<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 1-2755


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


                  NEW YORK                              13-1678633
      (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)

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 971,718,818 shares of $.05 par value common stock outstanding
(excluding 21,580,442 treasury shares) at April 30, 1999.


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



<PAGE>   2

PART I. FINANCIAL INFORMATION


                        GTE CORPORATION AND SUBSIDIARIES
             Condensed Consolidated Statements of Income (Unaudited)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                                March 31,
                                                    ------------------------------
                                                       1999              1998
                                                    ------------      ------------
                                                         (Dollars in Millions,
                                                       Except Per-Share Amounts)
<S>                                                 <C>               <C>         
REVENUES AND SALES                                  $      5,879      $      5,885

OPERATING COSTS AND EXPENSES
     Cost of services and sales                            2,617             2,498
     Selling, general and administrative                     981             1,071
     Depreciation and amortization                           920               969
     Special items                                          (321)              755
                                                    ------------      ------------

        Total operating costs and expenses                 4,197             5,293
                                                    ------------      ------------

OPERATING INCOME                                           1,682               592

OTHER (INCOME) EXPENSE
     Interest - net                                          309               289
     Other - net                                             (70)               23
                                                    ------------      ------------

Income before income taxes                                 1,443               280
     Income taxes                                            531               138
                                                    ------------      ------------

Income before extraordinary charges                          912               142
     Extraordinary charges                                   (30)             (320)
                                                    ------------      ------------

NET INCOME (LOSS)                                   $        882      $       (178)
                                                    ============      ============




BASIC EARNINGS (LOSS) PER COMMON SHARE
     Before extraordinary charges                   $        .94      $        .15
     Extraordinary charges                                  (.03)             (.33)
                                                    ------------      ------------

        NET INCOME (LOSS)                           $        .91      $       (.18)
                                                    ============      ============

DILUTED EARNINGS (LOSS) PER COMMON SHARE
     Before extraordinary charges                   $        .93      $        .15
     Extraordinary charges                                  (.03)             (.33)
                                                    ------------      ------------

        NET INCOME (LOSS)                           $        .90      $       (.18)
                                                    ============      ============


AVERAGE COMMON SHARES OUTSTANDING (IN MILLIONS)
     Basic                                                   969               959
     Diluted                                                 976               968
</TABLE>


The accompanying notes are an integral part of these statements.


                                       1
<PAGE>   3



                        GTE CORPORATION AND SUBSIDIARIES
                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                                      $        441      $        467
    Receivables, less allowances of $489 and $395                         4,481             4,785
    Inventories and supplies                                                690               668
    Net assets held for sale                                                294               274
    Other                                                                   561               587
                                                                   ------------      ------------

       Total current assets                                               6,467             6,781
                                                                   ------------      ------------


Property, plant and equipment, at cost                                   55,027            59,689
Accumulated depreciation                                                (31,871)          (34,823)
                                                                   ------------      ------------

       Total property, plant and equipment, net
         (including $1,600 held for sale)                                23,156            24,866
                                                                   ------------      ------------


Prepaid pension costs                                                     5,019             4,927
Franchises, goodwill and other intangibles, net of accumulated
    amortization of $866 and $819                                         3,144             3,144
Investments in unconsolidated companies                                   3,706             2,210
Other assets                                                              1,609             1,687
                                                                   ------------      ------------

Total assets                                                       $     43,101      $     43,615
                                                                   ============      ============
</TABLE>


The accompanying notes are an integral part of these statements.




                                       2
<PAGE>   4



                        GTE CORPORATION AND SUBSIDIARIES
          Condensed Consolidated Balance Sheets (Unaudited) - Continued


<TABLE>
<CAPTION>
                                                                     March 31,       December 31,
                                                                       1999              1998
                                                                   ------------      ------------
                                                                         (Dollars in Millions)
<S>                                                                <C>               <C>         
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
    Short-term obligations, including current maturities           $      4,326      $      4,148
    Accounts payable and accrued expenses                                 4,016             4,138
    Taxes payable                                                         1,147             1,071
    Other                                                                   918               998
                                                                   ------------      ------------

       Total current liabilities                                         10,407            10,355
                                                                   ------------      ------------


Long-term debt                                                           14,320            15,418
Employee benefit plans                                                    4,331             4,404
Deferred income taxes                                                     2,541             1,948
Minority interests in equity of subsidiaries                              1,468             1,984
Other liabilities                                                           713               740
                                                                   ------------      ------------

       Total liabilities                                                 33,780            34,849
                                                                   ------------      ------------


Shareholders' Equity
    Common stock (992,641,879 and 991,374,778 shares issued)                 50                50
    Additional paid-in capital                                            7,969             7,884
    Retained earnings                                                     3,168             2,740
    Accumulated other comprehensive loss                                   (396)             (375)
    Guaranteed ESOP obligations                                            (495)             (509)
    Treasury stock (22,264,866 and 23,377,388 shares, at cost)             (975)           (1,024)
                                                                   ------------      ------------

       Total shareholders' equity                                         9,321             8,766
                                                                   ------------      ------------

Total liabilities and shareholders' equity                         $     43,101      $     43,615
                                                                   ============      ============
</TABLE>


The accompanying notes are an integral part of these statements.




                                       3
<PAGE>   5



                        GTE CORPORATION AND SUBSIDIARIES
           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 charges                                       $        912      $        142
    Adjustments to reconcile income before extraordinary
       charges to net cash from operations:
         Depreciation and amortization                                                 920               969
         Special items                                                                (321)              755
         Changes in current assets and current liabilities, excluding the
             effects of acquisitions and dispositions                                  (28)             (437)
         Deferred income taxes and other - net                                          46               (96)
                                                                              ------------      ------------
       Net cash from operations                                                      1,529             1,333
                                                                              ------------      ------------

INVESTING
    Capital expenditures                                                              (935)           (1,079)
    Acquisitions and investments                                                      (373)              (35)
    Other - net                                                                         44                59
                                                                              ------------      ------------
       Net cash used in investing                                                   (1,264)           (1,055)
                                                                              ------------      ------------

FINANCING
    Common stock issued                                                                135               137
    Long-term debt issued                                                              222               846
    Long-term debt and preferred securities retired                                   (864)           (1,711)
    Dividends paid                                                                    (454)             (451)
    Increase in short-term obligations, excluding current maturities                   724             1,251
    Other - net                                                                        (54)              (54)
                                                                              ------------      ------------
       Net cash from (used in) financing                                              (291)               18
                                                                              ------------      ------------

Increase (decrease) in cash and cash equivalents                                       (26)              296

Cash and cash equivalents:
    Beginning of period                                                                467               551
                                                                              ------------      ------------
    End of period                                                             $        441      $        847
                                                                              ============      ============

</TABLE>



The accompanying notes are an integral part of these statements.


                                       4
<PAGE>   6



                        GTE CORPORATION AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 1.  BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included herein have
been prepared by GTE Corporation (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.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board 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 3.  SPECIAL ITEMS

         1999 SPECIAL ITEMS

Reported results for 1999 include a pretax gain of $513 million associated with
the merger of BC TELECOM and TELUS, as described in Note 7. The after-tax impact
of this gain is $308 million, or $.31 per diluted share.

Reported results for 1999 also include special charges of $192 million ($119
million after-tax, or $.12 per diluted share) associated with voluntary and
involuntary employee separation programs completed in early April 1999. The
components of the charge include separation and related benefits such as
outplacement and benefit continuation costs for approximately 3,000 employees.

         1998 SPECIAL ITEMS

During the first quarter of 1998, the Company committed to a plan to sell or
exit various business activities and reduce costs through employee reductions
and related actions. As a result of these actions, during the first quarter of
1998, the Company recorded a pretax charge of $755 million, $482 million
after-tax, or $.50 per diluted share, for the year.

During the first quarter of 1998, the Company decided to sell GTE Government
Systems Corporation, GTE Airfone Incorporated, and approximately 1.6 million
domestic access lines located in 13 states. The sales of GTE Government Systems
and GTE Airfone are expected to close in 1999 and, accordingly, their net
assets have been reclassified to "Net assets held for sale" in the condensed
consolidated balance sheets. 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 $1.6 billion, continues to be reported in "Property,
plant and equipment, net" in the condensed consolidated balance sheets. Based
on the decision to sell, the Company stopped recording depreciation expense for
these assets.

The Company recorded a pretax charge of $200 million to reduce the carrying
value of GTE Airfone's assets to estimated net sales proceeds. No charge was
recorded for GTE Government Systems or the access lines to be sold because their
estimated fair values were in excess of their carrying values.



                                       5
<PAGE>   7

                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



During the first quarter of 1998, the Company also committed to a plan to exit a
number of other nonstrategic business activities and took other strategic
actions that resulted in additional pretax charges of $555 million.

The following summarizes the total 1998 special charges by major category and by
business unit affected:

<TABLE>
<CAPTION>
                                                                                              Remaining Liability
                                             Initial Charge             Cash Payments         as of March 31, 1999
                                           -------------------       -------------------      -------------------
                                                                    (Dollars in Millions)
<S>                                        <C>                       <C>                      <C>                
Major Category:
    Asset impairments                      $               483       $                --      $                --
    Exit costs                                              34                        11                       23
    Employee related and other actions
       Severance                                            77                        49                       28
       Other                                                30                        26                        4
    Other actions                                          131                       113                       18
                                           -------------------       -------------------      -------------------
       Total                               $               755       $               199      $                73
                                           ===================       ===================      ===================

Business Unit:
    National Operations
       Network Services                    $               171       $               143      $                18
       Wireless Products and Services                       91                        14                       21
       Other National Operations                           397                         7                       --
    International Operations                                38                        --                       11
    Corporate and other                                     58                        35                       23
                                           -------------------       -------------------      -------------------
       Total                               $               755       $               199      $                73
                                           ===================       ===================      ===================
</TABLE>

The strategic actions to which the charges relate were substantially completed
as planned or will be completed during 1999. There have been no adjustments to
the liability as originally recorded in the first quarter of 1998.

NOTE 4.  EXTRAORDINARY CHARGES

During the first quarter of 1999, GTE repurchased $338 million of high-coupon
debt through a public tender offer prior to the maturity date, resulting in a
one-time, after-tax extraordinary charge of $30 million (net of tax benefits of
$16 million), or $.03 per diluted share.

During the first quarter of 1998, GTE recorded after-tax extraordinary charges
of $320 million (net of tax benefits of $256 million), or $.33 per diluted
share, resulting from the discontinued use of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," by GTE's Canadian operations, and the
early retirement of long-term debt and preferred securities.




                                       6
<PAGE>   8
                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



NOTE 5.  COMPREHENSIVE INCOME

The components of total comprehensive income (loss) are presented in the
following table:

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                              ------------------------------
                                                                                  1999              1998
                                                                              ------------      ------------
                                                                                   (Dollars in Millions)
<S>                                                                           <C>               <C>          
Net income (loss)                                                             $        882      $       (178)
Other comprehensive income (loss):
     Foreign currency translation adjustments                                           (9)               14
     Unrealized gains (losses) on securities, net of taxes of $(6) and $3              (12)                5
                                                                              ------------      ------------
       Subtotal                                                                        (21)               19
                                                                              ------------      ------------
Total comprehensive income (loss)                                             $        861      $       (159)
                                                                              ============      ============
</TABLE>

NOTE 6.  CAPITALIZED SOFTWARE

Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." Under
the provisions of this SOP, GTE capitalizes and amortizes the cost of all
internal-use software, including network-related software it previously
expensed. The net book value of capitalized software at March 31, 1999 and
December 31, 1998, respectively, is as follows:

<TABLE>
<CAPTION>
                                                              March 31, 1999      December 31, 1998
                                                            -----------------     -----------------
                                                                      (Dollars in Millions)
<S>                                                         <C>                   <C>              
Capitalized software, net book value
    Network                                                 $              35     $              --
    Non-network                                                           348                   301
                                                            -----------------     -----------------
       Total                                                $             383     $             301
                                                            =================     =================
</TABLE>


NOTE 7.  ACCOUNTING FOR INTERNATIONAL INVESTMENTS

At December 31, 1998, GTE had a 50.8% ownership interest in BC TELECOM, Inc. (BC
TELECOM), a full-service telecommunications provider in the province of British
Columbia, Canada. On January 31, 1999, BC TELECOM and TELUS Corporation merged
to form a public company called BCT.TELUS Communications, Inc. GTE's ownership
interest in the merged company, BCT.TELUS, is 26.7% and, as such, during the
first quarter of 1999, the Company changed the accounting for its investment
from full consolidation to the equity method.

CTI Holdings, S.A. (CTI), is a consortium providing cellular services in the
north and south interior regions of Argentina. During the fourth quarter of
1998, GTE increased its ownership interest in CTI and changed the accounting for
its investment from the equity method to full consolidation.

NOTE 8.  SEGMENT REPORTING

GTE has four reportable segments. As described below, three reportable segments
are within GTE's National Operations unit and the fourth reportable segment is
the International Operations unit. The three major product segments (reportable
segments) within National Operations are Network Services, Wireless Products and
Services, and Data Products and Services. See Note 7 describing changes in
accounting for investments at GTE's International Operations.



                                       7
<PAGE>   9
                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



For the most part, the National and the International Operations are independent
of each other and the various countries comprising the International Operations
are independent of each other. Within National Operations, the costs of certain
activities which are managed on a common basis are allocated to the segments
based on usage, where possible, or other factors depending on the nature of the
activity.

Affiliated transactions that occur are based on market prices. Operating income
includes profit on sales to affiliates. The related intersegment eliminations
for National Operations are included in Other National Operations.

The following table represents segment income statement results for the three
months ended March 31, and balance sheet results as of March 31, 1999 and
December 31, 1998.

<TABLE>
<CAPTION>
                                                            1999              1998
                                                        ------------      ------------
                                                            (Dollars in Millions)
<S>                                                     <C>               <C>         
NATIONAL OPERATIONS:
    NETWORK SERVICES
       Revenues and sales
          Local services                                $      1,467      $      1,423
          Network access services                              1,333             1,293
          Toll services                                          178               239
          Directory services and other                           705               644
                                                        ------------      ------------
              Total revenues                                   3,683             3,599

                 Intersegment revenues                           (91)              (44)
                                                        ------------      ------------
              Total external revenues                   $      3,592      $      3,555
                                                        ============      ============

       Operating income (a)                             $      1,147      $      1,043
       Special charges (b)                                       113               171
       Depreciation and amortization                             646               659
       Capital expenditures                                      652               725
       Total assets                                           23,329            23,287

    WIRELESS PRODUCTS AND SERVICES
       Revenues and sales
          Service revenues                              $        714      $        650
          Equipment sales and other                              102                92
                                                        ------------      ------------
              Total revenues                            $        816      $        742
                                                        ============      ============

       Operating income (a)                             $        136      $         89
       Special charges (b)                                        24                91
       Depreciation and amortization                             114               108
       Capital expenditures                                       64                55
       Total assets                                            5,736             5,783

    DATA PRODUCTS AND SERVICES (c)
       Revenues and sales
          Data revenues                                 $        223      $        123
          Intersegment revenues                                  (20)               (6)
                                                        ------------      ------------
              Total external revenues                   $        203      $        117
                                                        ============      ============

       Operating loss                                   $       (121)     $       (131)
       Depreciation and amortization                              41                31
       Capital expenditures                                       93                62
       Total assets                                            2,041             1,925
</TABLE>




                                       8
<PAGE>   10
                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



<TABLE>
<CAPTION>
                                                            1999              1998
                                                        ------------      ------------
                                                             (Dollars in Millions)
<S>                                                     <C>               <C>         
    OTHER NATIONAL OPERATIONS (c)
       Revenues and sales
          GTE Technology and Systems                    $        352      $        339
          GTE Communications                                     341               215
          Other, including eliminations                           93               147
                                                        ------------      ------------
              Total revenues                            $        786      $        701
                                                        ============      ============

       Operating loss (a)                               $       (153)     $       (499)
       Special charges (b)                                        42               397
       Depreciation and amortization                              54                47
       Capital expenditures                                       48               121
       Total assets                                            2,619             2,521

INTERNATIONAL OPERATIONS:  (d)
       Revenues and sales
          Local services                                $         80      $        307
          Toll services                                           72               240
          Wireless services                                      151                69
          Directory services and other                           101               151
                                                        ------------      ------------
              Total revenues                            $        404      $        767
                                                        ============      ============

       Operating income (a)                             $        586      $        141
       Special items (b)                                        (513)               38
       Depreciation and amortization                              62               122
       Equity income                                              82                15
       Capital expenditures                                       62               118
       Investments in unconsolidated companies                 3,303             1,820

       Revenues by country
          Dominican Republic                            $        148      $        129
          Argentina                                              128                --
          Canada                                                  84               595
          Other                                                   44                43
                                                        ------------      ------------
              Total revenues                            $        404      $        767
                                                        ============      ============

       Assets by country
          Venezuela                                     $      1,770      $      1,727
          Canada                                               1,468             2,979
          Argentina                                            1,207             1,129
          Dominican Republic                                     931               907
          Other                                                  839               543
                                                        ------------      ------------
              Total assets                              $      6,215      $      7,285
                                                        ============      ============


CONSOLIDATED REVENUES                                   $      5,879      $      5,885
CONSOLIDATED OPERATING INCOME (a)                              1,682               592
TOTAL SPECIAL ITEMS (b)                                         (321)              755
CONSOLIDATED ASSETS                                           43,101            43,615
</TABLE>

(a)  Includes special items in 1999 and 1998.

(b)  See Note 3 for a description of special items.

(c)  BBN Technologies, previously reported as a component of Data Products and
     Services, is now included with Other National Operations. Prior period
     amounts conform to the 1999 presentation.

(d)  See Note 7 for a description of changes in accounting for international 
     investments and the resulting impact on the financial statements.



                                       9
<PAGE>   11
                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



NOTE 9.  PROPOSED MERGER WITH BELL ATLANTIC CORPORATION

Bell Atlantic and GTE Corporation have announced a proposed merger of equals
under a definitive merger agreement dated 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. 

We have provided unaudited pro forma combined condensed financial statements of
income for the years ended December 31, 1998, 1997 and 1996 and a pro forma
combined condensed balance sheet at December 31, 1998 in a joint proxy statement
and prospectus filed with the Securities and Exchange Commission and dated April
13, 1999.

In this interim report, we have presented the following unaudited combined
condensed pro forma financial statements for the period ended March 31, 1999.
These financial statements are presented assuming that the merger will be
accounted for as a pooling of interests, and include certain reclassifications
to conform to the presentation that will be used by the combined company and
certain pro forma adjustments that conform the companies' methods of accounting.
This information is presented for illustration purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the merger had been completed at the date indicated. The
information does not necessarily indicate the future operating results or
financial position of the combined company. For a more complete discussion of
pro forma adjustments and other financial information, you should refer to the
pro forma financial information presented in the joint proxy statement and
prospectus.

<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income         Three Months Ended
(Unaudited)                                                March 31, 1999
                                                      -------------------------
                                                        (Dollars in Millions,
                                                      Except Per-Share Amounts)
<S>                                                          <C>         
Operating revenues                                           $     13,846
Operating expenses                                                 10,077
                                                             ------------

Operating income                                                    3,769

Income from unconsolidated businesses                                 139
Other income and (expense), net                                        (1)
Interest expense                                                      639
Provision for income taxes                                          1,208
                                                             ------------

Income from continuing operations                            $      2,060
                                                             ============


Basic Earnings Per Common Share
Income from continuing operations per common share           $        .75
                                                             ------------
Weighted-average shares outstanding (in millions)                   2,736
                                                             ------------

Diluted Earnings Per Common Share
Income from continuing operations per common share           $        .74
                                                             ------------
Weighted-average shares-diluted (in millions)                       2,774
                                                             ------------
</TABLE>



                                       10
<PAGE>   12

                        GTE CORPORATION AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



<TABLE>
<CAPTION>
Pro Forma Combined Condensed Balance Sheet                           At March 31, 1999
(Unaudited)                                                        ---------------------
                                                                   (Dollars in Millions)
<S>                                                                    <C>           
Assets
    Current assets
       Cash and temporary cash investments                             $        1,422
       Receivables, net                                                        11,016
       Other current assets                                                     2,964
                                                                       --------------
                                                                               15,402
                                                                       --------------

    Plant, property and equipment, net                                         60,254
    Investments in unconsolidated businesses                                    7,405
    Other assets                                                               14,817
                                                                       --------------
    Total assets                                                       $       97,878
                                                                       ==============


Liabilities and Shareowners' Investment
    Current liabilities
       Debt maturing within one year                                   $        6,612
       Accounts payable and accrued liabilities                                11,396
       Other current liabilities                                                2,593
                                                                       --------------
                                                                               20,601
                                                                       --------------


    Long-term debt                                                             32,027
    Employee benefit obligations                                               14,516
    Deferred credits and other liabilities                                      8,343


    Shareowners' investment
       Common stock (2,760,106,281 shares)                                        276
       Contributed capital                                                     20,328
       Reinvested earnings                                                      4,583
       Accumulated other comprehensive loss                                    (1,125)
                                                                       --------------
                                                                               24,062
       Less common stock in treasury, at cost                                     649
       Less deferred compensation - employee stock ownership plans              1,022
                                                                       --------------

                                                                               22,391
                                                                       --------------

    Total liabilities and shareowners' investment                      $       97,878
                                                                       ==============
</TABLE>


                                       11
<PAGE>   13
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                            And Results of Operations

OVERVIEW

CONSOLIDATED OPERATIONS
-----------------------

CONSOLIDATED NET INCOME

Consolidated net income for the first quarter of 1999 was $882 million, or $.90
per diluted share. This represents an increase of $1.08 per diluted share
compared with the consolidated net loss for the first quarter of 1998 of $178
million, or $.18 per diluted share. The Company's reported results for both
periods were affected by one-time items. Net income for 1999 includes the
effects of an after-tax gain of $189 million, or $.19 per diluted share, and an
after-tax extraordinary charge of $30 million, or $.03 per diluted share. The
net loss for 1998 includes the effects of after-tax special charges of $482
million, or $.50 per diluted share, and after-tax extraordinary charges of $320
million, or $.33 per diluted share. The table below summarizes these one-time
items, which are described in further detail in this "Overview" section.


<TABLE>
<CAPTION>
                                                               Three Months Ended March 31,
                                                              ------------------------------
                                                                   1999              1998
                                                              ------------      ------------
                                                                  (Dollars in Millions)
<S>                                                           <C>               <C>          
Reported net income (loss)                                    $        882      $       (178)
                                                              ============      ============

Special items - pretax, as reflected in operating income:
    Gain on merger of BC TELECOM and TELUS                            (513)               --
    Special charges                                                    192               755
                                                              ------------      ------------
Total special items - pretax                                          (321)              755
    Tax effect - expense (benefit)                                     132              (273)
                                                              ------------      ------------
Total special items - after-tax                                       (189)              482
                                                              ============      ============

Extraordinary charges, net of tax:
    Discontinued use of SFAS No. 71 at Canadian operations              --               300
    Early retirement of debt and preferred securities                   30                20
                                                              ------------      ------------
Total extraordinary charges, net of tax                       $         30      $        320
                                                              ============      ============
</TABLE>


1999 One-time Items

         SPECIAL ITEMS

Reported results for 1999 include a pretax gain of $513 million associated with
the merger of BC TELECOM and TELUS. The after-tax impact of this gain is $308
million, or $.31 per diluted share. See "Accounting for International
Investments" for additional information.

Reported results for 1999 also include special charges of $192 million ($119
million after-tax, or $.12 per diluted share) associated with voluntary and
involuntary employee separation programs completed in early April 1999. The
components of the charge include separation and related benefits such as
outplacement and benefit continuation costs for approximately 3,000 employees.

         EXTRAORDINARY CHARGE

During the first quarter of 1999, GTE repurchased $338 million of high-coupon
debt through a public tender offer prior to the maturity date, resulting in a
one-time, after-tax extraordinary charge of $30 million (net of tax benefits of
$16 million), or $.03 per diluted share.


                                       12

<PAGE>   14
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


1998 One-time Items

         SPECIAL ITEMS

During the first quarter of 1998, the Company committed to a plan to sell or
exit various business activities and reduce costs through employee reductions
and related actions. As a result of these actions, during the first quarter of
1998, the Company recorded a pretax charge of $755 million, $482 million
after-tax, or $.50 per diluted share, for the year.

During the first quarter of 1998, the Company decided to sell GTE Government
Systems Corporation, GTE Airfone Incorporated, and approximately 1.6 million
domestic access lines located in 13 states. The sales of GTE Government Systems
and GTE Airfone are expected to close in 1999 and, accordingly, their net assets
have been reclassified to "Net assets held for sale" in the condensed
consolidated balance sheets. 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 $1.6 billion, continues to be reported in "Property, plant
and equipment, net" in the condensed consolidated balance sheets. Based on the
decision to sell, the Company stopped recording depreciation expense for these
assets.

The Company recorded a pretax charge of $200 million to reduce the carrying
value of GTE Airfone's assets to estimated net sales proceeds. No charge was
recorded for GTE Government Systems or the access lines to be sold because their
estimated fair values were in excess of their carrying values.

During the first quarter of 1998, the Company also committed to a plan to exit a
number of other nonstrategic business activities and took other strategic
actions that resulted in additional pretax charges of $555 million.

The following summarizes the total 1998 special charges by major category and by
business unit affected:

<TABLE>
<CAPTION>
                                                                          Remaining Liability
                                          Initial Charge   Cash Payments  as of March 31, 1999
                                          --------------   -------------  --------------------
                                                       (Dollars in Millions)
<S>                                        <C>              <C>              <C>         
Major Category:
    Asset impairments                      $        483     $         --     $         --
    Exit costs                                       34               11               23
    Employee related and other actions
       Severance                                     77               49               28
       Other                                         30               26                4
    Other actions                                   131              113               18
                                           ------------     ------------     ------------
       Total                               $        755     $        199     $         73
                                           ============     ============     ============


Business Unit:
    National Operations
       Network Services                    $        171     $        143     $         18
       Wireless Products and Services                91               14               21
       Other National Operations                    397                7               --
    International Operations                         38               --               11
    Corporate and other                              58               35               23
                                           ------------     ------------     ------------
       Total                               $        755     $        199     $         73
                                           ============     ============     ============
</TABLE>


The strategic actions to which the charges relate were substantially completed
as planned or will be completed during 1999. There have been no adjustments to
the liability as originally recorded in the first quarter of 1998.



                                       13

<PAGE>   15
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



         EXTRAORDINARY CHARGES

During the first quarter of 1998, GTE recorded after-tax extraordinary charges
of $320 million (net of tax benefits of $256 million), or $.33 per diluted
share, resulting from the discontinued use of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," by GTE's Canadian operations, and the
early retirement of long-term debt and preferred securities.


CONSOLIDATED REVENUES AND SALES

Consolidated revenues in the first quarter of 1999 grew $413 million or 7.6% as
compared with adjusted revenues for the same period in 1998. This growth was
primarily driven by growth in domestic access lines and minutes of use, domestic
and international wireless subscribers, as well as increased demand for data and
long-distance service offerings. The table below summarizes revenues by business
unit. See "Accounting for International Investments" below for an explanation of
the first quarter 1998 comparative adjustments.


<TABLE>
<CAPTION>
                                                             Three Months Ended March 31,
                                          --------------------------------------------------------------------
                                                                                                      Percent
                                               1999            %           1998           %           Change
                                          --------------    -------   --------------   -------     -----------
                                                                 (Dollars in Millions)
<S>                                       <C>               <C>       <C>              <C>         <C>
Revenues and Sales
   Network Services                       $        3,683         63   $        3,599        61
   Wireless Products and Services                    816         14              742        13
   Data Products and Services                        223          4              123         2
   Other National Operations                         786         13              701        12
                                          --------------    -------   --------------   -------

     Total National Operations                     5,508         94            5,165        88
   International Operations                          404          7              767        13
   Corporate and other, including
   eliminations                                      (33)        (1)             (47)       (1)
                                          --------------    -------   --------------   -------

     Total reported revenues                       5,879        100            5,885       100
                                                            =======                    =======

     Adjustments (described below)                    --                        (419)
                                          --------------              --------------                    

     Adjusted revenues                    $        5,879              $        5,466                    7.6%
                                          ==============              ==============                 ====== 
</TABLE>

ACCOUNTING FOR INTERNATIONAL INVESTMENTS

At December 31, 1998, GTE had a 50.8% ownership interest in BC TELECOM, a
full-service telecommunications provider in the province of British Columbia,
Canada. On January 31, 1999, BC TELECOM and TELUS Corporation merged to form a
public company called BCT.TELUS Communications, Inc. GTE's ownership interest in
the merged company, BCT.TELUS, is approximately 26.7% and, as such, during the
first quarter of 1999, the Company changed the accounting for its investment
from full consolidation to the equity method. BC TELECOM's results of operations
for 1998 are reflected in reported revenues and expenses, while for 1999 the
BCT.TELUS net results are reported as a component of equity income.

CTI Holdings, S.A. (CTI), is a consortium providing cellular services in the
north and south interior regions of Argentina. During the fourth quarter of
1998, GTE increased its ownership interest in CTI and changed the accounting for
its investment from the equity method to full consolidation. The CTI net results
for 1998 are reflected in equity income, while for 1999 CTI's results of
operations are reflected in reported revenues and expenses.



                                       14
<PAGE>   16
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



The first quarter 1998 comparative adjustments to reflect the deconsolidation of
BC TELECOM and the consolidation of CTI, consistent with 1999 reporting, are
more fully described in the discussion of "Segment Results of Operations -
International Operations." For comparative discussion purposes only, first
quarter 1998 consolidated revenues, as previously shown, have been adjusted to
reflect the current method of accounting for these international investments.
Consolidated net income and earnings per share are not affected by these changes
in accounting methods.


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. 

This Management's Discussion and Analysis is based on GTE's own historical
financial results. It does not reflect the impact that the proposed merger will
have on future financial performance of the post-merger combined company.
Information about the proposed merger is provided in Note 9 to the condensed
consolidated financial statements.



                                       15
<PAGE>   17

                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



SEGMENT RESULTS OF OPERATIONS

GTE has four reportable segments. Three reportable segments are within GTE's
National Operations and the fourth reportable segment is GTE's International
Operations. Additional information about the segments is located in Note 8 to
the condensed consolidated financial statements.


NATIONAL OPERATIONS
-------------------

The results of GTE's National Operations include the Network Services, Wireless
Products and Services, and Data Products and Services reportable segments, as
well as smaller business units comprising Other National Operations, including
GTE Technology and Systems, GTE Communications Corporation, GTE Directories
Corporation and GTE Airfone.


NETWORK SERVICES

Network Services provides wireline communication services within its operating
areas, including local telephone service, toll calls within franchised areas and
access services that enable long-distance carriers to complete calls to or from
locations outside of GTE's operating areas. Network Services also provides
complex voice and data services to businesses, billing and collection,
operator-assistance and inventory management services to other
telecommunications companies.

Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                         (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Local services                                      $       1,467    $       1,423   $          44           3%
Network access services                                     1,333            1,293              40           3%
Toll services                                                 178              239             (61)        (26)%
Directory services and other                                  705              644              61           9%
                                                    -------------    -------------   -------------           
    Total revenues                                          3,683            3,599              84           2%
       Intersegment revenues                                  (91)             (44)            (47)         --
                                                    -------------    -------------   -------------           

       Total external revenues                      $       3,592    $       3,555   $          37           1%
                                                    =============    =============   =============          
</TABLE>

Local services

The increase in local services revenues for the first quarter of 1999 compared
with the same period in 1998 was primarily generated by an increase in switched
access lines in service of 4.8%. Access line growth reflects higher demand by
Internet Service Providers (ISPs) and additional residential lines, including
second lines. Revenue growth for the first quarter of 1999 was also attributable
to increased revenues from value-added services of $15 million in the first
quarter of 1999 compared with the same period of 1998.

Network access services

The increase in network access services revenues for the first three months of
1999 compared with the same period in 1998 was the result of higher customer
demand, reflected by growth in access minutes of use of 8.5%, driven in part by
higher network usage by alternative providers of intraLATA toll services.
Special access revenues, driven by growing demand for increased bandwidth by
high-capacity users, contributed $61 million to the 1999 increase. These
increases were partially offset by price reductions of $69 million, mandated by
federal and state regulation.


                                       16
<PAGE>   18
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



Toll services

Toll services revenues decreased in the first quarter of 1999 compared with the
same period in 1998 due to lower toll volumes resulting from continued
competition from alternative providers of intraLATA toll services. Toll minutes
of use declined 23% in first quarter 1999 over the prior year quarter. Revenue
reductions from intraLATA toll competition were partially offset by increased
network access revenues for usage of our network by alternative providers of
intraLATA toll services.

Directory services and other

Directory services revenues result primarily from publication rights received
from GTE Directories Corporation (included in the discussion of "Other National
Operations") for sales of Yellow Pages advertising to customers in Network
Services' operating areas. Directory services revenues remained relatively
constant.

Telecommunications service revenues and equipment sales contributed $35 million
in revenue growth for the first quarter of 1999 compared with the same period in
1998. Billing and collection services revenues also increased $20 million in the
first quarter of 1999 versus the same period of 1998.

Intersegment revenues

Intersegment revenues at Network Services primarily represent sales of inventory
management services provided to the telephone company affiliates, and
telecommunications services provided at market rates to GTE Communications,
which provides long-distance service and markets bundled telecommunications
services.

Operating Costs and Expenses

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                          (Dollars in Millions)
<S>                                                 <C>              <C>             <C>                    <C> 
Cost of services and sales                          $       1,267    $       1,277   $         (10)         (1)%
Selling, general and administrative                           510              449              61          14%
Depreciation and amortization                                 646              659             (13)         (2)%
Special charges                                               113              171             (58)        (34)%
                                                    -------------    -------------   -------------          

    Total operating costs and expenses              $       2,536    $       2,556   $         (20)         (1)%
                                                    =============    =============   =============          
</TABLE>

Operating costs and expenses, excluding special charges, increased slightly in
the first quarter of 1999 compared with the same quarter last year. This
increase was attributable to customer and access line growth, increased
telecommunications equipment sales volumes and higher promotional and marketing
expenditures for enhanced services. Partially offsetting these increases were
lower labor, benefits and contractor costs due to ongoing productivity
improvements, reduced advertising expenditures, and the adoption of Statement of
Position (SOP) 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use." In 1999, the Company began capitalizing right-to-use
(RTU) software associated with network switching equipment. In the first quarter
of 1999, $35 million of RTU software was capitalized. The decrease in
depreciation and amortization expense in the first quarter of 1999 compared with
the first quarter of 1998 was primarily driven by a $65 million decrease in
depreciation expense resulting from the discontinuation of depreciation on
approximately 1.6 million nonstrategic access lines held for sale (see "1998
One-time Items-Special Items"). This decrease was partially offset by a $42
million increase in depreciation expense primarily driven by an investment of
$1.6 billion in network facilities resulting from increased demand for switched
access lines.


                                       17

<PAGE>   19
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



WIRELESS PRODUCTS AND SERVICES

Wireless Products and Services provides wireless voice and data communications
services within licensed areas in the U.S., sells cellular telephones and
accessories and provides support services to other cellular telephone companies.

Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------                    Percent
                                                         1999             1998          Increase        Change
                                                    ---------------  --------------- --------------- ------------
                                                                          (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Service revenues                                    $         714    $         650   $          64          10%
Equipment sales and other                                     102               92              10          11%
                                                    -------------    -------------   -------------

    Total revenues                                  $         816    $         742   $          74          10%
                                                    =============    =============   =============
</TABLE>

GTE's wireless customer base grew 7.6% in the first quarter of 1999 compared
with the same period in 1998, which contributed $48 million to the increase in
service revenues as total U.S. customers served reached approximately 4.9
million at March 31, 1999. In addition, service revenues increased due to a
change in the manner of reporting customer roaming revenue. Previously, the
Company netted these revenues with roaming charges settled with other carriers
(see offsetting increase in "Operating Costs and Expenses" below). These
increases were partially offset by a decline in revenues per customer per month,
reflecting the increasing level of competition in the wireless industry. The
increase in equipment sales and other revenues was primarily due to growth of
retail customers.

Operating Costs and Expenses

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,                
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                         (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Cost of services and sales                          $         339    $         261   $          78          30%
Selling, general and administrative                           203              193              10           5%
Depreciation and amortization                                 114              108               6           6%
Special charges                                                24               91             (67)        (74)%
                                                    -------------    -------------   -------------        

    Total operating costs and expenses              $         680    $         653   $          27           4%
                                                    =============    =============   =============
</TABLE>

The increase in cost of services and sales for the first quarter of 1999
resulted from increased equipment costs due to customer growth and a change in
the reporting of customer roaming revenues (see offsetting increase in "Revenues
and Sales" above). The increase in selling, general and administrative expenses
for the first quarter of 1999 compared with the same period in 1998 was
primarily attributable to higher customer acquisition and retention costs.
Depreciation and amortization increased in the first quarter of 1999 compared
with the same period in 1998 as a result of continued investment in the wireless
network to provide greater capacity.



                                       18
<PAGE>   20
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



DATA PRODUCTS AND SERVICES

The Data Products and Services segment offers a wide range of advanced data and
Internet-related services, including dedicated and dial-up access to the
Internet, managed network security, Web-server hosting, application development
and systems integration services. Data Products and Services also includes the
investment in GTE's nationwide fiber-optic network. More than two thirds of the
planned 17,000 miles of this network is operational. Additional investments in
undersea cable expand the reach of the nationwide network into Europe, Asia and
Latin America.

This segment does not include the results of GTE's traditional local data
businesses, such as T-1 connections and ISDN dedicated access, which continue to
be reflected in the Company's Network Services segment.

Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                          (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Revenues and sales                                  $         223    $         123   $         100          81%
    Intersegment revenues                                     (20)              (6)            (14)         --
                                                    -------------    -------------   -------------  

    Total external revenues                         $         203    $         117   $          86          74%
                                                    =============    =============   =============         
</TABLE>

Data revenues for the first quarter of 1999 increased over the first quarter of
1998 due to customer growth and revenues derived from consumer and business
Internet-based products and services. The increase also reflects the expanded
relationship with America Online (AOL), for which GTE provides national network
deployment services in support of AOL's dial-up network.

Intersegment revenues reflect affiliate activity between Data Products and
Services and other entities within National Operations.

Operating Costs and Expenses

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                           (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Cost of services and sales                          $         223    $         134   $          89          66%
Selling, general and administrative                            80               89              (9)        (10)%
Depreciation and amortization                                  41               31              10          32%
                                                    -------------    -------------   -------------          

    Total operating costs and expenses              $         344    $         254   $          90          35%
                                                    =============    =============   =============          
</TABLE>

The increase in cost of services and sales for the first quarter of 1999
compared with the same period in 1998 reflects growth in the cost of the network
infrastructure and personnel to support a growing customer base and new service
offerings, as well as the continued expansion of dial-up networks operated for
AOL. Selling, general and administrative costs decreased in the first quarter of
1999 compared with the first quarter of 1998 due to increased efficiencies,
partially offset by increased selling expenses associated with customer growth.
Depreciation and amortization expenses increased for the first quarter of 1999
compared with the same period in 1998 primarily due to the continued investment
in building the network infrastructure.


                                       19

<PAGE>   21
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



OTHER NATIONAL OPERATIONS

GTE's Other National Operations include: GTE Technology and Systems, GTE
Communications Corporation, GTE Directories Corporation and GTE Airfone.
Eliminations for intersegment activity occurring within National Operations are
also included in Other National Operations.

Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                         (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Technology and Systems                              $         352    $         339   $          13           4%
Communications                                                341              215             126          59%
Other, including eliminations                                  93              147             (54)        (37)%
                                                    -------------    -------------   -------------          

    Total revenues                                  $         786    $         701   $          85          12%
                                                    =============    =============   =============          
</TABLE>

Operating Costs and Expenses

<TABLE>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                        (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Cost of services and sales                          $         646    $         602   $          44           7%
Selling, general and administrative                           197              154              43          28%
Depreciation and amortization                                  54               47               7          15%
Special charges                                                42              397            (355)        (89)%
                                                    -------------    -------------   -------------          

    Total operating costs and expenses              $         939    $       1,200   $        (261)        (22)%
                                                    =============    =============   =============        
</TABLE>

Technology and Systems is primarily composed of GTE Government Systems. The
Company has committed to a plan to sell its Government Systems unit, which the
Company expects to consummate during 1999.

GTE Communications Corporation includes GTE's national sales and marketing
organization, which enables GTE to expand its business beyond its traditional
operating boundaries. GTE Communications Corporation also includes GTE Long
Distance, which provides long-distance services to customers in all 50 states,
and GTE Video Services, which provides video services to residential and
business customers primarily in California, Florida and Hawaii.

The increase in GTE Communications Corporation's revenues was primarily due to
revenues from long-distance operations, which grew $62 million, or 51%, due to a
40% increase in the number of customers. The revenue increase also resulted from
$41 million in higher contract sales to strategic national accounts. In
addition, GTE's competitive local exchange carrier (CLEC) generated revenue
growth by providing bundled local, long-distance, wireless, paging and Internet
services to more than 108,000 customers by March 31, 1999, an increase of 184%
since the first quarter of 1998.

Total operating costs and expenses, excluding depreciation, amortization and
special charges, were higher in the first quarter of 1999 compared with the same
period in 1998 due to increased capacity costs associated with GTE
Communications Corporation's revenue growth as well higher data processing and
contractor costs related to customer growth.



                                       20
<PAGE>   22
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



INTERNATIONAL OPERATIONS
------------------------

GTE's International Operations provide telecommunications services in the
Dominican Republic, Argentina and Canada and operate directory advertising
companies in Europe and Central America through consolidated subsidiaries. GTE
also participates in ventures/consortia that are accounted for on the equity
basis. These investments include a full-service telecommunications company in
Venezuela, a paging network in China and a nationwide digital-cellular network
in Taiwan. In March 1999 GTE completed the acquisition of 40% of the Puerto Rico
Telephone Company (PRTC). PRTC is a full service telecommunications provider
serving the Commonwealth of Puerto Rico.

BC TELECOM, a majority-owned Canadian subsidiary of GTE, merged with TELUS on
January 31, 1999. GTE's ownership interest in the merged company, BCT.TELUS
Communications, Inc., is 26.7%; therefore, beginning in 1999, GTE has
deconsolidated BC TELECOM and now accounts for the investment in BCT.TELUS using
the equity method of accounting. In addition, during the fourth quarter of 1998,
GTE increased its ownership interest in CTI Holdings, an Argentine wireless
company, and began accounting for CTI Holdings on a consolidated basis.

The tables below represent reported and adjusted financial results, including
the impact of the changes in accounting methods described above. For comparative
purposes, the financial results are discussed on an adjusted basis.

Reported Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                              March 31,
                                                    -------------------------------
                                                         1999            1998
                                                    ---------------  --------------
                                                        (Dollars in Millions)
<S>                                                 <C>              <C>          
Local services                                      $          80    $         307
Toll services                                                  72              240
Wireless services                                             151               69
Directory services and other                                  101              151
                                                    -------------    -------------
    Total reported revenues and sales               $         404    $         767
                                                    =============    =============
</TABLE>

The following table provides supplemental detail for GTE's International
Operations revenues. The results for the three months ended March 31, 1998 have
been adjusted to reflect the deconsolidation of BC TELECOM and the consolidation
of CTI, consistent with 1999 reporting.

Adjusted Revenues and Sales

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                                March 31,
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                          (Dollars in Millions)
<S>                                                 <C>              <C>             <C>              <C>
Local services                                      $          80    $          69   $          11          16%
Toll services                                                  72               78              (6)         (8)%
Wireless services                                             151              128              23          18%
Directory services and other                                  101               73              28          38%
                                                    -------------    -------------   -------------

    Total adjusted revenues and sales               $         404    $         348   $          56          16%
                                                    =============    =============   =============
</TABLE>

Local services

Local rate increases, as part of an overall rate rebalancing effort in the
Dominican Republic, combined with increased access lines in service contributed
to the increase in the first quarter of 1999 compared with the same period in
1998.


                                       21
<PAGE>   23
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



Toll services

Rate reductions in Latin America and Canada stemming from rebalancing programs
and competitive pressures led to overall lower toll revenues. These rate
reductions are partially offset by increased toll volumes.

Wireless services

Wireless services revenues primarily represent cellular, PCS and paging
services. Wireless subscriber increases of 58%, including significant increases
in prepaid cellular subscribers within the Latin American operations,
contributed to the 1999 revenue increase.

Directory services and other

Directory services and other revenues result primarily from sales of Yellow
Pages advertising to local and national businesses, along with equipment and
other product sales. Increased product sales and higher Yellow Pages advertising
revenues in Canada and Europe, combined with a change in reporting for
publication-right fees paid to local exchange carriers, contributed to the
increase (see "Adjusted operating costs and expenses" below).

Reported Operating Costs and Expenses

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,
                                                    ------------------------------
                                                         1999             1998
                                                    -------------    -------------
                                                         (Dollars in Millions)
<S>                                                 <C>              <C>          
Cost of services and sales                          $         154    $         266
Selling, general and administrative                           115              200
Depreciation and amortization                                  62              122
Special items                                                (513)              38
                                                    -------------    -------------

    Total reported operating costs and expenses     $        (182)   $         626
                                                    =============    =============
</TABLE>


The 1999 special item represents a pretax gain of $513 million associated with
the merger of BC TELECOM and TELUS, as previously described. The after-tax
impact of this gain is $308 million, or $.31 per diluted share.

The following table provides supplemental detail for GTE's International
Operations operating costs and expenses. The results for the three months ended
March 31, 1998 have been adjusted to exclude the special items and reflect the
deconsolidation of BC TELECOM and the consolidation of CTI, consistent with 1999
reporting.

Adjusted Operating Costs and Expenses

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                               March 31,            
                                                    --------------------------------    Increase        Percent
                                                         1999             1998         (Decrease)       Change
                                                    ---------------  --------------- --------------- --------------
                                                                         (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>
Cost of services and sales                          $         154    $         123   $          31          25%
Selling, general and administrative                           115              121              (6)         (5)%
Depreciation and amortization                                  62               58               4           7%
                                                    -------------    -------------   -------------          

    Total adjusted operating costs and expenses     $         331    $         302   $          29          10%
                                                    =============    =============   =============          
</TABLE>

Higher network and customer support costs related to the increased service
revenues, combined with higher equipment cost of sales, contributed to the
increase in cost of services and sales. The classification change for directory
publication-right fees also contributed to the increase in costs for the first
quarter of 1999 compared with 



                                       22

<PAGE>   24
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



the same period in 1998 (see "Directory services and other" above). The decrease
in selling, general and administrative expenses primarily reflects lower selling
and commission expenses related to cellular customer acquisitions within the
Latin American operations. Investments in Latin American cellular networks
contributed to the increase in depreciation and amortization.

Equity Income

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,            
                                                    --------------------------------                    Percent
                                                         1999             1998          Increase        Change
                                                    ---------------  --------------- --------------- --------------
                                                                         (Dollars in Millions)
<S>                                                 <C>              <C>             <C>             <C>         
Reported Equity Income                              $          82    $          15   $          67          --
Adjusted Equity Income                                         82               51              31          61%
</TABLE>

Equity earnings increased $31 million, or 61%, for the first quarter of 1999
compared with the same period in 1998, after adjusting for the changes in
accounting method previously described. The Taiwan cellular consortium, Pacific
Cellular Corporation, became operational in January 1998 and has added over one
million customers to date. This strong increase in customer growth coupled with
increased earnings from our investment in CANTV, the Venezuela telephone
company, contributed to the equity earnings increase.


CONSOLIDATED FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                       Three Months Ended March 31,
                                                    ---------------------------------
                                                         1999                1998
                                                    --------------     --------------
                                                          (Dollars in Millions)
<S>                                                 <C>                <C>           
Cash flows from (used in):
    Operations                                      $        1,529     $        1,333
    Investing                                               (1,264)            (1,055)
    Financing                                                 (291)                18
</TABLE>

OPERATIONS

The increase in cash from operations primarily reflects continued strong
earnings and a decrease in the Company's working capital requirements.

INVESTING

Capital expenditures totaled $935 million in the first quarter of 1999, a 13%
decrease from the $1.1 billion spent in the first quarter of 1998. The primary
driver for this variance was the deconsolidation of BC TELECOM to the equity
method of accounting. The majority of the 1999 new investments were made to
acquire facilities and develop and install applications necessary to support the
growth in demand for GTE's core services, facilitate the introduction of new
products and services, and increase operating efficiency and productivity.
Significant investments are also being made to build and expand GTE's national
fiber-optic data network. 

As previously announced, GTE has committed to a plan to sell GTE Government
Systems, GTE Airfone and approximately 1.6 million domestic access lines over
the next two years. These transactions are expected to generate after-tax
proceeds in excess of $3 billion. Cash generated from these dispositions will be
partially used to fund the Company's growth strategy.

As announced in April 1999, the Company will acquire approximately half of
Ameritech's wireless properties. GTE will pay $3.27 billion in cash for the
properties. The completion of the acquisition is contingent on the closing of
the proposed merger between Ameritech and SBC Communications, which is expected
in mid-1999. In March 



                                       23
<PAGE>   25
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued




1999, the Company completed its purchase of approximately
40% of the Puerto Rico Telephone Company (PRTC) for approximately $360 million.

FINANCING

Cash used in financing activities totaled $291 million during the first quarter
of 1999 compared with cash provided of $18 million for the same period in 1998.
The Company retired $864 million of long-term debt in the first quarter of 1999
compared with long-term debt and preferred security retirements of $1.7 billion
in the first quarter of 1998. The net change in short-term debt provided cash of
$724 million in the first quarter of 1999 compared with $1.3 billion in the
first quarter of 1998. The Company issued $222 million of long-term debt in the
first quarter of 1999 compared with $846 million in the first quarter of 1998.

During the first quarter of 1999, GTE maintained its two syndicated credit
facilities totaling $4.0 billion, including a five-year line of $2.5 billion for
GTE and a 364-day line of $1.5 billion for certain domestic telephone operating
subsidiaries. Under current terms and conditions, the $2.5 billion line will
mature in June 2002 and the $1.5 billion line, which the Company expects to
renew, will mature in June 1999. Fifty-four banks representing 12 countries
participate in these syndicated facilities, which are used primarily to back up
commercial paper borrowings. In August 1998, GTE negotiated bilateral credit
agreements for an additional $1.0 billion. These facilities, which are shared by
GTE and certain domestic telephone operating subsidiaries, are aligned with the
maturity date of the existing 364-day line. GTE and certain of its domestic
telephone operating subsidiaries have shelf registration statements filed with
the Securities and Exchange Commission that total $2.2 billion as of March 31,
1999.

The Company believes that its present investment grade credit rating and those
of its subsidiaries provide ready access to the capital markets at reasonable
rates and provide the Company with the financial flexibility necessary to pursue
growth opportunities as they arise. At March 31, 1999, the Company had $5.0
billion of unused bank lines of credit available to back up commercial paper
borrowings and for working capital requirements.

OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS

REGULATORY AND COMPETITIVE TRENDS

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. To date, GTE has signed more than 800 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.

The Company'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 



                                       24
<PAGE>   26

                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



determination on the merits. On the other hand, the Supreme Court vacated the
FCC rule requiring incumbent local exchange carriers (LECs) to provide
unbundled network elements 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 unbundled network elements,
GTE will continue to provide individual unbundled network elements set forth in
existing interconnection agreements even though the Company is not legally 
obligated to do so.

Concurrent with competitors' entry into GTE markets, the Company has continued
its own expansion into local, long-distance, Internet-access, wireless and video
services both within and outside its traditional operating areas. GTE now
provides long-distance and dial-up Internet-access services to approximately 2.8
million and 600,000 customers, respectively.

         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. The Company 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.

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 



                                       25

<PAGE>   27

portion of its own systems and infrastructure, the Company 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.

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.

Company-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 the Company'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 the Company'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; and
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 company-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 



                                       26
<PAGE>   28

                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



corporate management and the audit committee of the Board of Directors. Program
status is also reported each quarter to the Company's external auditors.

Cost to Address Year 2000 Issues

The previous estimate for the cost of GTE's Year 2000 Program was $370 million;
with the incorporation of the TELUS Year 2000 program, the current estimate for
program cost is expected not to exceed $400 million. Through March 31, 1999,
expenditures totaled $283 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.



                                       27
<PAGE>   29
                        GTE CORPORATION AND SUBSIDIARIES

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board 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 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 REGARDING 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 or by companies in which GTE has
substantial investments; 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, unbundled network elements
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, joint ventures, noncontrolled investments and all
interconnecting carriers in achieving Year 2000 compliance. In addition, GTE has
embarked on a major initiative to expand its service capability in the data
communication, long-distance and enhanced services segments of the
telecommunications marketplace and to provide a bundle of products and services
both in and outside of its traditional service territories. Whether the Company
realizes the benefits of these initiatives depends on GTE's ability to
successfully develop the network facilities and systems required to provide
these enhanced services, the success of its marketing initiatives, the levels of
demand that are created for these services and the level of competition the
Company faces as it seeks to penetrate new markets and emerging markets for new
products and services. While GTE's management believes that it will be
successful in implementing these new initiatives, there are uncertainties
associated with its ability to increase revenue and income growth rates to the
levels targeted through these initiatives and its ability to do so within the
planned timeframes or investment levels.



                                       28
<PAGE>   30
PART II.  OTHER INFORMATION

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

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

               11     Statement re: Calculation of Earnings per Common Share

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

               27     Financial Data Schedule

      (b)      The Company filed a report on Form 8-K dated January 19, 1999
               under Item 7, "Financial Statements and Exhibits." No financial
               statements were included with this report.

               The Company filed a report on Form 8-K dated January 25, 1999
               under Item 7, "Financial Statements and Exhibits." No financial
               statements were included with this report.






                                       29

<PAGE>   31
                                    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 Corporation
                                          -----------------------------------
                                                     (Registrant)



Date:       May 12, 1999                          /s/ Paul R. Shuell
       ---------------------------        -----------------------------------
                                                     Paul R. Shuell
                                             Vice President and Controller



Date:       May 12, 1999                          /s/ Marianne Drost
       ---------------------------        -----------------------------------
                                                     Marianne Drost
                                                       Secretary


                                       30
<PAGE>   32


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
     Exhibit
      Number                                           Description
-------------------        ----------------------------------------------------------------------------------
<S>                        <C>                                                                       
        11                 Statement re:  Calculation of Earnings per Common Share

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

        27                 Financial Data Schedule
</TABLE>