respect to certain intrastate rates
and services and certain other matters. The FCC regulates rates that we charge
long distance carriers and end-user subscribers for interstate access services.
We are required to file new access rates with the FCC each year. In July 2000,
we implemented the Coalition for Affordable Local and Long Distance Service
(CALLS) plan. Rates included in the July 2000 CALLS plan were in effect through
June 2001. Effective July 3, 2001, we implemented further rate reductions in
accordance with the plan. The impact of the slowing economy also affected
network access revenues in 2001.

      These decreases were partially offset by higher customer demand for
special access services, particularly for high-capacity, high-speed digital
services.

LONG DISTANCE SERVICES

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                          $(6.8)      (21.9)%
--------------------------------------------------------------------------------

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

      Long distance service revenues declined in the first nine months of 2001
primarily due to the effects of competition and technology substitution.
Mandated price reductions on certain long distance services also contributed to
the decline in revenues, but to a lesser extent.

OTHER SERVICES

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                         $(17.9)      (16.1)%
--------------------------------------------------------------------------------

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

      Other service revenues decreased in the first nine months of 2001
primarily due to lower revenue from CPE sales and lower directory revenues from
an affiliate.

                                      11
<PAGE>

                              Verizon South Inc.

OPERATING EXPENSES
------------------
(Dollars in Millions)

OPERATIONS AND SUPPORT

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                         $(63.0)      (10.8)%
--------------------------------------------------------------------------------

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

      The decrease in operations and support expenses was primarily attributable
to the effect of merger-related costs and other special items recorded in 2000
and 2001, as described in Results of Operations. The effect of a state
regulatory matter and lower interconnection and related costs associated with
reciprocal compensation arrangements further contributed to the reduction in
operating expenses. Operating costs have also decreased due to business
integration activities, effective cost control measures and declining work force
levels. These decreases were partially offset by the effect of pre-tax gains
recorded in 2000 associated with lump-sum settlements of pension obligations for
certain active and former employees.

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

      On April 27, 2001, the FCC released an order responding to the court's
remand. The FCC found that Internet-bound traffic is interstate and subject to
the FCC's jurisdiction. Moreover, the FCC again found that Internet-bound
traffic is not subject to reciprocal compensation under section 251(b)(5) of the
Telecommunications Act. Instead, the FCC established federal rates that decline
from $0.0015 to $0.0007 per minute over a three year period. The FCC order also
sets caps on the total minutes that may be subject to any intercarrier
compensation and requires that incumbent local exchange carriers must offer to
pay reciprocal compensation for local traffic at the same rate as they are
required to pay on Internet-bound traffic.

DEPRECIATION AND AMORTIZATION

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                         $(32.7)      (13.8)%
--------------------------------------------------------------------------------

      Depreciation and amortization expense decreased in the first nine months
of 2001 primarily due to our decision to dispose of certain properties and, as a
consequence, no longer depreciate these assets (see Note 9 to the Notes to
Condensed Financial Statements). Also contributing to the decrease was the
effect of lower rates of depreciation. Partially affecting the change in
depreciation and amortization expense were adjustments made to conform the
accounting policies of Bell Atlantic and GTE as a result of the merger, as
described in Results of Operations.

OTHER INCOME AND (EXPENSE), NET

      2001 - 2000                                           (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                          $(3.0)
--------------------------------------------------------------------------------

      The change in other income and (expense), net, is primarily attributable
to equity losses recognized from our investment in Verizon Advanced Data Inc.
(VADI). VADI is a wholly owned subsidiary of Verizon Communications that
provides new exchange access services. At September 30, 2001, our ownership in
VADI was 1.01%. This change was partially offset by an increase in interest
income.

                                      12
<PAGE>

                               Verizon South Inc.

INTEREST EXPENSE

      2001 - 2000                                             (Decrease)
--------------------------------------------------------------------------------
      Nine Months                                         $(27.3)      (33.5)%
--------------------------------------------------------------------------------

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

      Interest expense decreased in the first nine months of 2001, compared to
the same period in 2000, primarily due to additional interest expense recorded
in the second quarter of 2000 associated with merger-related activities and a
regulatory contingency as described in Results of Operations.

EFFECTIVE INCOME TAX RATES

      Nine Months Ended September 30,

--------------------------------------------------------------------------------
      2001                                                      39.8%
--------------------------------------------------------------------------------
      2000                                                      39.2%
--------------------------------------------------------------------------------

      The effective income tax rate is the provision for income taxes as a
percentage of income before provision for income taxes and extraordinary item.
Our effective income tax rate was higher for the nine months ended September 30,
2001 principally due to the effect of equity losses associated with our
investment in VADI for which we do not recognize income tax benefits, as well as
increases in non-recurring income tax expense and the effective rate for state
income taxes.

EXTRAORDINARY ITEM
------------------

      During the first half of 2001, we redeemed $12.4 million of long-term debt
prior to stated maturity and recorded an after-tax extraordinary charge of $.3
million (net of tax benefits of $.2 million).

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

Recent Accounting Pronouncements

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

       SFAS No. 141, which applies to business combinations occurring after June
30, 2001, requires that the purchase method of accounting be used and includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in the combination.

       SFAS No. 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121. The new statement also applies to goodwill and indefinite-lived intangible
assets of investments accounted for under the equity method of accounting.
Intangible assets that do not have indefinite lives will continue to be
amortized over their useful lives and reviewed for impairment in accordance with
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
We are required to adopt SFAS No. 142 effective January 1, 2002. We are
currently evaluating our intangible assets to determine the impact, if any, the
adoption of SFAS No. 142 will have on our results of operations or financial
position.

                                      13
<PAGE>

                               Verizon South Inc.

       In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard provides the accounting for the cost of
legal obligations associated with the retirement of long-lived assets. SFAS No.
143 requires that companies recognize the fair value of a liability for asset
retirement obligations in the period in which the obligations are incurred and
capitalize that amount as a part of the book value of the long-lived asset. That
cost is then depreciated over the remaining life of the underlying long-lived
asset. We are required to adopt SFAS No. 143 effective January 1, 2003. We are
currently evaluating the impact this new standard will have on our future
results of operations or financial position.

       In August 2001, the FASB issued SFAS No. 144. This standard supersedes
SFAS No. 121 and the provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," with regard to reporting the effects of a disposal of
a segment of a business. SFAS No. 144 establishes a single accounting model for
assets to be disposed of by sale and addresses several SFAS No. 121
implementation issues. We are required to adopt SFAS No. 144 effective January
1, 2002. We do not expect the impact of the adoption of SFAS No. 144 to have a
material effect on our results of operations or financial position.


Potential Sale of Access Lines

      During the third quarter of 2001, we announced that we were exploring the
sale of approximately 774,000 access lines in the states of Alabama and
Kentucky.

      In October 2001, Verizon Communications agreed to sell all 675,000 of its
switched access telephone lines in Alabama and Missouri to CenturyTel Inc. for
$2.159 billion. We own and operate approximately 175,000 of these switched
access lines, all of which are located in Alabama. The sale must be approved by
the Alabama and Missouri public service commissions, the Federal Communications
Commission (FCC) and the U.S. Department of Justice (DOJ). We expect to close
the sale and transfer our operations to CenturyTel during the second half of
2002.

      Also in October 2001, we agreed to sell approximately 600,000 local
telephone lines in Kentucky to ALLTEL Corporation for $1.9 billion. The sale
must be approved by the Kentucky public service commission, the FCC and the DOJ.
We expect to close the sale and transfer our operations to ALLTEL during the
second half of 2002.

      These two access line agreements represent approximately 37% of the
switched access lines that we had in service at September 30, 2001. Due to the
centralized manner in which Verizon Communications manages its operating
telephone companies, operating revenues and operating income applicable to these
access lines are not readily determinable.

                                      14
<PAGE>

                               Verizon South Inc.

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

          There were no proceedings reportable under this Item.

Item 6.   Exhibits and Reports on Form 8-K

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


                                      15
<PAGE>

                               Verizon South Inc.

                                   SIGNATURES

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

                                                Verizon South Inc.




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






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

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