<PAGE>   1


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

                                  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: MARCH 31, 1999

                                       or

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

                For the transition period from _______ to _______


                          Commission File Number 0-2908


                           GTE NORTHWEST INCORPORATED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


          WASHINGTON                                    91-0466810
(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


      (Former name, former address and former fiscal year, if changed since
                                  last report)

The registrant, a wholly owned subsidiary of GTE Corporation, 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 [ ]

The Company had 17,920,000 shares of no par value common stock outstanding at
April 30, 1999. The Company's common stock is 100% owned by GTE Corporation.

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



<PAGE>   2


PART I.  FINANCIAL INFORMATION

                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
             Condensed Consolidated Statements of Income (Unaudited)


<TABLE>
<CAPTION>
                                                 Three Months Ended
                                                     March 31,
                                               ---------------------
                                                 1999         1998
                                               --------     --------
                                               (Dollars in Millions)

<S>                                            <C>          <C>     
REVENUES AND SALES
     Local services                            $  115.4     $  114.9
     Network access services                      115.3        123.4
     Other services and sales                      49.8         50.5
                                               --------     --------
        Total revenues and sales                  280.5        288.8
                                               --------     --------

OPERATING COSTS AND EXPENSES
     Cost of services and sales                    83.3         97.9
     Selling, general and administrative           42.7         40.7
     Depreciation and amortization                 54.3         51.4
                                               --------     --------
        Total operating costs and expenses        180.3        190.0
                                               --------     --------

OPERATING INCOME                                  100.2         98.8

OTHER EXPENSE
     Interest - net                                13.8         14.0
                                               --------     --------
INCOME BEFORE INCOME TAXES                         86.4         84.8
     Income taxes                                  31.9         33.5
                                               --------     --------
INCOME BEFORE EXTRAORDINARY CHARGE                 54.5         51.3
     Extraordinary charge                            --         (3.1)
                                               --------     --------
NET INCOME                                     $   54.5     $   48.2
                                               ========     ========
</TABLE>



Per share data is omitted since the Company's common stock is 100% owned by GTE
Corporation.

The accompanying notes are an integral part of these statements.

                                       1

<PAGE>   3


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
                Condensed Consolidated Balance Sheets (Unaudited)


<TABLE>
<CAPTION>
                                                        March 31,   December 31,
                                                          1999          1998
                                                        --------      --------
                                                         (Dollars in Millions)

<S>                                                     <C>           <C>     
ASSETS
Current assets
    Cash and cash equivalents                           $    0.4      $    0.4
    Receivables, less allowances of
       $15.7 million and $15.5 million                     185.6         214.8
    Accounts receivable from affiliates                      7.9           4.3
    Note receivable from affiliate                          43.4         105.5
    Inventories and supplies                                18.5          15.1
    Other                                                   10.6          20.0
                                                        --------      --------
       Total current assets                                266.4         360.1
                                                        --------      --------

Property, plant and equipment, at cost                   3,638.5       3,598.0
Accumulated depreciation                                (2,247.5)     (2,216.4)
                                                        --------      --------
       Total property, plant and equipment, net (a)      1,391.0       1,381.6
                                                        --------      --------

Prepaid pension costs                                      119.8         114.4
Other assets                                                16.9          16.4
                                                        --------      --------
Total assets                                            $1,794.1      $1,872.5
                                                        ========      ========
</TABLE>




(a) Includes $14.8 million held for sale at March 31, 1999 and December 31,
    1998, see Note 5.

The accompanying notes are an integral part of these statements.

                                       2

<PAGE>   4


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
          Condensed Consolidated Balance Sheets (Unaudited) - Continued


<TABLE>
<CAPTION>
                                                     March 31,     December 31,
                                                       1999           1998
                                                    ----------     ----------
                                                      (Dollars in Millions)

<S>                                                 <C>            <C>       
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
    Current maturities of long-term debt            $      0.9     $    125.9
    Accounts payable                                      50.7           67.6
    Affiliate payables                                    32.3           58.3
    Taxes payable                                         69.2           41.1
    Dividends payable                                     44.0           20.0
    Other                                                110.1           88.8
                                                    ----------     ----------
       Total current liabilities                         307.2          401.7
                                                    ----------     ----------

Long-term debt                                           765.6          765.4
Deferred income taxes                                    116.5          111.0
Deferred employee benefit plans other                     48.9           48.9
                                                    ----------     ----------
       Total liabilities                               1,238.2        1,327.0
                                                    ----------     ----------

Shareholder's equity
    Common stock (17,920,000 shares issued)              448.0          448.0
    Additional paid-in capital                            57.7           57.7
    Retained earnings                                     50.2           39.8
                                                    ----------     ----------
       Total shareholder's equity                        555.9          545.5
                                                    ----------     ----------
Total liabilities and shareholder's equity          $  1,794.1     $  1,872.5
                                                    ==========     ==========
</TABLE>



The accompanying notes are an integral part of these statements.

                                       3

<PAGE>   5


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
           Condensed Consolidated Statements of Cash Flows (Unaudited)


<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                     ----------------------
                                                                                       1999          1998
                                                                                     --------      --------
                                                                                     (Dollars in Millions)

<S>                                                                                  <C>           <C>     
OPERATIONS
    Income before extraordinary charge                                               $   54.5      $   51.3
    Adjustments to reconcile income before extraordinary 
       charge to net cash from operations:
         Depreciation and amortization                                                   54.3          51.4
         Provision for uncollectible accounts                                             3.3           3.6
         Changes in current assets and current liabilities                               29.8          37.4
         Deferred income taxes and other - net                                            2.5           6.6
                                                                                     --------      --------
       Net cash from operations                                                         144.4         150.3
                                                                                     --------      --------

INVESTING
    Capital expenditures                                                                (63.0)        (68.0)
    Other - net                                                                           1.5          (0.6)
                                                                                     --------      --------
       Net cash used in investing                                                       (61.5)        (68.6)
                                                                                     --------      --------

FINANCING
    Long-term debt retired, including premiums paid
       on early retirement                                                             (125.0)       (144.6)
    Dividends                                                                           (20.0)        (44.7)
    Net change in affiliate notes                                                        62.1         106.5
                                                                                     --------      --------
       Net cash used in financing                                                       (82.9)        (82.8)
                                                                                     --------      --------

Decrease in cash and cash equivalents                                                      --          (1.1)

Cash and cash equivalents:
    Beginning of period                                                                   0.4           1.5
                                                                                     --------      --------

    End of period                                                                    $    0.4      $    0.4
                                                                                     ========      ========
</TABLE>



The accompanying notes are an integral part of these statements.

                                       4

<PAGE>   6


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1.  BASIS OF PRESENTATION

GTE Northwest Incorporated (the Company) is incorporated under the laws of the
State of Washington and is a subsidiary of GTE Corporation (GTE).

The unaudited condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, in the opinion of management of the Company, the
condensed consolidated financial statements include all adjustments, which
consist only of normal recurring accruals, necessary to present fairly the
financial information for such periods. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's 1998 Annual Report on
Form 10-K.

Reclassifications of prior year data have been made, where appropriate, to
conform to the 1999 presentation.

NOTE 2.  CAPITALIZED SOFTWARE

Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants' (AICPA) Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." As a result of adopting SOP 98-1, in the first quarter of 1999
the Company capitalized $2.1 million of software expenditures, which would
previously have been expensed.

NOTE 3.  SPECIAL CHARGE

In 1999, GTE continued the review of its operations and cost structure to ensure
they were consistent with its growth objectives. In connection with this ongoing
review, GTE initiated voluntary and involuntary employee separation programs
that resulted in a one-time charge for GTE during the first quarter of 1999. The
charge pertaining to the Company totaled $5.9 million and is reflected as
"Selling, general and administrative" costs and expenses in the condensed
consolidated income statements. The components of the charge include voluntary
and involuntary separation programs and related benefits such as outplacement
and benefit continuation costs. These programs were completed during the first
quarter of 1999.

NOTE 4.  RECENT ACCOUNTING PRONOUNCEMENT

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," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company is
currently assessing the impact of adopting SFAS No. 133, which is effective
January 1, 2000.

NOTE 5.  PLANNED ASSET SALES

During the first quarter of 1998, the Company committed to a plan that resulted
in a decision to sell approximately 13,000 switched access lines located in
California. Due to the regulatory approvals that are required, it is projected
that most of the sales of local access lines will close in 2000. As a result,
the net book value of these lines, which approximates $14.8 million, continues
to be reported in "Property, plant and equipment, net" in the condensed
consolidated balance sheets. Until sold, the Company intends to continue to
operate all of these assets. Based on the decision to sell, however, the Company
stopped recording depreciation expense for these assets.

                                       5

<PAGE>   7


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Due to the centralized manner in which GTE's local telephone companies are
managed and since the access lines to be sold represent portions of states
rather than entire operating companies, revenues and operating income applicable
to the access lines to be sold are not readily determinable. The 13,000 access
lines represent approximately 1% of the average switched access lines that the
Company had in service during 1998.

NOTE 6.  PROPOSED MERGER WITH BELL ATLANTIC CORPORATION

Bell Atlantic and GTE have announced a proposed merger of equals under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic common
stock for each share of GTE common stock that they own.

We expect the merger to qualify as a pooling of interests, which means that for
accounting and financial reporting purposes the companies will be treated as if
they had always been combined. The completion of the merger is subject to a
number of conditions, including certain regulatory approvals, receipt of
opinions that the merger will be tax-free, and the approval of the shareholders
of both Bell Atlantic and GTE. Special meetings to vote on the merger will be
held on May 18, 1999 for GTE shareholders and on May 19, 1999 for Bell Atlantic
shareholders. 


                                       6

<PAGE>   8


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                            And Results of Operation
              (Abbreviated pursuant to General Instruction H (2).)

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in Millions)            Three Months Ended
                                      March 31,
                                ---------------------     Increase     Percent
                                  1999          1998     (Decrease)    Change
                                --------     --------    ----------    -------
<S>                             <C>          <C>         <C>           <C>
    Net income                  $   54.5     $   48.2      $   6.3       13%
</TABLE>

The increase in net income for the three months ended March 31, 1999, compared
to the same period in 1998, is primarily due to lower cost of services and
sales, partially offset by lower network access services revenues and a one-time
special charge of $5.9 million. Included in 1998 net income is an after-tax
extraordinary charge of $3.1 million (net of tax benefits of $1.8 million)
related to the retirement of high-coupon debt prior to stated maturity.


REVENUES AND SALES
<TABLE>
<CAPTION>
(Dollars in Millions)            Three Months Ended
                                      March 31,
                                ---------------------     Increase     Percent
                                  1999          1998     (Decrease)    Change
                                --------     --------    ----------    -------
<S>                             <C>          <C>          <C>            <C>
Local services                  $  115.4     $  114.9     $    0.5       --
Network access services            115.3        123.4         (8.1)      (7)%
Other services and sales            49.8         50.5         (0.7)      (1)%
                                --------     --------    ----------

   Total revenues and sales     $  280.5     $  288.8     $   (8.3)      (3)%
                                ========     ========     ========
</TABLE>

Local Services Revenues

The first quarter increase in local services revenues is primarily due to a 6%
growth in switched access lines, generating $4.1 million of additional revenues
from basic local services. Partially offsetting this increase is a $3.5 million
decrease primarily related to lower charges for Extended Area Service, which
resulted from a settlement between the Company and the Oregon Public Utilities
Commission in September 1998.

Network Access Services Revenues

The first quarter decrease in network access services revenues is primarily due
to interstate and intrastate access price changes that reduced revenues by $13.5
million. Revenues also decreased by $3.9 million as a result of settlements with
other local exchange carriers (LECs) in accordance with intrastate sharing
agreements. Partially offsetting these decreases is a $7.2 million increase in
special access revenues due to greater demand for increased bandwidth services
by high capacity users and an 11% increase in minutes of use, which generated
$3.9 million of additional revenues.

Other Services and Sales Revenues

The first quarter decline in other services and sales revenues is primarily
attributable to a decrease in toll revenues of $4.0 million related to intraLATA
(Local Access Transport Area) toll competition. Partially offsetting this
decrease are increases in nonregulated service revenues and equipment sales of
$2.0 million and billing and collection services revenue of $1.7 million.

                                       7

<PAGE>   9


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


OPERATING COSTS AND EXPENSES
<TABLE>
<CAPTION>
(Dollars in Millions)                        Three Months Ended
                                                   March 31,             
                                          -------------------------      Increase     Percent
                                             1999           1998        (Decrease)    Change
                                          ----------     ----------     ----------    ------
<S>                                       <C>            <C>            <C>             <C>  
Cost of services and sales                $     83.3     $     97.9     $    (14.6)     (15)%
Selling, general and administrative             42.7           40.7            2.0        5%
Depreciation and amortization                   54.3           51.4            2.9        6%
                                          ----------     ----------     ----------
   Total operating costs and expenses     $    180.3     $    190.0     $     (9.7)      (5)%
                                          ==========     ==========     ==========
</TABLE>

Total operating costs and expenses decreased for the three months ended March
31, 1999, compared to the same period in 1998, due to several factors.
Right-to-use (RTU) software fees, associated with network switching equipment,
decreased by $4.3 million over the first quarter of 1998. This includes a $2.1
million reduction in RTU costs due to the capitalization of software in 1999, as
a result of adoption of the AICPA's SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." Also contributing to
the decrease are lower sales and advertising costs of $3.7 million; lower leases
and rentals of $3.4 million; lower data processing costs of $1.9 million; and
lower operating taxes of $1.3 million. These reductions in operating costs and
expenses are partially offset by a special charge of $5.9 million, associated
with voluntary and involuntary employee separation programs, completed in the
first quarter of 1999. The increase in depreciation expense is the result of
additional investment in plant.


OTHER INCOME STATEMENT ITEMS

Income taxes decreased 5% or $1.6 million for the three months ended March 31,
1999 compared to the same period in 1998, primarily due to tax adjustments
recorded in 1999, partially offset by an increase in pretax income.


INTERSTATE REGULATORY DEVELOPMENTS

During the first quarter of 1999, regulatory and legislative activity at both
the state and federal levels continued to be a direct result of the
Telecommunications Act of 1996 (Telecommunications Act). Along with promoting
competition in all segments of the telecommunications industry, the
Telecommunications Act was intended to preserve and advance universal service.

GTE continued in the first quarter of 1999 to meet the wholesale requirements of
new competitors. GTE signed interconnection agreements with other carriers,
providing them the capability to purchase individual unbundled network elements
(UNEs), resell retail services and interconnect facilities-based networks.
Several of these interconnection agreements were the result of the arbitration
process established by the Telecommunications Act, and incorporated prices or
terms and conditions based upon the Federal Communications Commission (FCC)
rules that were subsequently overturned by the Eighth Circuit Court (Eighth
Circuit) in July 1997. GTE challenged a number of such agreements in federal
district courts during 1997.

GTE's position in these challenges was supported by the Eighth Circuit's July
1997 decision stating that the FCC had overstepped its authority in several
areas concerning implementation of the interconnection provisions of the
Telecommunications Act. In January 1999, the U.S. Supreme Court (Supreme Court)
reversed in part and affirmed in part the Eighth Circuit's decisions. The
Supreme Court reversed the Eighth Circuit on many of the FCC rules related to
pricing and costing, that had previously been reversed by the Eighth Circuit on
jurisdictional grounds. The pricing rules established by the FCC will now be
remanded back to the Eighth Circuit for a determination on the

                                       8

<PAGE>   10


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


merits. On the other hand, the Supreme Court vacated the FCC rule requiring
incumbent LECs to provide UNEs to competitive LECs. This latter ruling will be
the subject of continued proceedings before the FCC and the state commissions
concerning what elements will have to be offered under what conditions. Pending
the final rulemaking by the FCC on the provisions of UNEs, GTE will continue to
provide individual UNEs set forth in existing interconnection agreements even
though it is not legally obligated to do so.

Universal Service

In October 1998, the FCC issued an order selecting a cost model for universal
service and plans to select cost inputs in the second quarter of 1999. For this
reason, the FCC moved the implementation date of the new universal service
mechanism for nonrural carriers to July 1999. GTE filed a Petition for
Reconsideration in December 1998, stating that the adopted model is incomplete
and requires additional time for proper evaluation. GTE is currently awaiting
action from the FCC.

Advanced Telecommunications Services

Section 706 of the Telecommunications Act required the FCC to "encourage the
deployment on a reasonable and timely basis of advanced telecommunications
capability to all Americans." Further, the FCC was required to conduct a
proceeding aimed at determining the availability of advanced telecommunications
and to take action to remove barriers to infrastructure investment and to
promote competition.

In an Order and Notice of Proposed Rule Making (NPRM) released in August 1998,
the FCC clarified that advanced services offered by an incumbent LEC are subject
to the unbundling and resale requirements of the Telecommunications Act. In the
NPRM, the FCC sought comment on extensive, new separate affiliate rules under
which an incumbent LEC's affiliate could offer advanced services free from the
unbundling and resale obligations of the Telecommunications Act. In addition,
the NPRM sought comment on a number of issues regarding collocation, local loops
and unbundling and resale obligations for network facilities needed for advanced
services.

On March 31, 1999, the FCC released an Order stemming from the August 1998 NPRM.
In the Order the FCC adopted a number of new collocation rules designed to make
competitive entry easier and less costly. These rules specify how incumbent LECs
will manage such items as alternate collocation arrangements, security, space
preparation cost allocation, provisioning intervals and space exhaustion. The
FCC also released a Further NPRM seeking comment on spectrum compatibility
issues and line sharing. Line sharing is a concept wherein two or more service
providers are allowed to use the same local loop (e.g., voice and xDSL). GTE
will vigorously oppose line sharing.

The FCC has yet to release an order addressing separate affiliates, local loops,
unbundling and resale.


INTRASTATE REGULATORY DEVELOPMENTS

Washington

The Company has received approval from the Washington Utility and Transportation
Commission (WUTC) on interconnection agreements with thirty-three competitive
LECs and wireless carriers. The approval of interconnection agreements with six
other carriers are pending. The interim discount rates for the Company's resold
services will be replaced by the permanent rates that result from the WUTC's
Phase II proceeding in its generic cost

                                       9

<PAGE>   11


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


docket. The WUTC issued a decision on the generic cost docket in April 1998, but
a cost model was not chosen. Instead, price floors for UNEs were established.
The Company filed cost studies in May 1998. A decision on the pricing aspect of
the Phase II proceeding is expected in the second quarter of 1999.


PROPOSED MERGER WITH BELL ATLANTIC CORPORATION

On July 27, 1998, GTE and Bell Atlantic entered into a merger agreement
providing for the combination of the two companies. Under the terms of the
agreement, which was unanimously approved by the boards of directors of both
companies, GTE shareholders will receive 1.22 shares of Bell Atlantic stock for
each GTE share they own.

We expect the merger to qualify as a pooling of interests, which means that for
accounting and financial reporting purposes the companies will be treated as if
they had always been combined. The completion of the merger is subject to a
number of conditions, including certain regulatory approvals, receipt of
opinions that the merger will be tax-free, and the approval of the shareholders
of both Bell Atlantic and GTE. Special meetings to vote on the merger will be
held on May 18, 1999 for GTE shareholders and on May 19, 1999 for Bell Atlantic
shareholders. 


OTHER DEVELOPMENTS

Planned Asset Sales

In April 1998, GTE announced the planned sale of local telephone exchanges that
have approximately 1.6 million access lines in 13 states. Specifically, 13,000
access lines in the state of California have been identified for sale or trade.
The identified assets constituted approximately 1% of the average switched
access lines that the Company had in service during 1998. FCC and state
commission approvals of the access line sales will be required. Preliminary
meetings have been held with the regulators. Transition of these properties to
the buyers will occur in 2000.


YEAR 2000 CONVERSION

General

The Year 2000 issue concerns the potential inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000, and has industry-wide implications. GTE has had an active Year 2000
program in place since 1995. This program is necessary because the Year 2000
issue could impact telecommunications networks, systems and business processes
at GTE. Although GTE maintains a significant portion of its own systems and
infrastructure, it also depends on certain, material external supplier products
that GTE must verify as Year 2000 compliant in their condition of use. In 1997,
GTE's Year 2000 methodology and processes were certified by the Information
Technology Industry Association of America. GTE presently expects that the
essential functions of its domestic wireline telecommunications business will
complete Year 2000 testing by June 30, 1999, and remaining businesses will
complete before October 1999.

                                       10

<PAGE>   12


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


State of Readiness

GTE's Year 2000 program is focused on both information technology (IT) and
non-IT systems, including: 1) telecommunications network elements that
constitute the portion of the public switched telephone network (PSTN) for which
GTE is responsible; 2) systems that directly support GTE's telecommunications
network operations and interactions with customers; 3) systems and products that
support GTE's national and international business units; 4) software that
supports basic business operations, customer premise equipment and
interconnection with other telecommunications carriers; and 5) systems that
support GTE's physical infrastructure, financial operations and facilities.

Corporate-wide, essential remediation was approximately 88% complete as of March
31, 1999. In addition to the essential remediation budget, GTE has set aside
funds equivalent to approximately 11% of it's overall Year 2000 budget. These
funds are planned for verification, problem resolution and administrative
program closeout in the last six months of 1999 and to address contingencies and
millennium program operations and control through March 2000. GTE's portion of
the PSTN in the United States has been upgraded substantially for Year 2000; 97%
of GTE's access lines are already operational using Year 2000 compliant central
office switches. Additionally, over 98% of GTE's essential software has been
remediated. GTE's focus continues to be on deployment and testing of these
systems throughout GTE's operations.

GTE's Year 2000 program has been organized into five phases as follows:
Awareness: program definition and general education; Assessment: analysis and
prioritization of systems supporting the core business; Renovation: rectifying
Year 2000 issues; Validation: testing the Year 2000 solutions; Implementation:
placing the tested systems into production. Awareness and Assessment are more
than 95% complete; System Renovation, including supplier products, is
approximately 91% complete; Validation, including enterprise testing in
operational environments, and Implementation, including regional deployment, are
approximately 73% complete. It is anticipated that the Renovation, Validation
and Implementation phases for essential functions will be substantially complete
in June 1999.

In summary, compliant product deployment and enterprise testing for GTE's
domestic telecommunications-related business, including national and
international interoperability and validation, are presently expected to be
complete by the end of June 1999. The remaining domestic and international
businesses are on schedule for completing testing before October 1999.

Successful conclusion of GTE's Year 2000 program depends upon timely delivery of
Year 2000 compliant products and services from external suppliers. With the
addition of new products, approximately 1,500 of third-party products used by
GTE have been determined to be "vital" products, critical to GTE's business and
operations. As of March 31, 1999, Year 2000 compliant versions, or suitable
alternatives, for 95% of these vital supplier products have been provided and
are currently undergoing certification testing by GTE.

Use of Independent Verification and Validation

Independent verification and validation is the final step in GTE's process. As
part of independent verification and validation, GTE's Year 2000 program
management office has established a corporate-wide quality oversight and control
function that reviews and evaluates quality reports on the Year 2000 issue. Each
GTE business unit has access to an independent quality team that evaluates the
conversion and testing of applications and third-party supplier products. This
quality assurance process is expected to be completed in October 1999.
Separately, GTE's corporate internal auditors conduct periodic reviews and
report significant findings, if any, to business unit and corporate management
and the audit committee of the Board of Directors. Program status is also
reported each quarter to GTE's external auditors.

                                       11

<PAGE>   13


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


Cost to Address Year 2000 Issues

The current estimate for the cost of GTE's Year 2000 Program is expected not to
exceed $400 million. Through March 31, 1999, expenditures totaled $283 million.
The current estimate for the cost of remediation for the Company is
approximately $14.5 million. Through March 31, 1999, expenditures totaled $8.1
million. Year 2000 remediation costs are expensed in the year incurred. GTE has
not elected to replace or accelerate the planned replacement of systems due to
the Year 2000 issue.

Currently supporting GTE's Year 2000 program worldwide are an estimated 1,000 to
1,200 full-time equivalent workers (both company employees and contractors).
Approximately 10% of these full-time equivalent workers are engaged in all
aspects of program management; 4% are engaged in system conversion; 27% are
involved in external supplier management; 54% are involved in testing at all
levels; and 5% are addressing contingency planning and interoperability
operations both nationally and internationally. Approximately 66% of GTE's
program effort involves U.S. domestic operations of all types.

Risks of Year 2000 Issues

GTE has begun to examine the risks associated with its "most reasonably likely
worst case Year 2000 scenarios." To date, GTE has no indication that any
specific function or system is so deficient in technical progress as to threaten
GTE's present schedule. GTE's program and plans currently indicate a compliant
network infrastructure to be deployed by the end of June 1999. A general,
unspecific, schedule shift that would erode progress beyond January 1, 2000,
cannot reasonably be calculated. If, however, there were a schedule delay
lasting no more than six months, such schedule erosion would likely affect only
nonessential systems due to the prioritization of work schedules.

Other scenarios might include a possible but presently unforeseen failure of key
supplier or customer business processes or systems. This situation could
conceivably persist for some months after the millennium transition and could
lead to possible revenue losses. GTE's present assessment of its key suppliers
and customers does not indicate that this scenario is likely.

To date, GTE has not encountered any conditions requiring tactical contingency
planning to its existing Year 2000 program; however, contingency planning for
business and network operations and customer contact during 1999 and 2000 is
ongoing.

GTE is bolstering its normal business continuity planning to address potential
Year 2000 interruptions. In addition, GTE's disaster preparedness recovery teams
are including procedures and activities for a "multi-regional" Year 2000
contingency, if it occurs. GTE is also developing its plans with respect to
possible occurrences immediately before, during, and after the millennium
transition. These plans are expected to be completed by June 30, 1999, and
tested (as appropriate) by the end of September 1999. This contingency plan
includes: business continuity planning; disaster recovery/emergency
preparedness; millennium rollover planning; post millennium degradation
tracking; a network and information technology "stabilization" period; employee
availability and logistics backup planning; "follow-the-sun" time-zone impact
analysis; coordination with other (non-PSTN) telecommunications providers; a
Year 2000 "war room" operation to provide high-priority recovery support, plans
for key personnel availability, command structures and contingency traffic
routing; and plans for round-the-clock, on-call repair teams.

                                       12

<PAGE>   14


                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operation - Continued
              (Abbreviated pursuant to General Instruction H (2).)


RECENT ACCOUNTING PRONOUNCEMENT

Derivative Instruments and Hedging Activities

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement requires
entities that use derivative instruments to measure these instruments at fair
value and record them as assets or liabilities on the balance sheet. It also
requires entities to reflect the gains or losses associated with changes in the
fair value of these derivatives, either in earnings or as a separate component
of comprehensive income, depending on the nature of the underlying contract or
transaction. The Company is currently assessing the impact of adopting SFAS No.
133, which is effective January 1, 2000.


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

In this Management's Discussion and Analysis, the Company has made
forward-looking statements. These statements are based on the Company's
estimates and assumptions and are subject to certain risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company, as well as those statements
preceded or followed by the words "anticipates," "believes," "estimates,"
"expects," "hopes," "targets" or similar expressions. For each of these
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.

The future results of the Company could be affected by subsequent events and
could differ materially from those expressed in the forward-looking statements.
If future events and actual performance differ from the Company's assumptions,
the actual results could vary significantly from the performance projected in
the forward-looking statements.

The following important factors could affect the future results of the Company
and could cause those results to differ materially from those expressed in the
forward-looking statements: (1) materially adverse changes in economic
conditions in the markets served by the Company; (2) material changes in
available technology; (3) the final resolution of federal, state and local
regulatory initiatives and proceedings, including arbitration proceedings, and
judicial review of those initiatives and proceedings, pertaining to, among other
matters, the terms of interconnection, access charges, universal service, UNEs
and resale rates; (4) the extent, timing, success and overall effects of
competition from others in the local telephone and intraLATA toll service
markets; and (5) the success and expense of our remediation efforts and those of
our suppliers, customers and all interconnecting carriers in achieving Year 2000
compliance.

                                       13

<PAGE>   15


PART II. OTHER INFORMATION

                    GTE NORTHWEST INCORPORATED AND SUBSIDIARY


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

     (a) Exhibits required by Item 601 of Regulation S-K.

         12      Statement re: Calculation of the Consolidated Ratio of Earnings
                 to Fixed Charges

         27      Financial Data Schedule

     (b) The Company filed no reports on Form 8-K during the first quarter of
         1999.

                                       14

<PAGE>   16


                                    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.


                                             GTE Northwest Incorporated
                                       ----------------------------------------
                                                   (Registrant)

Date:         May 13, 1999                     /s/ Stephen L. Shore
      ------------------------------   ----------------------------------------
                                                   Stephen L. Shore
                                                      Controller
                                             (Principal Accounting Officer)

                                       15

<PAGE>   17


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
     Exhibit
      Number                                                     Description
-------------------        -----------------------------------------------------------------------------------------

<S>                        <C>
        12                 Statement re: Calculation of the Consolidated Ratio of Earnings to Fixed Charges

        27                 Financial Data Schedule
</TABLE>