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


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

                                    FORM 10-Q


           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 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 1-3040

                          U S WEST Communications, Inc.
<TABLE>
<CAPTION>
<S>                                                                         <C>

             A Colorado Corporation                                                      84-0273800
 (State or other jurisdiction of incorporation                              (I.R.S. Employer Identification No.)
                of organization)
</TABLE>

                 1801 California Street, Denver, Colorado 80202
                         Telephone Number (303) 672-2700
                                   -----------


         THE REGISTRANT,  A WHOLLY-OWNED SUBSIDIARY OF U S WEST, INC., MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a) AND (b) OF FORM 10-Q AND IS
THEREFORE  FILING THIS FORM WITH REDUCED  DISCLOSURE  FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).

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


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

<PAGE>







                                                   U S WEST Communications, Inc.
                                                             Form 10-Q
<TABLE>
<CAPTION>

                                                           TABLE OF CONTENTS

  Item                                                                                                 Page
                                        PART I - FINANCIAL INFORMATION
  <S>                                                                                                    <C>

   1.      Financial Statements

                  Consolidated Statements of Income -
                            Three months and six months ended June 30, 1999 and 1998...............       3

                  Consolidated Balance Sheets -
                             June 30, 1999 and December 31, 1998...................................       4

                  Consolidated Statements of Cash Flows -
                            Six months ended June 30, 1999 and 1998................................       5

                   Notes to Consolidated Financial Statements......................................       6

   2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations..............................................      11

   3.      Quantitative and Qualitative Disclosures
                  About Market Risk................................................................      18
</TABLE>

                                         PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
   <S>                                                                                                   <C>

   1.      Legal Proceedings.......................................................................      24

   6.      Exhibits and Reports on Form 8-K........................................................      24

</TABLE>


<PAGE>


                          U S WEST Communications, Inc.
                        CONSOLIDATED STATEMENTS OF INCOME
                              (dollars in millions)
                                   (unaudited)
<TABLE>
<CAPTION>


                                                                   Three Months Ended                   Six Months Ended
                                                                         June 30,                            June 30,
                                                                         --------                            --------
                                                                   1999            1998               1999              1998
                                                                   ----            ----               ----              ----
  <S>                                                          <C>              <C>               <C>                <C>


  Operating revenues:
        Local services.......................................       $1,933           $1,756             $3,800            $3,486
        Access services......................................          688              671              1,369             1,336
        Long-distance services...............................          150              195                321               396
        Other services.......................................           78               73                152               146
                                                               -------------    ------------      -------------      ------------
           Total operating revenues..........................        2,849            2,695              5,642             5,364
  Operating expenses:
        Employee-related expenses............................          891              860              1,784             1,682
        Other operating expenses.............................          658              740              1,287             1,344
        Depreciation and amortization........................          557              518              1,142             1,036
                                                               -------------    ------------      -------------      -----------
           Total operating expenses..........................        2,106            2,118              4,213             4,062
                                                               -------------    ------------      -------------      ------------

  Operating income...........................................          743              577              1,429             1,302
  Other expense:
        Interest expense.....................................           98               94                187               185
        Other expense-net....................................           12               29                 24                56
                                                               -------------    ------------      -------------      ------------

           Total other expense-net...........................          110              123                211               241
                                                               -------------    ------------      -------------      ------------

  Income before income taxes.................................          633              454              1,218             1,061
  Provision for income taxes.................................          246              178                462               411
                                                               -------------    ------------      -------------      ------------


  Net income.................................................         $387             $276               $756              $650
                                                               =============    ============      =============      ============
</TABLE>





The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


<PAGE>


                          U S WEST Communications, Inc.
                           CONSOLIDATED BALANCE SHEETS
                              (dollars in millions)
<TABLE>
<CAPTION>

                                                                                                 June 30,      December 31,
                                                                                                   1999            1998

                                                                                                (unaudited)
   <S>                                                                                         <C>                <C>

   ASSETS
   Current assets:
      Cash and cash equivalents...............................................................         $66              $68
      Accounts receivable, less allowance for uncollectibles  of
        $53 and $48, respectively.............................................................       1,640            1,619
      Inventories and supplies................................................................         194              154
      Deferred tax assets.....................................................................         109              113
      Prepaid and other.......................................................................         115               61
                                                                                               --------------     -------------
   Total current assets.......................................................................       2,124            2,015
   Property, plant and equipment-net..........................................................      15,224           14,681
   Other assets-net...........................................................................         987              882
                                                                                               --------------     -------------

   Total assets...............................................................................     $18,335          $17,578
                                                                                               ==============     =============


   LIABILITIES AND STOCKHOLDER'S EQUITY
   Current liabilities:
      Short-term debt.........................................................................      $1,342             $789
      Accounts payable........................................................................       1,446            1,411
      Accrued expenses........................................................................       1,604            1,383
      Advance billings and customer deposits..................................................         337              326
                                                                                               --------------     -------------
   Total current liabilities..................................................................       4,729            3,909
   Long-term debt.............................................................................       4,970            5,154
   Postretirement and other postemployment benefit obligations................................       2,427            2,458
   Deferred income taxes......................................................................         997              898
   Unamortized investment tax credits.........................................................         159              159
   Deferred credits and other.................................................................         591              537

   Commitments and Contingencies

   Stockholder's equity:
      Common stock-one share without par value, owned by parent...............................       8,079            8,080
      Cumulative deficit......................................................................      (3,617)          (3,617)
                                                                                               --------------     -------------

   Total stockholder's equity.................................................................       4,462            4,463
                                                                                               --------------     -------------

   Total liabilities and stockholder's equity.................................................     $18,335          $17,578
                                                                                               ==============     =============
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

<PAGE>


                          U S WEST Communications, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (dollars in millions)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                                                  Six Months Ended
                                                                                                       June 30,
                                                                                                1999            1998
<S>                                                                                         <C>             <C>

OPERATING ACTIVITIES
Net income................................................................................       $756             $650
   Adjustments to net income:
      Depreciation and amortization.......................................................      1,142            1,036
      Deferred income taxes and amortization of investment tax credits....................         98               79
   Changes in operating assets and liabilities:
      Accounts receivable.................................................................        (21)             (20)
      Inventories, supplies and other current assets......................................        (87)             (63)
      Accounts payable, accrued expenses and advance billings.............................        221             (159)
      Other...............................................................................        (61)              86
                                                                                            --------------  --------------
      Cash provided by operating activities...............................................      2,048            1,609
                                                                                            --------------  --------------

INVESTING ACTIVITIES
   Expenditures for property, plant and equipment.........................................     (1,627)          (1,242)
   Proceeds from (payments on) disposals of property, plant and equipment.................        (18)              34
   Other..................................................................................          -              (24)
                                                                                            --------------  --------------
   Cash used for investing activities.....................................................     (1,645)          (1,232)
                                                                                            --------------  --------------

FINANCING ACTIVITIES
   Net proceeds from short-term debt......................................................        555              228
   Proceeds from issuance of long-term debt...............................................         17                -
   Repayments of long-term debt...........................................................       (280)             (83)
   Dividends paid on common stock.........................................................       (697)            (566)
   Equity infusions from U S WEST.........................................................          -               63
                                                                                            --------------  --------------

   Cash used for financing activities.....................................................       (405)            (358)
                                                                                            --------------  --------------

CASH AND CASH EQUIVALENTS
   Increase (decrease)....................................................................         (2)              19
   Beginning balance......................................................................         68               26
                                                                                            --------------  --------------

   Ending balance.........................................................................        $66              $45
                                                                                            ==============  ==============
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.



<PAGE>



                          U S WEST Communications, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     For the six months ended June 30, 1999
                              (dollars in millions)
                                   (unaudited)


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The consolidated financial statements include accounts of
U S WEST Communications, Inc. (the "Company") and its wholly owned subsidiaries.
We are a wholly owned subsidiary of U S WEST, Inc. ("U S WEST").

         The  consolidated  interim  financial  statements  are  unaudited.  The
financial  statements have been prepared in accordance with the instructions for
Form 10-Q  and,  therefore,  do not  necessarily  include  all  information  and
footnotes required by generally accepted accounting principles.  In our opinion,
all adjustments  (consisting only of normal recurring  adjustments) necessary to
present fairly our consolidated  financial  position,  results of operations and
cash flows as of June 30, 1999 and for all periods presented have been made. The
statements  are subject to  year-end  audit  adjustment.  A  description  of our
accounting policies and other financial  information are included in the audited
consolidated  financial  statements  filed  with  the  Securities  and  Exchange
Commission  in our Form  10-K/A  for the  year  ended  December  31,  1998.  The
consolidated  results of operations  for the three and six months ended June 30,
1999 are not necessarily indicative of the results expected for the full year.

         Certain  reclassifications  of prior period  revenue  amounts have been
made to conform to the current year presentation.

         On January 1, 1999, we adopted the  accounting  provisions  required by
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." SOP 98-1, among other things,  requires that certain
costs of internal use software,  whether purchased or developed  internally,  be
capitalized  and  amortized  over the  estimated  useful  life of the  software.
Adoption of the SOP  resulted in an increase in net income for the three  months
ended  June 30,  1999 of $52 and $86 for the six  months  ended  June 30,  1999,
respectively.


<PAGE>



NOTE 2  SEGMENT INFORMATION

         We operate in three segments:  retail services,  wholesale services and
network services. The retail services segment provides local telephone services,
including  wireless,  data and long-distance  services.  The wholesale  services
segment  provides  access  services that connect  customers to the facilities of
interexchange carriers and interconnection to our telecommunications  network to
competitive  local exchange  carriers.  Our network  services  segment  provides
access   to  our   telecommunications   network,   including   our   information
technologies,  primarily to our retail services and wholesale services segments.
We  provide  our  services  to more than 25  million  residential  and  business
customers in Arizona,  Colorado, Idaho, Iowa, Minnesota,  Montana, Nebraska, New
Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

         Following is a breakout of our segments,  which has been extracted from
the financial  statements of U S WEST.  Separate segment data is not provided to
our  chief  operating  decision-maker  for the  Company.  Certain  revenues  and
expenses  of U S WEST  are  included  in  the  segment  data,  which  have  been
eliminated in the reconciling items column.  Additionally,  because  significant
expenses of operating the retail  services and wholesale  services  segments are
not allocated to the segments for decision-making purposes,  management does not
believe the segment margins are  representative  of the actual operating results
of the  segments.  The margin for the retail  services  and  wholesale  services
segments  excludes  network and corporate  expenses.  The margin for the network
services segment excludes corporate  expense.  The "other" category includes our
corporate expenses and intersegment  eliminations.  Asset information by segment
is not provided to our chief operating decision-maker.  The total communications
and related services column represents a total of the retail services, wholesale
services and network services segments.
<TABLE>
<CAPTION>

                                                         Total
                                                    Communications
                                                          and
                     Retail    Wholesale    Network    Related                 Reconciling   Consolidated
                    Services    Services    Services    Services     Other        Items          Total
                    --------    --------    --------    --------     -----        -----          -----
Three Months Ended June 30,
      1999
<S>                  <C>           <C>         <C>       <C>            <C>       <C>          <C>

Operating
revenues.........    $2,222        $719         $65      $3,006          $-       $(157)       $2,849
Margin...........     1,543         526        (699)      1,370          (3)       (734)          633(1)
Capital
expenditures.....        93(2)        9         831         933          38         (23)          948
      1998
Operating
revenues.........    $2,113        $638         $53      $2,804          $-       $(109)       $2,695
Margin...........     1,544         449        (629)      1,364         (81)       (829)          454(1)
Capital
expenditures.....       119(2)        -         641         760          34         (13)          781

--------------------
</TABLE>


(1)  Represents  income before income  taxes.  Adjustments  that are made to the
     total of the  segments'  margin to arrive at  income  before  income  taxes
     include the following:



<PAGE>

<TABLE>
<CAPTION>


                                                                            Three Months Ended June 30,
                                                                     ------------------------------------------
                                                                            1999                   1998
                                                                     -------------------    -------------------
<S>                                                                  <C>                    <C>


Costs and  adjustments  excluded  from  segment  data  but  included  in the
     consolidated total:
Restructuring costs.............................................              $-                   $129
Taxes other than income taxes...................................             104                     87
Depreciation and amortization...................................             557                    518
Interest expense................................................              98                     94
Other amounts applicable to U S WEST, Inc.......................             (37)                   (28)
Other expense-net...............................................              12                     29
                                                                     ===================    ===================
                                                                            $734                   $829
                                                                     ===================    ===================
</TABLE>

(2)  Capital expenditures  reported for the retail services segment include only
     expenditures  for wireless  services and certain data services.  Additional
     capital  expenditures  relating to those  services  are included in network
     services capital expenditures.


<TABLE>
<CAPTION>

                                                         Total
                                                    Communications
                                                          and
                     Retail    Wholesale    Network    Related                 Reconciling   Consolidated
                    Services    Services    Services    Services     Other        Items          Total
                    --------    --------    --------    --------     -----        -----          -----
Six Months Ended June 30,
      1999
<S>                  <C>         <C>         <C>         <C>           <C>       <C>           <C>

Operating
revenues.........    $4,390      $1,409        $115      $5,914          $-       $(272)       $5,642
Margin...........     3,047       1,055      (1,384)      2,718         (36)     (1,464)        1,218(1)
Capital
expenditures.....       204(2)       40       1,469       1,713          38         (38)        1,713
      1998
Operating
revenues.........    $4,180      $1,273         $99      $5,552          $-       $(188)       $5,364
Margin...........     3,108         959      (1,305)      2,762        (188)     (1,513)        1,061(1)
Capital
expenditures.....       237(2)        -       1,032       1,269          41         (20)        1,290
</TABLE>


--------------------
(1)  Represents  income before income  taxes.  Adjustments  that are made to the
     total of the  segments'  margin to arrive at  income  before  income  taxes
     include the following:

<TABLE>
<CAPTION>

                                                                             Six Months Ended June 30,
                                                                     ------------------------------------------
                                                                            1999                   1998
                                                                     -------------------    -------------------
<S>                                                                  <C>                    <C>

Costs and  adjustments  excluded  from  segment  data  but  included  in the
     consolidated total:
Restructuring costs.............................................              $-                   $129
Taxes other than income taxes...................................             190                    181
Depreciation and amortization...................................           1,142                  1,036
Interest expense................................................             187                    185
Other amounts applicable to U S WEST, Inc.......................             (79)                   (74)
Other expense-net...............................................              24                     56
                                                                     ===================    ===================
                                                                          $1,464                 $1,513
                                                                     ===================    ===================
</TABLE>


(2)  Capital expenditures  reported for the retail services segment include only
     expenditures  for wireless  services and certain data services.  Additional
     capital  expenditures  relating to those  services  are included in network
     services capital expenditures.


         In addition to the operating  revenues  disclosed  above,  intersegment
operating  revenues of the retail services  segment and network services segment
were:
<TABLE>
<CAPTION>

                                                  Three Months Ended June 30,              Six Months Ended June 30,
                                                 -------------------------------         ------------------------------
<S>                                                  <C>               <C>                   <C>               <C>

                                                     1999              1998                  1999              1998
                                                     ----              ----                  ----              ----

Retail services.................................      $8                $7                   $14                $13
Network services................................      17                16                    31                 33

</TABLE>




NOTE 3:  COMMITMENTS AND CONTINGENCIES

Commitments

         We have entered into an agreement with Olympic Properties of the United
States to sponsor the 2002 Salt Lake City Winter  Olympics and the U.S.  Olympic
Teams through  2004. As of June 30, 1999, we have a remaining  commitment of $49
to be paid in a combination of cash and services through 2004.

Contingencies

         On May  1,  1996,  the  Oregon  Public  Utilities  Commission  ("OPUC")
approved  a  stipulation   terminating   prematurely  our  alternative  form  of
regulation ("AFOR") plan and it then undertook a review of our earnings.  In May
1997, the OPUC ordered us to reduce our annual revenues by $97, effective May 1,
1997, and to issue a one-time refund,  including interest, of approximately $102
to reflect the revenue  reduction  for the period May 1, 1996 through  April 30,
1997.  This one-time  refund for interim rates became subject to refund when our
AFOR plan was terminated on May 1, 1996.

         We filed an appeal of the order and asked for an immediate  stay of the
refund  with the Oregon  Circuit  Court  which  granted  our request for a stay,
pending a full review of the OPUC's  order.  On February  19,  1998,  the Oregon
Circuit  Court  entered a judgment in our favor on most of the appealed  issues.
The OPUC  appealed  to the Oregon  Court of Appeals on March 19,  1998,  and the
appeal remains pending. We continue to charge interim rates,  subject to refund,
during the pendency of that appeal. The potential exposure,  including interest,
at June 30, 1999,  is not expected to exceed $386.  Management  does not believe
there will be a material adverse impact to the financial  statements as a result
of this matter.

         Other  Contingencies.  In  December  1998,  we  were  informed  of  the
possibility  of a  claim  by a  purported  class  challenging  the  transfer  of
approximately  $54 from the U S WEST  pension  trust to the U S WEST health care
trust to pay retiree  medical  expenses  pursuant to Section 420 of the Internal
Revenue Code of 1986, as amended.  We believe that this  transfer  complied with
the  applicable  law and the associated  plan  documents.  We plan to vigorously
defend any such claim if and when it is asserted.

         We are subject to other legal  proceedings and claims that arise in the
ordinary course of business.  Although there can be no assurance of the ultimate
disposition  of  these  matters,  it is  management's  opinion,  based  upon the
information  available at this time, that the expected outcome,  individually or
in the  aggregate,  will not have a material  adverse  effect on our  results of
operations or financial position.


NOTE 4: SALE OF EXCHANGES

         In June 1999, we entered into a series of definitive agreements to sell
local-exchange  telephone properties serving  approximately 530,000 access lines
in nine states for approximately $1,650 in cash, subject to adjustment. Approval
of the sale is subject to review by federal and state regulatory  agencies.  The
transfer of ownership,  which will occur on a state-by-state  basis, is expected
to be completed in 2000.




<PAGE>


ITEM 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations (dollars in millions)
                Special Note Regarding Forward-Looking Statements

         Some  of the  information  presented  in  this  Form  10-Q  constitutes
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation   Reform  Act  of  1995  (the  "Reform  Act").   Although  U  S  WEST
Communications, Inc. (the "Company," which may also be referred to as "we," "us"
or "our")  believes that its  expectations  are based on reasonable  assumptions
within the bounds of its knowledge of its businesses and  operations,  there can
be no  assurance  that  actual  results  will  not  differ  materially  from our
expectations.   Factors  that  could  cause   actual   results  to  differ  from
expectations include:

o    greater  than  anticipated  competition  from new  entrants  into the local
     exchange,  intraLATA (local access transport area) toll, wireless, data and
     directories  markets,   causing  loss  of  customers  and  increased  price
     competition;

o    changes in demand for our products and services,  including optional custom
     calling  features;

o    higher than anticipated employee levels, capital expenditures and operating
     expenses  (such as costs  associated  with  interconnection  and Year  2000
     remediation);

o    the loss of significant customers;

o    pending  and future  state and federal  regulatory  changes  affecting  the
     telecommunications industry, including changes that could have an impact on
     the competitive environment in the local exchange market;

o    a change  in  economic  conditions  in the  various  markets  served by our
     operations;

o    higher  than  anticipated  start-up  costs  associated  with  new  business
     opportunities;

o    delays in our ability to begin offering interLATA long-distance services;

o    consumer acceptance of broadband services, including telephony, data, video
     and wireless services;

o    delays in the  development of anticipated  technologies,  or the failure of
     such technologies to perform according to expectations; and

o    the timing and  completion  of the  recently  announced  merger  with Qwest
     Communications  International Inc. ("Qwest") and the subsequent integration
     of the businesses of the two companies.

         These  cautionary  statements  should not be construed as an exhaustive
list or as any  admission by us regarding  the adequacy of the  disclosures.  We
cannot  always  predict or  determine  after the fact what  factors  would cause
actual results to differ materially from those indicated by our  forward-looking
statements or other statements.  In addition,  consider  statements that include
the terms "believes," "belief," "expects," "plans," "objectives," "anticipates,"
"intends,"  or the like to be  uncertain  and  forward-looking.  All  cautionary
statements should be read as being applicable to all forward-looking  statements
wherever they appear.

         We do not  undertake any  obligation  to publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed herein might not occur.

Results of Operations

Three and Six Months Ended June 30, 1999 Compared with 1998

         Net income for the quarter  ended June 30, 1999,  increased by $111, or
40.2% to $387,  compared  to net income of $276 for the  quarter  ended June 30,
1998.  Net income for the six months ended June 30,  1999,  increased  $106,  or
16.3% to $756,  compared to net income of $650 for the six months ended June 30,
1998. We  experienced a 5.7% and 5.2% increase in revenues for the three and six
months ended June 30, 1999,  respectively,  over the  comparable  1998  periods.
These  increases were  partially  offset by increases in expenses to support our
growth   initiatives,   enhanced   customer  service  and  greater  network  and
interconnection costs.

         The  following  sections  provide  a more  detailed  discussion  of the
changes in revenues and expenses.

Operating Revenues
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                               <C>        <C>         <C>       <C>          <C>        <C>         <C>      <C>

Local services revenues.........  $1,933     $1,756      $177      10.1%        $3,800     $3,486      $314     9.0%
</TABLE>



 Local services revenues.  Local services revenues include basic monthly service
fees,   fees  for  calling   services   such  as  voice   messaging  and  caller
identification,  wireless revenues,  subscriber access line charges, MegaBit(TM)
data services,  public phone revenues,  and installation and connection charges.
State public service commissions regulate most local service rates.

         Local services revenues  increased  primarily due to increased sales of
wireless and calling services.  Wireless  services  accounted for $41 and $72 of
the  revenue  increases  for the  three  and six  months  ended  June 30,  1999,
respectively.  Increased revenues from calling services  contributed $36 for the
quarter ended June 30, 1999 and $67 for the six months ended June 30, 1999, over
comparable  1998  periods.  Additionally,   revenues  from  access  line  growth
contributed to the rise in revenues.  Second line  additions by residential  and
small  business  customers  contributed  to access line growth due to continuing
demand for Internet access and data transport capabilities. As of the end of the
second quarter of 1999, we had added 510,000  access lines,  an increase of 3.1%
over the second  quarter of 1998. Of this  increase,  second line  installations
accounted  for 242,000  lines,  an increase  of 16.5%  compared  with the second
quarter of 1998.  Also  contributing to the revenue growth were increases in the
subscriber base of our Megabit(TM) data services and greater revenue from inside
wire maintenance plans. Partially offsetting these increases were net regulatory
rate  adjustments and refunds of $4 for the three months ended June 30, 1999 and
$19 for the six months ended June 30, 1999, over the comparable 1998 periods.

         While local  services  revenues  increased in 1999, the growth rate has
declined from 1998. The decline in the growth rate was primarily attributable to
increased  competition  as well as our customer  retention  strategy of offering
bundles of services to customers  at lower  prices in return for  entering  into
longer-term  contracts.  Additionally,  some  business  customers  have opted to
migrate from multiple single lines to high capacity lines, which decreases local
services  revenues but increases  access  services  revenues.  We believe we may
continue to experience  declining  growth rates as the level of customer  demand
slows and  competition  increases.  In June 1999,  we  entered  into a series of
definitive  agreements to sell 530,000 access lines in nine states for $1,650 in
cash, subject to adjustment.  The access lines accounted for 3.8% of fiscal 1998
local  services  revenues.  While  the sale is  expected  to  provide  us with a
one-time gain in 2000, it will negatively  impact future local services  revenue
growth.
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                                <C>        <C>        <C>       <C>          <C>        <C>          <C>     <C>


Access services revenues........   $688       $671       $17       2.5%         $1,369     $1,336       $33     2.5%
</TABLE>



 Access services  revenues.  Access services revenues are derived primarily from
charging interexchange  carriers,  such as AT&T and MCI WorldCom, for use of our
local  network to  connect  customers  to their  long-distance  networks.  These
revenues are generated from both interstate and intrastate services.

         Access  services  revenues  increased  due to  greater  demand for both
interstate  and  intrastate  access  services.  The  volume  of  interstate  and
intrastate  access  minutes  billed both increased 5% for the three months ended
June 30, 1999,  over the comparable  periods in 1998.  Interstate and intrastate
access  minutes  billed  increased 6% and 5%,  respectively,  for the six months
ended June 30, 1999 over the comparable 1998 periods. Rate reductions of $17 and
$14 for interstate and intrastate access services,  respectively,  for the three
months  ended June 30,  1999,  and $31 and $30 for the six months ended June 30,
1999, offset increases in demand. The net impact of increased demand,  offset by
rate  reductions  for the three  months  ended June 30,  1999,  was to  increase
interstate  access  services  revenues by $42, or 9% and to decrease  intrastate
access services revenues by $4, or 3% over the comparable 1998 periods.  The net
impact of increased  demand,  offset by rate reductions for the six months ended
June 30, 1999, was to increase  interstate  access services  revenues by $93, or
10% and to decrease  intrastate  access services revenues by $19, or 3% over the
comparable 1998 periods.  While we anticipate  increased demand for total access
services will continue, the effect of rate reductions is anticipated to continue
to  cause a  decline  in  intrastate  access  services  revenues.  Additionally,
revenues  for the  quarter  and six months  ended June 30,  1998 were  favorably
impacted by regulatory rate adjustments of $20 and $40, respectively.
<TABLE>
<CAPTION>

                                 Three Months Ended                                Six Months
                                       June 30,                                  Ended June 30,
                                   1999       1998          Decrease             1999       1998         Decrease
<S>                                <C>        <C>       <C>      <C>             <C>        <C>      <C>      <C>

Long-distance services revenues..  $150       $195      ($45)    (23.1%)         $321       $396     ($75)    (18.9%)
</TABLE>



 Long-distance  services revenues.  Long-distance  services revenues are derived
from customer calls to locations  outside of their local calling area but within
the same LATA. The decrease in long-distance services revenues for the three and
six  months  ended  June  30,  1999  was  primarily   attributable   to  greater
competition,  resulting in revenue declines of $31 and $51,  respectively.  Rate
reductions  of $7 and $17 for the  three and six  months  ended  June 30,  1999,
respectively,  also  contributed  to the revenue  losses.  As of June 30,  1999,
customers  in 11 of the 14  states  in which we  operate  were able to choose an
alternative  provider for intraLATA  calls without dialing a special access code
when placing the call.

         We  believe  we  will  continue  to  experience   further  declines  in
long-distance  services  revenues as  regulatory  actions  provide for increased
levels of  competition.  We are  responding to competition  through  competitive
pricing of intraLATA long-distance services and increased promotional efforts to
retain  customers.  See "Special Note Regarding  Forward-Looking  Statements" on
page 11.
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                                 <C>       <C>         <C>      <C>           <C>        <C>         <C>     <C>

Other services revenues.........    $78       $73         $5       6.8%          $152       $146        $6      4.1%
</TABLE>



Other  services   revenues.   Other  services   revenues  include  billings  and
collections  for  interexchange  carriers and sales of customer  equipment.  The
increases  for the three and six months  ended  June 30,  1999,  were  primarily
attributable to billing and collection and rent revenues.

Operating Expenses
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                                <C>        <C>        <C>       <C>          <C>        <C>         <C>      <C>

Employee-related expenses.......   $891       $860       $31       3.6%         $1,784     $1,682      $102     6.1%

</TABLE>


Employee-related expenses. Employee-related expenses include salaries and wages,
benefits, payroll taxes and contract labor.

         Employee-related  expenses  increased  during  the  three and six month
periods ended June 30, 1999, because of increased  commitments towards improving
customer services, including meeting requests for installation,  repair services
and customer services, resulting in higher labor costs. Additionally,  growth in
several  sectors of the business,  primarily  wireless and data  communications,
resulted in increased  employee  levels.  Across-the-board  wage  increases also
contributed to the increase in employee-related  expenses.  Partially offsetting
the higher  expenses  were net  reductions  in the costs of  employee  benefits,
including  pension expense,  of $22 for the three months ended June 30, 1999 and
$41 for the six months ended June 30, 1999, over the comparable 1998 periods. In
addition,  $24 for the  quarter  ended June 30,  1999 and $38 for the six months
ended June 30, 1999, of  employee-related  expenses  associated  with developing
internal use software were  capitalized in 1999 due to the adoption of Statement
of  Position  ("SOP")  98-1,  "Accounting  for the  Costs of  Computer  Software
Developed or Obtained for Internal Use," effective January 1, 1999.
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Decrease             1999       1998         Decrease
<S>                                <C>        <C>       <C>       <C>           <C>        <C>        <C>      <C>

Other operating expenses........   $658       $740      ($82)     (11.1%)       $1,287     $1,344     ($57)    (4.2%)
</TABLE>



Other operating  expenses.  Other operating expenses include access charges paid
to  independent  local exchange  carriers  ("LECs") for the routing of local and
long-distance  traffic through their  facilities and other selling,  general and
administrative costs. Included in the quarter and six months ended June 30, 1998
were $129 of separation  costs  associated  with the split from MediaOne  Group,
Inc. and asset  impairment  charges.  Excluding  these charges,  other operating
expenses  increased  $47,  or 7.7%,  for the  quarter  ended  June 30,  1999 and
increased $72 or 5.9% for the six months ended June 30, 1999. These increases in
other  operating  expenses  for the quarter and six months  ended June 30, 1999,
were primarily attributable to the following:

o    higher  access  charge  expenses  resulting  from  regulatory  rulings that
     require  us to pay  reciprocal  compensation  to other  LECs for calls that
     originate on our network and terminate on other LECs' networks,

o    increased  costs of  product  sales  associated  with  growth  initiatives,
     including   wireless  handset  costs  and  costs  applicable  to  our  data
     communications services, and

o    higher interconnection and Year 2000 remediation costs.

         In  addition,  the  increase in other  operating  expenses  for the six
months ended June 30, 1999, was also due to the following:

o    higher marketing and advertising  costs for wireless,  data  communications
     services and calling services, such as caller identification, and

o    higher rent expense  related to  increased  computer  hardware  leasing and
     increases in leasing costs associated with telephone poles.

         Offsetting the increases in other  operating  expenses were the effects
of  capitalizing  $73 for the  quarter  ended June 30, 1999 and $127 for the six
months  ended June 30, 1999 of costs  associated  with  developing  internal use
software in accordance with SOP 98-1.
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                                <C>        <C>        <C>       <C>          <C>        <C>         <C>     <C>

Depreciation and amortization
   expense......................   $557       $518       $39       7.5%         $1,142     $1,036      $106    10.2%
</TABLE>



Depreciation and  amortization  expense.  Depreciation and amortization  expense
increased primarily due to higher overall property, plant and equipment balances
resulting from  continued  investment in our network.  Additionally,  the useful
lives of certain assets were reduced, reflecting changes in technology,  causing
greater depreciation  expense.  Partially offsetting the second quarter increase
was the cessation of depreciation  primarily  associated with the 530,000 access
lines that are under  definitive  sales  agreements  entered  into in the second
quarter of 1999.
<TABLE>
<CAPTION>

                                 Three Months Ended                            Six Months
                                      June 30,                               Ended June 30,
                                   1999      1998         Decrease           1999       1998           Decrease
<S>                                <C>       <C>      <C>       <C>          <C>        <C>       <C>        <C>

Other expense-net...............   $110      $123     ($13)     10.6%        $211       $241      ($30)      (12.4%)

</TABLE>


 Other  expense-net.  Interest  expense remained  relatively  consistent for the
three and six  months  ended June 30,  1999,  compared  to the prior  comparable
periods.  Included  in other  expense-net  were  other  expenses  of $12 for the
quarter ended June 30, 1999, compared to $29 for the quarter ended June 30, 1998
and $24 for the six months  ended June 30,  1999,  compared to $56 for the prior
comparable period. The decreases were due to a reduction in regulatory  interest
expense  from the prior year.  Additionally,  for the six months  ended June 30,
1999, there was a reduction in interest  expense  attributable to an anticipated
settlement of federal income tax liabilities for tax years still under audit.



<PAGE>

<TABLE>
<CAPTION>


                                 Three Months Ended                                 Six Months
                                      June 30,              Increase              Ended June 30,             Increase
                                   1999      1998          (Decrease)            1999       1998            (Decrease)
<S>                               <C>       <C>          <C>       <C>         <C>          <C>          <C>         <C>

Segment margin results:
Retail segment..................  $1,543    $1,544       $(1)      (0.1)%      $3,047       $3,108       $(61)       (1.2)%
Wholesale segment...............     526       449        77        17.1        1,055          959         96        10.0
Network segment.................    (699)     (629)      (70)      (11.1)      (1,384)      (1,305)       (79)       (6.1)

</TABLE>


Segment results. For segment reporting purposes, segment margins exclude certain
costs and expenses, including depreciation and amortization,  corporate expenses
and  taxes  other  than  income.  See  Note  2  to  the  consolidated  financial
statements.

         Margin from the retail  services  segment  decreased for the six months
ended June 30, 1999 over the comparable  prior period due to operating  expenses
increasing  at a greater  rate than  revenue  growth.  Revenue  from the  retail
services segment  increased 5.0% for the six months ended June 30, 1999 over the
comparable 1998 period,  primarily due to growth in local services revenue.  The
revenue increase was more than offset by the higher operating expenses driven by
growth  initiatives and increased  customer service costs. For the quarter ended
June 30, 1999,  the margin was flat  compared to the prior  comparable  quarter.
This  improvement,  compared to the margin decline for the six months ended June
30, 1999,  resulted  from a reduction  in  advertising  costs.  Margins from the
wholesale  services  segment  increased as a result of greater demand for access
services,  partially  offset by price reductions as mandated by both federal and
state   regulatory   authorities   and  higher   operating   costs  relating  to
interconnection  costs and additional  access charge expenses.  Margins from the
network services segment decreased as a result of expenditures to support growth
in  both  the  retail  and  wholesale  services  segments.   Additionally,   the
implementation  of SOP 98-1 in 1999,  contributed  favorably  to each  segment's
margin results.
<TABLE>
<CAPTION>

                                 Three Months Ended                                 Six Months
                                       June 30,                                   Ended June 30,
                                   1999       1998          Increase             1999       1998         Increase
<S>                                <C>        <C>        <C>       <C>           <C>        <C>        <C>     <C>

Provision for income
   taxes........................   $246       $178       $68       38.2%         $462       $411       $51     12.4%
</TABLE>




 Provision for income  taxes.  The effective tax rate for the three months ended
June 30, 1999 was 38.9%  compared to 39.2% for the  comparable  quarter of 1998.
The effective tax rate was 37.9% for the six months ended June 30, 1999 compared
to 38.7% for the six months  ended June 30,  1998.  The  reductions  in the 1999
effective tax rates were due to lower permanent differences in the current year.



<PAGE>


Risk Management

         Over time,  we are  exposed to market  risks  arising  from  changes in
interest rates. The objective of our interest rate risk management program is to
manage  the  level  and  volatility  of our  interest  expense.  We  may  employ
derivative financial  instruments to manage our interest rate risk exposure.  We
have also  employed  financial  derivatives  to hedge  interest rate and foreign
currency  exposures  associated  with  particular  debt issues to  synthetically
obtain  below  market  interest  rates.  We  do  not  use  derivative  financial
instruments for trading purposes.

         As of June 30, 1999 and December 31, 1998, approximately $464 and $123,
respectively,  of  floating-rate  debt was exposed to changes in interest rates.
This  exposure  is  primarily  linked to  commercial  paper rates and changes in
3-month  LIBOR.  A  hypothetical  increase of 1% in  commercial  paper rates and
3-month LIBOR would not have had a material  effect on our earnings.  As of June
30, 1999 and  December  31, 1998,  we also had $222 and $228,  respectively,  of
long-term fixed rate debt obligations  maturing in the following 12 months.  Any
new debt obtained to refinance this debt would be exposed to changes in interest
rates.  A  hypothetical  10% change in the interest rates on this debt would not
have had a material effect on our earnings.

         As of June 30,  1999,  all  outstanding  interest  rate  swaps  and the
associated  debt  instrument  have  matured.  As of December  31,  1998,  we had
interest  rate swaps with  notional  amounts  of $155.  The swaps  synthetically
transformed  certain  of the  Company's  floating  rate  issues  into fixed rate
obligations.  The swaps and  associated  debt  issues  were  indexed  to two and
10-year constant  maturity U.S.  Treasury rates. Any gains (losses) on the swaps
were offset by losses (gains) on the associated debt instruments.

         As of June 30, 1999 and  December  31,  1998,  we had also entered into
cross-currency swaps with notional amounts of $133 and $204,  respectively.  The
cross-currency  swaps  synthetically  transform  $97  and  $182 of  Swiss  Franc
borrowings  at June 30, 1999 and  December  31,  1998,  respectively,  into U.S.
dollar  obligations.  Any gains  (losses) on the  cross-currency  swaps would be
offset by losses (gains) on the Swiss Franc debt obligations.

Recent Regulatory Developments

Interconnection.  The FCC issued an order (the  "Order") in 1996 relating to the
Telecommunications  Act of 1996 (the  "Act")  that  established  interconnection
costing and pricing rules which,  from our  perspective,  significantly  impeded
negotiations  with new entrants to the local exchange  market,  state regulatory
commission   interconnection   rulemakings   and   interconnection   arbitration
proceedings.

         On January 25, 1999, the U.S. Supreme Court ("Supreme  Court") issued a
ruling on our appeal of the Order. Although the decision stated that the Act was
ambiguous and self-contradictory, the Supreme Court ruled that:

o    the FCC has authority to set pricing methodology;

o    unbundled  network  elements  ("UNEs")  must be  provided  in  cases  where
     necessary or the lack of availability would impair competition;

o    Incumbent local exchange companies  ("ILECs") must sell on a bundled basis,
     at the competitive  local exchange  carriers'  ("CLECs")  request,  network
     elements the ILEC uses itself on a bundled basis; and

o    CLECs  may pick and  choose  pricing  or other  terms and  conditions  from
     multiple contracts within certain bounds.

         The  impact  of  the  Supreme  Court  ruling  is  unclear  since  state
regulatory  commissions  generally  follow  the  FCC's  pricing  and  unbundling
requirements in setting UNE prices.  On April 16, 1999, the FCC issued a Further
Notice of Proposal  Rulemaking  ("FNPRM") to address how it should interpret the
"necessary  and impair"  standard and which  specific  network  elements the FCC
should  require ILECs to unbundle.  We expect  further review of the legality of
the FCC's pricing rules will occur at the Eighth Circuit Court of Appeals.

 InterLATA  Long-Distance  Entry. Several regional Bell operating companies have
filed for entry into the  interLATA  long-distance  business.  Although  many of
these applications have been approved by state regulatory  commissions,  the FCC
has rejected all applications to date.

         We view  entry into this  business  as  important  to our  strategy  of
providing  an  integrated  bundle of  services  to our  customers.  In 1999,  we
withdrew  our  applications  to enter the  interLATA  long-distance  business in
Wyoming and Montana but we filed an application  in Arizona.  In April 1999, the
Nebraska Public Service  Commission  indicated it needed additional  information
before  making a  recommendation  to the FCC.  We expect our  application  to be
forwarded to the FCC for its review in late 1999 or early 2000.
See "Special Note Regarding Forward-Looking Statements" on page 11.

 Access  Reform.  In its access  reform  order,  the FCC mandated a  substantial
restructuring  of  interstate  access  pricing.  A  significant  portion  of the
services  that were charged using  minutes-of-use  pricing are now being charged
using  a  combination   of   minutes-of-use   rates,   flat-rate   presubscribed
interexchange  carrier charges  ("PICCs") and subscriber line charges  ("SLCs").
Although an increase in the SLC to multi-line business users occurred on July 1,
1997,  the bulk of the  mandated  pricing  changes  occurred on January 1, 1998.
Additional mandated pricing changes occurred on January 1, 1999 and July 1, 1999
and more will be  implemented  on  January  1, 2000 and 2001.  The net effect of
these changes will be to decrease  minutes-of-use charges and increase flat-rate
charges (i.e., PICCs and SLCs).

         The access reform order also continued in place the current rules under
which ILECs may not assess  interstate  access  charges on  information  service
providers and purchasers of UNEs.

         In  February  1999,  the FCC issued an order  declaring  that  Internet
traffic is  interstate  and opened a  proceeding  to determine  the  appropriate
regulatory  structure.  The FCC allowed no change in the current  agreements for
reciprocal  compensation  with CLECs until it rules on this matter.  A ruling is
expected in the summer of 1999.

 Advanced  Telecommunications  Services.  On March 31,  1999,  the FCC issued an
order establishing expanded collocation requirements for both conventional voice
and  advanced  services.  The FCC also  issued a FNPRM on "line  sharing."  Line
sharing allows a CLEC to provide  advanced  services over the same loop that the
ILEC uses to provide analog voice service.

 Long-Term Number Portability  Tariffs. In July 1999, the FCC issued an order on
our local number  portability  tariff that was originally  effective in February
1999. The FCC's order reduced our tariff from $0.54 per access line to $0.43 per
access line. The FCC also required that the  difference  between $0.54 and $0.43
be  refunded  to  customers.  The  Company  does not expect the refund to have a
material impact on its financial statements.

 Court Remand of 6.5%  Productivity  Factor.  On May 21,  1999,  the District of
Columbia U.S. Court of Appeals  issued a ruling  reversing and remanding back to
the FCC its order requiring  ILECs to  retroactively  increase the  productivity
offset to price caps to 6.5% in their annual price cap filings.  The Court found
that the FCC's  order did not  justify  the  increase.  The FCC must  revise and
reissue its order by April 2000.

 Shared  Transport.  In June 1999, the Supreme Court vacated and remanded to the
Eight Circuit Court of Appeals its decision on the FCC's shared transport rules.
Until the FCC issues new rules,  there is no federal  requirement to make shared
transport  available as a UNE. The FCC has combined this issue with its FNPRM on
UNE pricing.

Contingencies

         We have pending regulatory  actions in local regulatory  jurisdictions.
See Note 3 to the consolidated financial statements.

Other Items

         From time to time, we engage in discussions  regarding  restructurings,
dispositions,  acquisitions and other similar transactions. Any such transaction
could  include,  among  other  things,  the  transfer,  sale or  acquisition  of
significant assets,  businesses or interests,  including joint ventures,  or the
incurrence,  assumption or refinancing of indebtedness, and could be material to
our financial  condition and results of  operations.  There is no assurance that
any such discussions will result in the consummation of any such transaction.

Year 2000 Costs

 Background.  We have  conducted a  comprehensive  review of our  computer-based
systems and related software and are taking measures to ensure that such systems
will properly  recognize the year 2000 and continue to process  beyond  December
31,  1999.  The  systems  we  evaluated  include  systems  within (i) the Public
Switched  Telephone  Network  (the  "Network"),  (ii)  Information  Technologies
("IT"), and (iii) individual Business Units (the "Business Units").

         The Network, which processes voice and data information relating to our
core  communications  business,  relies  on  remote  switches,   central  office
equipment,   interoffice   equipment  and  loop  transport   equipment  that  is
predominantly  provided  to  us by  telecommunications  network  vendors.  IT is
comprised of our internal  business systems that employ hardware and software on
an enterprise-wide basis,  including  operational,  financial and administrative
functions.  The Business Units,  which include  internal  organizations  such as
finance,  procurement,  directory services,  operator services,  wireless,  data
networks,   real  estate,   etc.,   employ  systems  that  support  desktop  and
departmental applications, as well as embedded computer chip technologies, which
relate  specifically to each of our Business Unit's  functions and generally are
not part of the Network or IT.

         We have  approached  year  2000  remediation  activities  through  five
general phases: (i) inventory/assessment,  (ii) planning, (iii) conversion, (iv)
testing/certification and (v) implementation.  Additionally, we are continuously
monitoring  and  improving  our  year  2000  related  activities  and  progress,
communicating  with our  customers  and vendors,  participating  in  cooperative
testing with others and taking steps to assure that we have contingency plans in
place prior to the end of 1999. These activities will continue throughout 1999.

 Network  update.   With  regard  to  the  Network,  we  are  working  with  our
telecommunications  network vendors to obtain and convert to compliant  releases
of  hardware  and  software.  We also are  testing,  at our own  initiative,  in
cooperation with certain of our customers, vendors and with other major wireline
telecommunications  companies,  network  equipment over multiple  configurations
involving a broad  spectrum of services.  Toward this end, we participate in the
Telco Year 2000 Forum (the  "Forum"),  an  organization  that addresses the year
2000 readiness of network elements and network  interoperability.  The Forum has
contracted  with  Telcordia  (formerly  known as Bellcore),  a former  affiliate
engaged in  telecommunications  industry  research,  development and maintenance
activities,  to engage in inter-region  interoperability testing. No significant
issues have been found to date.  We also  participate  in (i) the FCC's  Network
Reliability and  Interoperability  Council IV working group,  which is tasked to
evaluate the year 2000 readiness of the public  telecommunications  network, and
(ii) the Alliance for Telecommunications  Industry Solutions ("ATIS"),  which is
testing  inter-network  interoperability,  and which,  in  conjunction  with the
Cellular  Telecommunications  Industry Association  ("CTIA"), is testing network
interoperability with wireless networks. Our inventory/assessment,  planning and
conversion    phases   for   the    Network    are    complete.    The   network
testing/certification phase was approximately 100% complete as of June 30, 1999.
Cooperative testing with certain customers, vendors and other telecommunications
companies  is  expected  to  continue   during  1999.   As  of  June  30,  1999,
approximately 99.6% of our Network remediation implementation was complete, with
the remainder  anticipated to be finished by August 1999.  Substantial  progress
has been made with Network contingency planning  activities.  We anticipate that
the remainder of the Network contingency planning activities will be complete by
the end of the third quarter, 1999.

 IT update.  Within IT, we have identified  approximately  570 applications that
support  our  critical  business  processes,  such as billing  and  collections,
network monitoring,  repair and ordering. The  inventory/assessment and planning
phases for such IT applications are complete. As of June 30, 1999, approximately
99% of IT conversion  activities,  96.8% of IT testing  activities and 97% of IT
implementation  had been completed.  We anticipate that each of these phases for
IT will be complete by September 1999.  Substantial  progress has been made with
IT contingency planning  activities.  We anticipate that the remainder of the IT
contingency  planning  activities  will  be  complete  by the  end of the  third
quarter, 1999.

 Business Units update.  Within our Business  Units,  it is estimated that as of
June 30, 1999, approximately 100% of the inventory/assessment activity, 99.5% of
the planning activity,  99.5% of the conversion  activity and 99% of the testing
and remediation implementation activities were complete. We anticipate that each
of these phases will be complete in the Business Units for major conversions and
upgrades by the end of the third  quarter of 1999.  We have  recently  initiated
Business Unit  contingency  planning  activities and we anticipate those will be
complete by the end of the third quarter, 1999.

 Costs relating to year 2000. We and our parent company have spent approximately
$200 from the beginning of 1997 through the end of the second quarter of 1999 on
year 2000  projects and  activities.  We and our parent  company  estimate  that
additional  costs  for  year  2000  related  projects  and  activities  will  be
approximately $75. Virtually all year 2000 related expenditures are being funded
through  operations.  Though year 2000 costs will  directly  impact the reported
level of future  net  income,  we intend to control  our total  cost  structure,
including  deferral of  non-critical  projects to future years,  in an effort to
mitigate  the  impact  of year 2000  costs on our  historical  rate of  earnings
growth.  The  estimates  stated  above are subject to change.  The timing of our
expenses may vary and is not  necessarily  indicative  of  readiness  efforts or
progress to date.

 Contingency plan. We cannot provide assurance that the results of our year 2000
compliance  efforts or the costs of such efforts will not differ materially from
estimates. Accordingly, we are developing year 2000 specific business continuity
and  contingency  plans to address high risk areas as they are  identified.  Our
year 2000  contingency  planning  activities  will  include  training  of crisis
managers on year 2000 issues and potential  business impacts to their particular
process areas,  reviewing and modifying  existing  business  continuity plans to
address   year  2000  issues  and   establishing   rapid   response   teams  and
communications  procedures  for  each  of  the  major  critical  operations  and
facilities to handle  potential  post-implementation  year 2000 failures.  These
year 2000 specific  contingency  planning  activities  are to be in place by the
third  quarter  of 1999.  In  addition,  we have in place our  standard  overall
business  continuity,  contingency  and disaster  recovery plans (such as diesel
generator  back-up  power  supply  sources for our  Network,  Network  rerouting
capabilities,  computer data and records  safe-keeping  and back-up and recovery
procedures) which will be verified,  and as appropriate,  augmented for specific
year 2000 contingencies.

 Dependencies.    Within   Network,   we   are   highly   dependent   upon   our
telecommunications  network vendors to provide year 2000 compliant  hardware and
software in a timely  manner,  and on third parties that are assisting us in the
focused  testing and  implementation  phases  regarding the Network.  Because of
these  dependencies,  we have  developed  and  implemented  a vendor  compliance
process  whereby  we have  obtained  written  assurances  of  timely  year  2000
compliance from most of our critical vendors (not only for Network, but also for
IT and the Business Units). In addition,  we monitor and actively participate in
coordinated Network testing activities,  as discussed above, with respect to the
Forum,  ATIS and Telcordia.  Within IT, we depend on the development of software
by  experts,  both  internal  and  external,  and the  availability  of critical
resources with the requisite  skill sets.  Because of this  dependency,  we have
developed detailed timetables, resource plans and standardized year 2000 testing
requirements for identified critical applications (irrespective of whether these
applications  are used  primarily  by IT, the  Network or the  Business  Units).
Within  the  Business  Units,  we are  dependent  on vendor  supplied  goods and
services  and  operability  of the Network and  critical  IT and  Business  Unit
specific  applications.  Because of these dependencies,  we are implementing the
same type of vendor  compliance  processes and application  planning and testing
processes at the Business  Units, as discussed above with respect to the Network
and IT. Overall,  we have sought compliance  assurances from approximately 7,765
vendors concerning  approximately  25,769 products and have received  assurances
for 99.6% of those  products as of June 30, 1999.  During 1999, we will continue
to pursue  assurances of timely year 2000 compliance for the remaining  critical
vendors.

         As with any  large-scale  computer-related  project  such as year  2000
remediation,  the testing phase may require resources in excess of other project
phases and the other project  phases may be affected by and  dependent  upon the
results of the testing phase.

 Summary.  In management's  view, the most reasonably likely worse case scenario
for year 2000 failure prospects we face is that a limited number of important IT
and/or Business Unit specific  applications may unexpectedly  fail. In addition,
there may be unexpected problems with the Network relating to the year 2000. Our
failure  or the  failure  by  certain  of our  vendors  to  remediate  year 2000
compliance  issues  in  advance  of the  year  2000 and to  execute  appropriate
contingency  plans in the event that a critical  failure is  experienced,  could
result in  disruption  of our  operations,  possibly  impacting  the Network and
impairing our ability to bill or collect revenues.  However,  while no assurance
can be given,  management  believes that our efforts at remediation and testing,
year 2000  specific  contingency  planning,  and  overall  business  continuity,
contingency and disaster recovery  planning will likely be successful,  and that
the aforementioned "worse case scenario" is unlikely to develop or significantly
disrupt our financial operations.

         The above discussion  regarding year 2000 contains many statements that
are "forward-looking"  within the meaning of the Reform Act. Although we believe
that our estimates are based on  reasonable  assumptions,  we cannot assure that
actual results will not differ materially from these  expectations or estimates.
See "Special Note Regarding Forward-Looking Statements" on page 11.

New Accounting Standards

         On June 15,  1998,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards  ("FAS") No. 133,  "Accounting for
Derivative  Instruments  and Hedging  Activities."  This  statement  establishes
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  FAS No. 133  requires,  among  other  things,  that all  derivative
instruments  be recognized at fair value as assets or liabilities on the balance
sheet and that  changes in fair  value  generally  be  recognized  currently  in
earnings unless specific  criteria are met. The standard is effective for fiscal
years  beginning  after June 15, 2000,  though  earlier  adoption is  permitted.
Financial  statement impacts of adopting the new standard depend upon the amount
and  nature of the  future  use of  derivative  instruments  and their  relative
changes in valuation  over time.  Had we adopted FAS No. 133 in 1999, its impact
on the consolidated financial statements would not have been material.


<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company and its  subsidiaries are subject to claims and proceedings
arising in the ordinary  course of business.  For a discussion of these actions,
see "Note 3:  Commitments and  Contingencies"  - to the  consolidated  financial
statements.

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits filed for the Company through the filing of this Form 10-Q.

Exhibit No.

(2a)              Articles of Merger  including  the Plan of Merger  between The
                  Mountain States  Telephone and Telegraph  Company (renamed U S
                  WEST  Communications,  Inc.) and  Northwestern  Bell Telephone
                  Company.  (Incorporated herein by this reference to Exhibit 2a
                  to Form SE filed on January 8, 1991, File No. 1-3040).

(2b)              Articles of Merger  including  the Plan of Merger  between The
                  Mountain States  Telephone and Telegraph  Company (renamed U S
                  WEST   Communications,   Inc.)  and  Pacific   Northwest  Bell
                  Telephone Company.  (Incorporated  herein by this reference to
                  Exhibit  2b to Form SE  filed on  January  8,  1991,  File No.
                  1-3040).

(3a)              Restated   Articles  of   Incorporation   of  the  Registrant.
                  (Incorporated  herein by this  reference to Exhibit 3a to Form
                  10-K/A filed on April 13, 1998, File No. 1-3040).

(3b)              Bylaws of the Registrant,  as amended.  (Incorporated  herein
                  by this reference to Exhibit 3b to Form 10-K/A filed on April
                  13, 1998, File No. 1-3040).

4                 No instrument  which defines the rights of holders of long and
                  intermediate  term debt of the  Registrant  is filed  herewith
                  pursuant  to  Regulation  S-K,  Item  601(b)  (4)  (iii)  (A).
                  Pursuant to this regulation,  the Registrant  hereby agrees to
                  furnish a copy of any such instrument to the SEC upon request.

(10a)             Reorganization and Divestiture  Agreement dated as of November
                  1, 1983, between American Telephone and Telegraph Company, U S
                  WEST  Inc.,  and  certain  of  their   affiliated   companies,
                  including The Mountain States Telephone and Telegraph Company,
                  Northwestern  Bell Telephone  Company,  Pacific Northwest Bell
                  Telephone Company and NewVector Communications,  Inc. (Exhibit
                  10a to Form 10-K for the period ended December 31, 1983,  File
                  No. 1-3040).



<PAGE>


(10b)             Shared  Network  Facilities  Agreement  dated as of January 1,
                  1984, between American  Telephone and Telegraph Company,  AT&T
                  Communications  of the Midwest,  Inc. and The Mountain  States
                  Telephone and Telegraph Company. (Exhibit 10b to Form 10-K for
                  the period ended December 31, 1983, File No. 1-3040).

(10c)             Agreement  Concerning   Termination  of  the  Standard  Supply
                  Contract   effective   December  31,  1983,  between  American
                  Telephone and Telegraph  Company,  Western  Electric  Company,
                  Incorporated,  The Mountain  States  Telephone  and  Telegraph
                  Company and Central Services Organization (Exhibit 10d to Form
                  10-K for the period ended December 31, 1983, File No.
                  1-3040).

(10d)             Agreement  Concerning  Certain  Centrally  Developed  Computer
                  Systems   effective   December  31,  1983,   between  American
                  Telephone and Telegraph  Company,  Western  Electric  Company,
                  Incorporated,  The Mountain  States  Telephone  and  Telegraph
                  Company and Central Services Organization (Exhibit 10e to Form
                  10-K for the period ended December 31, 1983, File No.
                  1-3040).

(10e)             Agreement  Concerning  Patents,   Technical   Information  and
                  Copyrights  effective  December  31,  1983,  between  American
                  Telephone and Telegraph  Company and U S WEST,  Inc.  (Exhibit
                  10f to Form 10-K for the period ended December 31, 1983,  File
                  No. 1-3040).

(10f)             Agreement Concerning Liabilities,  Tax Matters and Termination
                  of Certain  Agreements  dated as of November 1, 1983,  between
                  American  Telephone and Telegraph Company, U S WEST, Inc., The
                  Mountain States Telephone and Telegraph Company and certain of
                  their  affiliates  (Exhibit  10g to Form  10-K for the  period
                  ended December 31, 1983, File No. 1-3040).

(10g)             Agreement Concerning Trademarks, Trade Names and Service Marks
                  effective  December 31, 1983,  between American  Telephone and
                  Telegraph   Company,    American   Information    Technologies
                  Corporation, Bell Atlantic Corporation, BellSouth Corporation,
                  Cincinnati  Bell,  Inc.,  NYNEX  Corporation,  Pacific Telesis
                  Group,   The   Southern   New   England   Telephone   Company,
                  Southwestern  Bell Corporation and U S WEST, Inc. (Exhibit 10i
                  to Form 10-K for the period ended December 31, 1984,  File No.
                  1-3040).

(10h)             Shareholders'  Agreement dated as of January 1, 1988,  between
                  Ameritech Services,  Inc., Bell Atlantic Management  Services,
                  Inc., BellSouth Services, Incorporated, NYNEX Service Company,
                  Pacific  Bell,   Southwestern  Bell  Telephone  Company,   The
                  Mountain States Telephone and Telegraph Company,  Northwestern
                  Bell  Telephone  Company and Pacific  Northwest Bell Telephone
                  Company  (Exhibit 10h to Form SE dated March 5, 1992, File No.
                  1-3040).

(10i)             Form  of   Agreement   for  Purchase  and  Sale  of  Telephone
                  Exchanges,   dated  as  of  June 16,  1999,  between  Citizens
                  Utilities Company and U S WEST  Communications,  Inc. (Exhibit
                  99B to Form 8-K dated June 17, 1999, File No. 1-3040).

10j               364-Day  $800 Million  Credit  Agreement, dated  May 19, 1999,
                  with The  Banks  Listed  Therein  and  Morgan  Guaranty Trust
                  Company of New York, as Administrative Agent.

10k               Amendment No. 1 to Credit  Agreement dated as of June 11, 1999
                  to the 364-Day $800 Million Credit Agreement,  dated as of May
                  19, 1998, among U S WEST Communications, Inc., U S WEST, Inc.,
                  the Banks  listed on the  signature  pages  thereto and Morgan
                  Guaranty Trust Company of New York, as Administrative Agent.

27                Financial Data Schedule
-------------------
( )               Previously filed.



(b) Reports on Form 8-K filed during the Second  Quarter of 1999 and through the
filing of this form 10-Q.

(i)               Form 8-K dated June 17, 1999 providing notification of a press
                  release   entitled   "Citizens   Utilities  signs   definitive
                  agreements  with U S WEST to  purchase  approximately  530,000
                  telephone access lines in nine states for $1.65 billion".




<PAGE>





                                                              SIGNATURES

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


                                   U S WEST Communications, Inc.


                                        /s/ ALLAN R. SPIES
                                   By:___________________________________
                                      Allan R. Spies
                                      Vice President and Chief Financial Officer

August 9, 1999