<PAGE>


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

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

                                    FORM 10-Q

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


(Mark one)
   [X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2002

                                       OR

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


                          Commission file number 1-7077


                           GTE SOUTHWEST INCORPORATED


    A Delaware Corporation     I.R.S. Employer Identification No. 75-0573444


        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>

                           GTE Southwest Incorporated

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                         Three Months Ended June 30,    Six Months Ended June 30,
                                                                      -------------------------------------------------------------
(Dollars in Millions) (Unaudited)                                            2002           2001            2002           2001
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>             <C>            <C>
OPERATING REVENUES
    (including $22.2, $21.5, $43.1 and $36.7 from affiliates)              $338.5         $347.1          $673.2         $689.7
                                                                      -------------------------------------------------------------

OPERATING EXPENSES
Operations and support (including $56.1, $51.4, $105.4 and
     $91.7 to affiliates)                                                   194.5          137.9           359.0          313.1
Depreciation and amortization                                                69.3           69.9           139.4          138.3
                                                                      -------------------------------------------------------------
                                                                            263.8          207.8           498.4          451.4
                                                                      -------------------------------------------------------------

OPERATING INCOME                                                             74.7          139.3           174.8          238.3

OTHER INCOME AND (EXPENSE), NET
    (including $0, $(5.4), $.1 and $(7.1) from affiliates)                     .1           (5.4)             .3           (7.1)

INTEREST EXPENSE
    (including $.9, $.2, $1.7 and $.4 to affiliate)                          14.8           13.2            27.2           24.2
                                                                      -------------------------------------------------------------

INCOME BEFORE PROVISION FOR INCOME TAXES                                     60.0          120.7           147.9          207.0

PROVISION FOR INCOME TAXES                                                   22.6           44.6            55.7           75.8
                                                                      -------------------------------------------------------------

NET INCOME                                                                 $ 37.4         $ 76.1          $ 92.2         $131.2
                                                                      ==============================================================

</TABLE>

                  See Notes to Condensed Financial Statements.

                                       1

<PAGE>
                           GTE Southwest Incorporated

                            CONDENSED BALANCE SHEETS

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>

 (Dollars in Millions)                                                                    June 30, 2002       December 31, 2001
 ---------------------------------------------------------------------------------------------------------------------------------
                                                                                            (Unaudited)
<S>                                                                                           <C>                     <C>
CURRENT ASSETS
Cash                                                                                          $     9.8               $    12.1
Short-term investments                                                                             16.9                    48.3
Accounts receivable:
    Trade and other, net of allowances for uncollectibles of $34.1 and $23.1                      182.7                   189.5
    Affiliates                                                                                     91.9                    68.0
Material and supplies                                                                              28.1                    28.5
Prepaid expenses                                                                                    9.2                    20.6
Deferred income taxes                                                                               5.5                      .9
Other                                                                                              32.0                    33.3
                                                                                         -----------------------------------------
                                                                                                  376.1                   401.2
                                                                                         -----------------------------------------

PLANT, PROPERTY AND EQUIPMENT                                                                   4,845.2                 4,736.2
Less accumulated depreciation                                                                   3,013.6                 2,922.4
                                                                                         -----------------------------------------
                                                                                                1,831.6                 1,813.8
                                                                                         -----------------------------------------

PREPAID PENSION ASSET                                                                             464.8                   441.7
                                                                                         -----------------------------------------

OTHER ASSETS                                                                                       59.1                    64.5
                                                                                         -----------------------------------------

TOTAL ASSETS                                                                                  $ 2,731.6               $ 2,721.2
                                                                                         =========================================

</TABLE>

                  See Notes to Condensed Financial Statements.

                                       2

<PAGE>
                           GTE Southwest Incorporated

                            CONDENSED BALANCE SHEETS

                     LIABILITIES AND SHAREOWNER'S INVESTMENT
                     ---------------------------------------

<TABLE>
<CAPTION>

(Dollars in Millions, Except Per Share Amount)                                  June 30, 2002        December 31, 2001
--------------------------------------------------------------------------------------------------------------------------
                                                                                  (Unaudited)
<S>                                                                                 <C>                      <C>
CURRENT LIABILITIES
Debt maturing within one year:
    Note payable to affiliate                                                       $   180.1                $   105.4
Accounts payable and accrued liabilities:
    Affiliates                                                                          105.3                     80.9
    Other                                                                               109.3                    212.1
Other current liabilities                                                               121.8                    120.4
                                                                               -------------------------------------------
                                                                                        516.5                    518.8
                                                                               -------------------------------------------

LONG-TERM DEBT                                                                          647.4                    647.1
                                                                               -------------------------------------------

EMPLOYEE BENEFIT OBLIGATIONS                                                            271.0                    268.2
                                                                               -------------------------------------------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes                                                                   283.6                    258.8
Unamortized investment tax credits                                                         --                       .1
Other                                                                                    63.1                     67.4
                                                                               -------------------------------------------
                                                                                        346.7                    326.3
                                                                               -------------------------------------------
SHAREOWNER'S INVESTMENT
Common stock - $100 stated value per share                                             650.0                    650.0
  Authorized shares: 6,500,000
  Outstanding shares: 6,500,000
Contributed capital                                                                     448.3                    448.3
Accumulated deficit                                                                    (148.3)                  (137.5)
                                                                               -------------------------------------------
                                                                                        950.0                    960.8
                                                                               -------------------------------------------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT                                       $ 2,731.6                $ 2,721.2
                                                                               ===========================================

</TABLE>

                  See Notes to Condensed Financial Statements.

                                       3

<PAGE>
                           GTE Southwest Incorporated

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                  Six Months ended June 30,
                                                                                            -----------------------------------
(Dollars in Millions) (Unaudited)                                                                   2002               2001
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                        $ 145.3            $ 193.2
                                                                                            -----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments                                                                31.4               17.4
Capital expenditures                                                                              (151.5)            (160.7)
Change in note receivable from affiliate                                                              --               12.8
Other, net                                                                                            .8                2.4
                                                                                            -----------------------------------
Net cash used in investing activities                                                             (119.3)            (128.1)
                                                                                            -----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in note payable to affiliate                                                                 74.7               22.8
Dividends paid                                                                                    (103.0)             (86.0)
                                                                                            -----------------------------------
Net cash used in financing activities                                                              (28.3)             (63.2)
                                                                                            -----------------------------------

NET CHANGE IN CASH                                                                                  (2.3)               1.9

CASH, BEGINNING OF PERIOD                                                                           12.1                9.7
                                                                                            -----------------------------------

CASH, END OF PERIOD                                                                              $   9.8            $  11.6
                                                                                            ===================================
</TABLE>

                  See Notes to Condensed Financial Statements.

                                       4

<PAGE>
                           GTE Southwest Incorporated

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

1.    Basis of Presentation

      GTE Southwest Incorporated 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, 2001 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 2001
Annual Report on Form 10-K.

      We have reclassified certain amounts from prior year's data to conform to
the 2002 presentation.

2.    Adoption of New Accounting Standards

      Goodwill and Other Intangible Assets

      Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." 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 prescribed conditions) for impairment in accordance with this statement.
This impairment test uses a fair value approach rather than the undiscounted
cash flows approach previously required by SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The goodwill impairment test under SFAS No. 142 requires a two-step approach,
which is performed at the reporting unit level, as defined in SFAS No. 142. Step
one identifies potential impairments by comparing the fair value of the
reporting unit to its carrying amount. Step two, which is only performed if
there is a potential impairment, compares the carrying amount of the reporting
unit's goodwill to its implied value, as defined in SFAS No. 142. If the
carrying amount of the reporting unit's goodwill exceeds the implied fair value
of that goodwill, an impairment loss is recognized for an amount equal to that
excess. Intangible assets that do not have indefinite lives are 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." The adoption
of SFAS No. 142 did not impact our results of operations or financial position
because we had no goodwill or other intangible assets at December 31, 2001 and
2000.

      Impairment or Disposal of Long-Lived Assets

      Effective January 1, 2002, we adopted SFAS No. 144. This standard
supersedes SFAS No. 121 and the provisions of Accounting Principles Board (APB)
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. The adoption of SFAS No. 144 did not have a
material effect on our results of operations or financial position.

3.    Recent Accounting Pronouncements

      Asset Retirement Obligations

      In June 2001, the Financial Accounting Standards Board (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.

                                       5

<PAGE>

                           GTE Southwest Incorporated

      Debt Extinguishment

      In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145, among other things, eliminates the requirement that
all gains and losses on the extinguishment of debt must be classified as
extraordinary items on the income statement, thereby permitting the
classification of such gains and losses as extraordinary items only if the
criteria of APB 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," are met. We are required to
adopt this provision of SFAS No. 145 no later than January 1, 2003 and upon
adoption we will reclassify in our statements of income previously reported
extraordinary charges for the early extinguishment of debt to income from
continuing operations.

      Exit or Disposal Activities

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This standard addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." EITF Issue No.
94-3 required accrual of liabilities related to exit and disposal activities at
a plan (commitment) date. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. The provisions of this standard are effective for exit or disposal
activities that are initiated after December 31, 2002.

4.    Dividend

      On August 1, 2002, we declared and paid a dividend in the amount of $60.0
million to GTE.

5.    Shareowner's Investment

<TABLE>
<CAPTION>

                                                                    Contributed        Accumulated
(Dollars in Millions)                           Common Stock            Capital            Deficit
------------------------------------------------------------------------------------------------------
<S>                                                   <C>                <C>               <C>
Balance at December 31, 2001                          $650.0             $448.3            $(137.5)
Net income                                                                                    92.2
Dividends declared to GTE                                                                   (103.0)
                                            ----------------------------------------------------------
Balance at June 30, 2002                              $650.0             $448.3            $(148.3)
                                            ==========================================================

</TABLE>

      Net income and comprehensive income were the same for the six months ended
June 30, 2002 and 2001.

6.    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 to customers 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
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.

                                       6

<PAGE>

                           GTE Southwest Incorporated

7.    Investment in Verizon Ventures III Inc.

      In December, 2000, we transferred certain advanced data assets to an
affiliated company, Verizon Ventures III Inc. (Ventures III) in exchange for
common stock of Ventures III. This transfer was done to satisfy a condition of
the Federal Communications Commission's (FCC) approval of the Bell Atlantic -
GTE merger, which required the provision of advanced data services through a
separate affiliate. Throughout 2000 and 2001, we continued to invest in Ventures
III through the transfer of additional assets. As a result of the transfers, we
acquired an ownership interest in Ventures III, which we accounted for under the
equity method of accounting.

      In September 2001, the FCC issued an order eliminating this merger
condition. Following the FCC order, we made necessary filings with our state
regulatory commission for approval of the transfer of these assets back to us.
During the fourth quarter of 2001, after required state regulatory approvals
were obtained, Ventures III transferred these assets to us. In consideration of
the transfer of these assets, we surrendered our common stock in Ventures III
and remitted cash compensation.

      No gain or loss was recognized as a result of the reintegration of the
advanced data assets to us. This reintegration did not have a material effect on
our results of operations or financial condition.

8.    Employee Severance and Other Items

     In connection with the Bell Atlantic-GTE merger on June 30, 2000, we
incurred charges associated with employee severance of $30.0 million. These
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 of ongoing SFAS No. 112 obligations for GTE employees. As of
June 30, 2002, the severances in connection with the Bell Atlantic-GTE merger
are complete.

     During the fourth quarter of 2001, we recorded a charge of $4.5 million for
the voluntary and involuntary separation of employees in accordance with SFAS
No. 112. During the second quarter of 2002, we recorded a charge of $3.2 million
in accordance with SFAS No. 112 associated with employee severance. As of June
30, 2002, a total of approximately 110 employees have been separated under the
2001 and 2002 severance programs. The remaining severance liability relating to
these programs is $2.6 million, which includes future payments to employees
separated as of June 30, 2002. We expect to complete the severance programs
within a year of when the charge was recorded.

      In addition, during the second quarter of 2002, we recorded an impairment
charge of $8.4 million driven by our financial statement exposure of WorldCom
Inc.

                                       7

<PAGE>

                           GTE Southwest Incorporated

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 Condensed
Financial Statements and Condensed Notes to Financial Statements.


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

         We reported net income of $92.2 million for the six month period ended
June 30, 2002, compared to net income of $131.2 million for the same period in
2001. Our reported results for the first half of 2002 included the following
special items:

Employee Severance and Other Items

         During the second quarter of 2002, we recorded a charge of $3.2 million
in accordance with Statement of Financial Accounting Standards (SFAS) No.112,
"Employers' Accounting for Postemployment Benefits," associated with employee
severance.

         In addition, during the second quarter of 2002, we recorded an
impairment charge of $8.4 million driven by our financial statement exposure of
WorldCom Inc.

Verizon Ventures III

         During 2000 and 2001, pursuant to one of the Federal Communications
Commission's (FCC) requirements for the Bell Atlantic - GTE merger, we
transferred our advanced data assets to Verizon Ventures III Inc. (Ventures III)
in exchange for an ownership interest in Ventures III, which we accounted for
under the equity method of accounting. In September 2001, the FCC issued an
order eliminating this merger condition. In the fourth quarter of 2001, after
required state regulatory approvals were obtained, these assets were transferred
back to us and we surrendered our ownership in Ventures III. (See Note 7 to the
Condensed Financial Statements.)

         This reintegration principally affected our comparison of Network
access services revenues, Operations and support expenses, Other income and
(expense), net, and the Provision for income taxes, as described below.

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

                                                   Six Months Ended June 30,
                                    ------------------------------------------
                                                       2002            2001
------------------------------------------------------------------------------
Local services                                       $376.0          $395.1
Network access services                               224.8           222.9
Long distance services                                 10.8            13.0
Other services                                         61.6            58.7
                                    ------------------------------------------
Total                                                $673.2          $689.7
                                    ==========================================

         We recognize service revenues based upon usage of our local exchange
network and facilities and contract fees. We recognize product and other service
revenues when the products are delivered and accepted by the customers and when
services are provided in accordance with contract terms.

                                       8

<PAGE>
                           GTE Southwest Incorporated

LOCAL SERVICES

      2002 - 2001                                              (Decrease)
--------------------------------------------------------------------------------
      Six Months                                          $(19.1)       (4.8)%
--------------------------------------------------------------------------------

         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 (CLECs),
certain data transport revenues and wireless interconnection revenues.

         Local service revenues decreased in the first six months of 2002
primarily due to the effect of lower demand and usage of some basic wireline
services, as reflected by a decline in our switched access lines in service of
2.7% from June 30, 2001. This decrease primarily reflects the impact of the
economic slowdown and competition. In addition, lower billings to CLECs for
interconnection of their network with our network, also contributed to the
decrease in local service revenues. Rate reductions resulting from expanded
calling area service implementations effective January 1, 2002 and technology
substitution have also affected local service revenue growth in the first half
of 2002.

NETWORK ACCESS SERVICES

      2002 - 2001                                                 Increase
--------------------------------------------------------------------------------
      Six Months                                            $1.9           .9%
--------------------------------------------------------------------------------

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

         Network access service revenue increased in the first six months of
2002 primarily due to higher customer demand for special access services,
particularly for high-capacity, high-speed digital services, and to the
reintegration of Ventures III. These increases were substantially offset by the
effects of mandated price reductions on interstate access services and other
regulatory decisions. In addition, growth in switched access service revenue
declined in the first half of 2002 due to the impact of the slowing economy, as
reflected by a decline in minutes of use from carriers and CLECs.

LONG DISTANCE SERVICES

      2002 - 2001                                              (Decrease)
--------------------------------------------------------------------------------
      Six Months                                           $(2.2)      (16.9)%
--------------------------------------------------------------------------------

         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 the Texas Public Utility Commission (TPUC) 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 six months of 2002
primarily due to the effects of competition, technology substitution and the
slowing economy.

                                       9

<PAGE>
                           GTE Southwest Incorporated

OTHER SERVICES

      2002 - 2001                                                Increase
--------------------------------------------------------------------------------
      Six Months                                            $2.9         4.9%
--------------------------------------------------------------------------------

          Our other services include such services as billing and collections
for long distance carriers and affiliates, facilities rentals to affiliates and
non-affiliates, 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 listings, 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 increased in the first six months of 2002
primarily due to higher rates charged to customers for late payment fees and an
increase in sales and services to affiliates. These increases were partially
offset by a decrease in CPE sales.

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


OPERATIONS AND SUPPORT

      2002 - 2001                                               Increase
--------------------------------------------------------------------------------
      Six Months                                           $45.9        14.7%
--------------------------------------------------------------------------------

          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 increase in operations and support expenses was primarily attributable
to the effect of a favorable adjustment recorded in 2001 associated with the
previous sale of assets, as well as higher centralized services expenses
allocated to us by Verizon Services. An increase in the provision for
uncollectible accounts receivable, the reintegration of Ventures III and
employee severance costs recorded in the second quarter of 2002 also contributed
to the increase in operations and support expenses. These increases were
partially offset by effective cost control measures and lower interconnection
and related costs associated with reciprocal compensation arrangements. The
effect of declining workforce levels further offset the increase in operations
and support expenses for the six months ended June 30, 2002.

DEPRECIATION AND AMORTIZATION

      2002 - 2001                                                Increase
--------------------------------------------------------------------------------
      Six Months                                            $1.1          .8%
--------------------------------------------------------------------------------

          Depreciation expense is principally based on the composite group
remaining life method and straight-line composite rates. This method provides
for the recognition of the cost of the remaining net investment in telephone
plant, less anticipated net salvage value, over the remaining asset lives. This
method requires the periodic revision of depreciation rates.

          Depreciation and amortization expense increased in the first six
months of 2002 primarily due to growth in depreciable telephone plant and, to a
lesser extent, increased software amortization costs. These increases were
substantially offset by the effect of lower rates of depreciation.

                                       10

<PAGE>
                           GTE Southwest Incorporated

OTHER RESULTS
-------------
(Dollars in Millions)


OTHER INCOME AND (EXPENSE), NET

      2002 - 2001                                                Increase
--------------------------------------------------------------------------------
      Six Months                                            $7.4         104.2%
--------------------------------------------------------------------------------

         Other income and (expense), net includes equity income (losses),
interest income and other nonoperating income and expense items. As a result of
the reintegration of Ventures III in the fourth quarter of 2001, we no longer
recognize equity income (losses) from this investment.

         The increase in other income and (expense), net, was primarily
attributable to the effect of equity losses recognized in 2001 from our
investment in Ventures III.

INTEREST EXPENSE

      2002 - 2001                                               Increase
--------------------------------------------------------------------------------
      Six Months                                            $3.0        12.4%
--------------------------------------------------------------------------------

         Interest expense includes costs associated with borrowing and capital
leases, net of capitalized interest costs. We capitalize interest associated
with the acquisition or construction of plant assets. Capitalized interest is
reported as a cost of plant and a reduction in interest expense.

         Interest expense increased in the first six months of 2002, over the
same period in 2001, primarily due to the effect of higher average levels of
short-term debt with an affiliate and additional interest expense associated
with the settlement of tax-related matters.

EFFECTIVE INCOME TAX RATES

      Six Months Ended June 30,
--------------------------------------------------------------------------------
      2002                                                      37.7%
--------------------------------------------------------------------------------
      2001                                                      36.6%
--------------------------------------------------------------------------------

         The effective income tax rate is the provision for income taxes as a
percentage of income before provision for income taxes. Our effective income tax
rate was higher for the six months ended June 30, 2002, compared to the same
period in 2001, primarily due to an increase in the effective income tax rate
for state income taxes. This increase was partially offset by the effect of
equity losses associated with our investment in Ventures III, which were
recorded in 2001, for which we did not recognize income tax benefits and by a
decrease in non-recurring income tax expense.

                                       11

<PAGE>

                           GTE Southwest Incorporated

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

Recent Accounting Pronouncements

         Asset Retirement Obligations

         In June 2001, the Financial Accounting Standards Board (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.

         Debt Extinguishment

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145, among other things, eliminates the requirement that
all gains and losses on the extinguishment of debt must be classified as
extraordinary items on the income statement, thereby permitting the
classification of such gains and losses as extraordinary items only if the
criteria of APB 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," are met. We are required to
adopt this provision of SFAS No. 145 no later than January 1, 2003 and upon
adoption we will reclassify in our statements of income previously reported
extraordinary charges for the early extinguishment of debt to income from
continuing operations.

         Exit or Disposal Activities

         In June 2002, the FASB issued SFAS No. 46, "Accounting for Costs
Associated with Exit or Disposal Activities." This standard addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." EITF Issue No.
94-3 required accrual of liabilities related to exit and disposal activities at
a plan (commitment) date. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. The provisions of this standard are effective for exit or disposal
activities that are initiated after December 31, 2002.

Compensation for Internet Traffic

         We continue to incur expenditures related to reciprocal compensation
arrangements with CLECs and other carriers to terminate calls on their network.

         On April 27, 2001, the FCC released an order addressing intercarrier
compensation for dial-up connections for Internet-bound traffic. 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 1996 Act. Instead, the
FCC established federal rates per minute for this traffic that decline from
$0.0015 to $0.0007 over a three-year period. The FCC order also sets caps on the
total minutes of this traffic 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. On May 3, 2002 the U.S. Court of
Appeals for the D.C. Circuit remanded the April 27, 2001 FCC order for further
proceedings. It did not vacate the interim pricing rules established in that
order and they remain in effect.

         Several parties, including Pac-West Telecomm and Focal Communications
Corp. have requested rehearing, asking the court to vacate the underlying order.
A decision on the rehearing petitions remains pending, and the FCC's underlying
order remains in effect.

                                       12

<PAGE>
                           GTE Southwest Incorporated

                          PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

           There were no proceedings reportable under this Item.

Item 6.    Exhibits and Reports on Form 8-K

           (a) Exhibits:

               Exhibit
               Number
               ------

                3.1     Restated Certificate of Incorporation of GTE Southwest
                        Incorporated.

                3.2     Amended and Restated Bylaws of GTE Southwest
                        Incorporated.

                 12     Computation of Ratio of Earnings to Fixed Charges.

           (b) There were no Current Reports on Form 8-K filed during the
quarter ended June 30, 2002.

                                       13


<PAGE>

                           GTE Southwest Incorporated

                                   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.

                                         GTE Southwest Incorporated



Date: August 14, 2002                    By  /s/ Edwin F. Hall
                                            --------------------------------
                                                 Edwin F. Hall
                                                 Controller

      UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 7, 2002.

                                       14

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>


           Exhibit
           Number
           -------
<S>                   <C>
              3.1     Restated Certificate of Incorporation of GTE Southwest
                      Incorporated.

              3.2     Amended and Restated Bylaws of GTE Southwest
                      Incorporated.

               12     Computation of Ratio of Earnings to Fixed Charges.
</TABLE>