<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

<TABLE>
<S>            <C>                                                          <C>
     /X/           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                             SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR

<TABLE>
<S>            <C>                                                          <C>
     / /          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
                             SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                           COMMISSION FILE NO. 1-3040

                         U S WEST COMMUNICATIONS, INC.

<TABLE>
<S>                                            <C>
        A COLORADO CORPORATION                              84-0273800
---------------------------------------        ------------------------------------
     (State or other jurisdiction                        (I.R.S. Employer
   of incorporation or organization)                   Identification No.)

                  1801 California Street, Denver, Colorado 80202
                          Telephone Number (303) 672-2700
</TABLE>

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

          Securities registered pursuant to Section 12 (b) of the Act:

<TABLE>
<CAPTION>
                       NAME OF EACH EXCHANGE ON
 TITLE OF EACH CLASS       WHICH REGISTERED
 -------------------   ------------------------
<S>                    <C>
5.625% Notes Due 2008  New York Stock Exchange
</TABLE>

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

          Securities registered pursuant to Section 12 (g) of the Act:
                                      None

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K.  ***

*** Not applicable in that registrant is a wholly-owned subsidiary.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                                   FORM 10-K
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
        ITEM                                    DESCRIPTION                             PAGE
---------------------                           -----------                           --------
<C>                     <S>                                                           <C>
                                            PART I

         1.             Business....................................................     2

         2.             Properties..................................................     4

         3.             Legal Proceedings...........................................     4

         4.             Submission of Matters to a Vote of Security Holders.........     4

                                           PART II

         5.             Market for Registrant's Common Equity and Related
                          Stockholder Matters.......................................     4

         6.             Selected Financial Data.....................................     4

         7.             Management's Discussion and Analysis of Financial Condition
                          and Results of Operations.................................     4

       7A.              Quantitative and Qualitative Disclosures About Market
                          Risk......................................................     4

         8.             Consolidated Financial Statements and Supplementary Data....     4

         9.             Changes in and Disagreements with Accountants on Accounting
                          and Financial Disclosure..................................     4

                                           PART III

        10.             Directors and Executive Officers of the Registrant..........     5

        11.             Executive Compensation......................................     5

        12.             Security Ownership of Certain Beneficial Owners and
                          Management................................................     5

        13.             Certain Relationships and Related Transactions..............     5

                                           PART IV

        14.             Financial Statement Schedules, Reports on Form 8-K and
                          Exhibits..................................................     5
</TABLE>

                                       i
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                                   FORM 10-K

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Some of the information presented in this Annual Report on Form 10-K
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 its
expectations. Factors that could cause actual results to differ from
expectations include:

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

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

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

    - the loss of significant customers;

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

    - acceleration of the deployment of additional services and/or advanced new
      services to customers, such as broadband data and wireless (including the
      purchase of spectrum licenses), which would require substantial
      expenditure of financial and other resources;

    - changes in economic conditions in the various markets served by our
      operations;

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

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

    - timing, cost and consumer acceptance of telephony and wireless services;

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

    - timing and completion of the announced merger of our parent company,
      U S WEST, Inc. ("U S WEST"), with Qwest Communications International Inc.
      ("Qwest") and the subsequent integration of the businesses of the two
      companies.

    You should not construe these cautionary statements as an exhaustive list or
as any admission by us regarding the adequacy of disclosures made by us. 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, you are urged to 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 in this report might not occur.

                                       1
<PAGE>
                                     PART I

ITEM 1.  BUSINESS.

GENERAL

    We are incorporated under the laws of the State of Colorado and have our
principal offices at 1801 California Street, Denver, Colorado 80202, telephone
number (303) 672-2700. We are a wholly-owned subsidiary of U S WEST, Inc., a
Delaware corporation ("U S WEST").

    On June 12, 1998, our former parent corporation, which has subsequently been
renamed MediaOne Group, Inc., separated its media business and communications
business into two publicly traded companies (the "Separation"). The media
business is conducted through MediaOne Group, Inc. and the communications
business, including the domestic directory business, is now conducted through
U S WEST and its subsidiaries.

    On July 18, 1999, our parent company and Qwest entered into an agreement and
plan of merger (the "Qwest Merger Agreement"). Upon completion of the merger,
holders of U S WEST common stock will receive, for each share of U S WEST common
stock, subject to the collar and the cash options described in the Qwest Merger
Agreement, shares of Qwest common stock having a value of $69. The merger is
subject to, among other things, the approval of the Federal Communications
Commission ("FCC") and other state regulatory reviews.

COMPANY OPERATIONS

    We provide communications services to more than 25 million residential and
business customers in our 14 state region (the "Region"). The Region includes
the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New
Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We are
organized on the basis of our products and services and operate in three
segments: retail services, wholesale services and network services. For further
financial information on our segments, you should refer to Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 12 to the consolidated financial statements on page F-16 through F-17.

RETAIL SERVICES

    The principal types of retail services we offer are: (i) local exchange
telephone services, (ii) long-distance services within local access and
transport areas ("LATAs") in the Region, (iii) wireless services and
(iv) high-speed data and Internet services.

    LOCAL EXCHANGE.  Local exchange telephone services provide lines from
telephone exchange offices to customers' premises to originate and terminate
telecommunications services within our local exchange service territories as
defined by the state public utilities commissions ("PUCs"). These services
include basic local exchange services provided through our regular switched
network, dedicated private line facilities for voice and special services, such
as transport of data, radio, switching services for customers' internal
communications through facilities owned by us, data transport services that
include managing and configuring special service networks and dedicated low and
high-capacity public or private digital networks. Other local exchange revenue
is derived from directory assistance, public telephone service and various
custom calling features such as Caller ID, Call Waiting, Call Return and 3-Way
Calling.

    We also provide other products and services, such as customer premises
equipment and enhanced services, including voice mail to residents, business
customers and governmental agencies.

    INTRALATA LONG-DISTANCE.  We provide intraLATA long-distance services within
our Region. These services include intraLATA service beyond the local calling
area, Wide Area Telecommunications Service or "800" services for customers with
highly concentrated demand, and special services, such as transport of data and
radio. We intend to begin offering interLATA long-distance services in our
Region pursuant to the Telecommunications Act of 1996 (the "Telecommunications
Act" or the "Act") upon satisfaction of

                                       2
<PAGE>
certain regulatory conditions primarily related to local exchange telephone
competition. We currently offer limited out-of-region long-distance services.

    WIRELESS SERVICES.  We hold 10 MHz licenses to provide personal
communications services ("PCS") in 53 markets in our Region. These licenses,
which cover approximately 20 million POPs (i.e., potential customers), were
purchased in an FCC auction held in January 1997. In December 1997, we purchased
additional licenses for a majority of the Seattle market, which cover an
additional 4 million POPs. Using these licenses, we are constructing networks
utilizing digital code division multiple access technology. We launched wireless
PCS services in (i) Denver, Fort Collins, Greeley and Colorado Springs,
Colorado; Portland and Salem, Oregon; and Vancouver, Washington in 1997;
(ii) Phoenix and Tucson, Arizona; Minneapolis, St. Cloud, St. Paul and
Rochester, Minnesota; and Seattle, Olympia and Bremerton, Washington in 1998;
and (iii) Cheyenne, Wyoming; Pueblo, Colorado and Salt Lake City, Utah
(including the Wasatch front region) in 1999, covering approximately 15 million
POPs. These wireless services, which are being marketed under the "U S WEST
Wireless" brand, enable customers to use the same number for their wireless
phone as for their home or business phone. We recently announced a joint venture
with Touch America, Inc., the telecommunications subsidiary of The Montana Power
Corporation, to provide the nation's only one-number digital PCS service to
customers in seven states in the Pacific Northwest and the Upper Midwest.

    HIGH-SPEED DATA AND INTERNET SERVICES.  We offer high-speed data and
Internet services to customers in our Region. Through U S WEST !NTERPRISE, our
data division, we provide high-speed data communications and network services,
including frame relay service, transparent LAN (Local Area Network) service, ATM
(Asynchronous Transfer Mode) Cell Relay Service, network integration solutions
and other data-related services to business customers. In 1997 and 1998, we
introduced U S WEST Megabit-TM- Services, a high-speed Internet access service
in select markets and expect to launch this service in additional markets in
2000.

    At December 31, 1999, we had over 17 million telephone network access lines
in service, an increase of 2.5% over 1998. 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
$1.65 billion 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 over the
next two years. Additionally, we are planning to sell approximately 270,000
access lines in New Mexico and Washington.

WHOLESALE SERVICES

    We provide sales, marketing and customer care for competitive local exchange
carriers ("CLECs"), interexchange carriers ("IXCs") and wireless providers in
the purchase of wholesale local network services. CLECs are communications
companies, certified by a state PUC, that provide local exchange service within
a U S WEST associated local calling area. IXCs provide transitional
long-distance services to end users by handling calls that are made from a phone
exchange in one LATA to an exchange in another LATA. We have 27 LATAs within our
Region. We provide such wholesale local network services by interconnecting such
carriers and providers to our public switched network or through our dedicated
private lines. These carriers can resell our products and services.

NETWORK SERVICES

    Our network segment provides access to our telecommunications network,
including our information technologies, primarily to our retail services and
wholesale services segments.

COMPETITION AND REGULATION

    For a discussion of competition and regulation affecting us, you should read
"Item 1. Business" of U S WEST's Form 10-K for the year ended December 31, 1999.

                                       3
<PAGE>
ITEM 2.  PROPERTIES.

    Our properties do not lend themselves to description by character and
location of principal units. At December 31, 1999, the percentage distribution
of total net property, plant and equipment by major category for us was as
follows:

<TABLE>
<S>                                                           <C>
Telecommunications outside plant............................   40%
Telecommunications network equipment (primarily central
  office equipment).........................................   42
Land and buildings (principally central offices)............    6
General purpose computers and other.........................   12
</TABLE>

    At December 31, 1999, substantially all of the installations of central
office equipment were located in buildings owned by us situated on land which we
own in fee, while many garages and administrative and business offices are
leased.

ITEM 3.  LEGAL PROCEEDINGS.

    We are subject to claims and proceedings arising in the ordinary course of
business. For a discussion of these actions, you should read Note 10 to the
consolidated financial statements.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    Not applicable.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    Not applicable.

ITEM 6.  SELECTED FINANCIAL DATA.

    We have omitted this information pursuant to General Instruction I(2).

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

    We have omitted certain information pursuant to General Instruction I(2).
For "Management's Discussion and Analysis of Financial Condition and Results of
Operations," please refer to the information set forth on pages 9 through 15.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

    See "Management's Discussion and Analysis of Financial Condition and Results
of Operation--Risk Management." Please refer to the information set forth on
page 13.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    Please refer to the information set forth on pages F-1 through F-17.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.

    We have nothing to report to you under this item.

                                       4
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    We have omitted this information pursuant to General Instruction I(2).

ITEM 11.  EXECUTIVE COMPENSATION.

    We have omitted this information pursuant to General Instruction I(2).

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    We have omitted this information pursuant to General Instruction I(2).

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    We have omitted this information pursuant to General Instruction I(2).

                                    PART IV

ITEM 14.  FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS.

(a) Documents filed as part of this report

<TABLE>
<CAPTION>
                                                                      PAGE
                                                                   ----------
<S>  <C>                                                           <C>
(1)  Reports of Independent Public Accountants...................     F-1
(2)  Consolidated Financial Statements:
     Consolidated Statements of Income for the years ended
       December 31, 1999, 1998 and 1997..........................     F-2
     Consolidated Balance Sheets as of December 31, 1999 and
       1998......................................................     F-3
     Consolidated Statements of Cash Flows for the years ended
       December 31, 1999, 1998 and 1997..........................     F-4
     Consolidated Statements of Stockholder's Equity.............     F-5
     Notes to Consolidated Financial Statements and Supplementary
       Data......................................................  F-6 - F-17
(3)  Consolidated Financial Statement Schedule:
     Schedule II--Valuation and Qualifying Accounts..............     F-18
</TABLE>

    Financial statement schedules other than those listed above have been
    omitted because the required information is contained in the consolidated
    financial statements and notes thereto or because such schedules are not
    required or applicable.

(b) Reports on Form 8-K:

        U S WEST Communications filed the following reports on Form 8-K during
        the fourth quarter of 1999 and through the filing of this Form 10-K:

    (i) report dated February 11, 2000 providing notification of the release of
        fourth quarter earnings.

                                       5
<PAGE>
(c) Exhibits:

        Exhibits identified in parentheses below, on file with the United States
    Securities and Exchange Commission ("SEC"), are incorporated herein by
    referenced as exhibits hereto. All other exhibits are provided as part of
    this electronic submission.

<TABLE>
<CAPTION>
             EXHIBIT
             NUMBER
             -------
      <C>                     <S>
              (1-A)           Purchase Agreement, dated October 26, 1999, among U S WEST
                              Communications, Inc., Salomon Smith Barney Inc., ABN AMRO
                              Incorporated, Banc of America Securities, LLC and Chase
                              Securities Inc., as representatives of the initial purchaser
                              named therein.
              (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 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 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.
               4a             Registration Rights Agreement, dated October 26, 1999,
                              between U S WEST Communications, Inc., Salomon Smith
                              Barney Inc., ABN AMRO Incorporated, Bank of America
                              Securities LLC and Chase Securities, Inc.
               4b             Indenture dated as of October 15, 1999, between U S WEST
                              Communications, Inc. and Bank One Trust Company, NA, as
                              Trustee.
              (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).
              (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).
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
             EXHIBIT
             NUMBER
             -------
      <C>                     <S>
              (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).
               12             Computation of Ratio of Earnings to Fixed Charges.
               24             Power of Attorney.
               27             Financial Data Schedule.
</TABLE>

                                       7
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Denver,
State of Colorado, on March 3, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       U S WEST COMMUNICATIONS, INC.

                                                       By:              /s/ ALLAN R. SPIES
                                                            -----------------------------------------
                                                                          Allan R. Spies
                                                                EXECUTIVE VICE PRESIDENT AND CHIEF
                                                                        FINANCIAL OFFICER
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in capacities and on the date indicated.

<TABLE>
<S>                                            <C>

PRINCIPAL EXECUTIVE OFFICER:

/s/ Solomon D. Trujillo                        President and Chief Executive Officer

PRINCIPAL FINANCIAL OFFICER:

/s/ Allan R. Spies                             Executive Vice President and Chief Financial
                                               Officer

PRINCIPAL ACCOUNTING OFFICER:

/s/ Janet K. Cooper                            Vice President--Finance and Controller

DIRECTORS:

/s/ Solomon D. Trujillo

/s/ Allan R. Spies

/s/ Janet K. Cooper
</TABLE>

Dated: March 3, 2000

                                       8
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                             (DOLLARS IN MILLIONS)

    Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" on page 1 for additional
factors relating to such statements.

RESULTS OF OPERATIONS

1999 COMPARED WITH 1998

    Several non-recurring items impacted net income in 1998. Results of
operations for the two years, normalized to exclude the effects of such items,
are as follows:

<TABLE>
<CAPTION>
                                                                           INCREASE
                                                  1999       1998         (DECREASE)
                                                --------   --------   -------------------
<S>                                             <C>        <C>        <C>        <C>
Net income....................................   $1,562     $1,335      $227        17.0%
Non-recurring items...........................       --         89       (89)     (100.0)
                                                 ------     ------      ----      ------
Normalized income.............................   $1,562     $1,424      $138         9.7%
                                                 ======     ======      ====      ======
</TABLE>

    Non-recurring items in 1998 include:

    - an after-tax charge of $68 for Separation costs and

    - an after-tax charge of $21 related to the impairment of certain long-lived
      assets associated with our video operations.

    Normalized income increased $138 or 9.7% in 1999. The increase was primarily
due to revenue growth associated with increased demand for services. Partially
offsetting these revenue increases were higher operating costs driven by growth
initiatives and interconnection activities.

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

REVENUES

<TABLE>
<CAPTION>
                                                    1999       1998          INCREASE
                                                  --------   --------   -------------------
<S>                                               <C>        <C>        <C>        <C>
Local services revenues.........................   $7,773     $7,124      $649       9.1%
</TABLE>

    LOCAL SERVICES REVENUES.  Local services revenues include retail and
wholesale basic monthly service fees, fees for calling services such as voice
messaging and caller identification, wireless revenues, subscriber line charges,
MegaBit-TM- data services, local number portability ("LNP") charges, public
phone revenues, interconnection, paging, and installation and connection
charges. State PUCs regulate most local service rates.

    Local services revenues increased primarily due to greater sales of wireless
and calling services of $142 and $119, respectively. Additionally, 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
1999, we had added 408,000 access lines, an increase of 2.5% over the end of
1998. Of this increase, residential second line installations accounted for
187,000 lines, an increase of 11.8% compared with 1998. Also contributing to the
revenue growth were greater revenues from inside wire maintenance plans, LNP
charges, interconnection revenues, subscriber line charges and increases in the
subscriber base of our Megabit-TM- data services, collectively

                                       9
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

contributing $212. Partially offsetting these increases were net regulatory rate
adjustments and refunds of $16 for 1999, over the comparable 1998 period.

    While local services revenues increased in 1999, our 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 local exchange telephone properties serving
approximately 530,000 access lines in nine states for approximately $1,650 in
cash, subject to adjustment. The transfer of ownership, which will occur on a
state-by-state basis, is expected to be completed over the next two years. The
access lines accounted for approximately 3% of fiscal 1999 local services
revenues. While the sale is expected to provide us with one-time gains in 2000
and 2001, it will negatively impact future local services revenue growth.
Additionally, we are planning the sale of approximately 270,000 access lines in
New Mexico and Washington.

<TABLE>
<CAPTION>
                                                      1999       1998          INCREASE
                                                    --------   --------   -------------------
<S>                                                 <C>        <C>        <C>        <C>
Access services revenues..........................   $2,731     $2,662      $69        2.6%
</TABLE>

    ACCESS SERVICES REVENUES.  Access services revenues are derived primarily
from charging IXCs, such as AT&T and MCI WorldCom, for use of our local network
to connect customers to their long-distance networks. Also included in access
services revenues are special access and private line revenues from end-users
buying dedicated local exchange capacity to support their private networks.

    The growth in access services revenues was attributable to increased demand
for private line and special access services. Revenues from private line and
special access services increased $186 primarily due to the increased demand for
data services. Additionally, increased demand from IXCs contributed to the
revenue increase. Access minutes of use increased 5.0% for 1999. The growth in
access minutes of use was partially offset by mandated rate reductions of $164.

<TABLE>
<CAPTION>
                                                     1999       1998          DECREASE
                                                   --------   --------   -------------------
<S>                                                <C>        <C>        <C>        <C>
Long-distance services revenues..................    $568       $779      $(211)     (27.1)%
</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 1999
was primarily attributable to greater competition, strategic price reductions
and the expansion in the number and size of extended service areas. Mandated
rate reductions of $40 for 1999 also contributed to the revenue decrease. As of
December 31, 1999, customers in all 14 states in which we operate are able to
choose an alternative provider for intraLATA calls without dialing a special
access code when placing a 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 1.

<TABLE>
<CAPTION>
                                                       1999       1998          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Other services revenues............................    $392       $306       $86        28.1%
</TABLE>

                                       10
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

    OTHER SERVICES REVENUES.  Other services revenues include billing and
collection services for IXCs and sales of customer equipment. The increase for
1999 was primarily attributable to greater billing and collection revenues.

EXPENSES

<TABLE>
<CAPTION>
                                                     1999       1998      INCREASE
                                                   --------   --------   ----------
<S>                                                <C>        <C>        <C>    <C>
Employee-related expenses........................   $3,696     $3,430    $266   7.8%
</TABLE>

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

    Employee related expenses for 1998 include $21 of costs related to the third
quarter 1998 work stoppage. Excluding the work stoppage costs, employee-related
expenses increased $287 or 8.4% for 1999 over 1998. Employee-related expenses
increased because of increased commitments towards improving customer service,
including meeting requests for installation and repair services, resulting in
higher labor costs. Additionally, growth in several sectors of the business,
primarily wireless and data communications and year 2000 costs, resulted in
increased employee levels and contract labor costs. Across-the-board wage
increases also contributed to the increase in employee-related expenses.
Additionally, included in employee-related expenses for 1999 are the salary and
benefit costs for employees who were transferred from Old U S WEST as part of
the Separation. Prior to the Separation, these costs were allocated to us and
included in other operating expenses. Partially offsetting these increases was
the capitalization in 1999 of employee-related costs associated with developing
internal use software due to the adoption of 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." In
accordance with the SOP, $85 of employee related costs were capitalized in 1999.
An increase in net pension credits of $38 also partially offset the increase in
employee-related expenses for 1999. As a result of the favorable return on
investment earnings on pension plan assets, we will continue to experience
increases in our pension credits in 2000.

<TABLE>
<CAPTION>
                                                   1999       1998          DECREASE
                                                 --------   --------   -------------------
<S>                                              <C>        <C>        <C>        <C>
Other operating expenses.......................   $2,515     $2,685     $(170)      (6.3)%
</TABLE>

    OTHER OPERATING EXPENSES.  Other operating expenses include access charges
paid to carriers for the routing of local and long-distance traffic to their
facilities, interconnection costs, taxes other than income taxes and other
selling, general and administrative costs. Included in 1998 were $129 of
Separation costs and asset impairment charges. Excluding the Separation costs
and asset impairment charges, other operating expenses decreased $41, or 1.6%
for 1999 over 1998. This decrease was primarily attributable to the effect of
capitalizing $281 of software costs in 1999 primarily associated with developing
internal use software in accordance with SOP 98-1. Additionally, for the second
half of 1998, the transfer of employees from Old U S WEST as part of the
Separation resulted in the reclassification of related salary and benefit costs
to employee-related expenses.

    Offsetting the decrease were the following:

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

    - higher access and interconnection expenses resulting from regulatory
      rulings that require us to pay access charges to carriers for calls that
      originate on our network and terminate on other carriers'

                                       11
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

     networks offset by reductions in access expense due to end-users dialing
      toll calls directly to IXCs and bypassing our network,

    - higher rent expense related to increased computer software, hardware and
      telephone pole leasing,

    - higher property taxes,

    - higher bad debt expense related to increased revenues, and

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

<TABLE>
<CAPTION>
                                                     1999       1998      INCREASE
                                                   --------   --------   ----------
<S>                                                <C>        <C>        <C>    <C>
Depreciation and amortization expense............   $2,293     $2,138    $155   7.2%
</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, we
incurred amortization costs related to the capitalization of internal use
software in accordance with SOP 98-1 and reduced the useful lives of certain
assets due to changes in technology, both of which caused greater depreciation
expense. Partially offsetting the increases was the cessation of depreciation
associated with access lines that are intended to be sold.

<TABLE>
<CAPTION>
                                                       1999       1998      DECREASE
                                                     --------   --------   -----------
<S>                                                  <C>        <C>        <C>    <C>
Other expense--net.................................    $440       $468     $(28)  (6.0)%
</TABLE>

    OTHER EXPENSE--NET.  Interest expense was $403 in 1999 and $386 in 1998. The
increase was due to higher average debt balances to fund growth initiatives.

    Also included in other expense--net was other expense of $37 for 1999,
compared to $82 for 1998. The decrease in other expense was due to a reduction
in regulatory interest expense and gains on sales of real estate. Additionally,
the decrease in other expense-net for 1999 was due to the reduction in interest
expense attributable to an anticipated settlement of federal income tax
liabilities for tax years still under audit.

<TABLE>
<CAPTION>
                                                                          INCREASE
                                                 1999       1998         (DECREASE)
                                               --------   --------   -------------------
<S>                                            <C>        <C>        <C>        <C>
Segment results:
Retail segment...............................  $ 6,111    $ 6,194      $(83)      (1.3)%
Wholesale segment............................    2,157      1,908       249       13.1
Network segment..............................   (2,793)    (2,776)      (17)      (0.1)
</TABLE>

    SEGMENT RESULTS.  Segment results represent margins which, for segment
reporting purposes, exclude certain costs and expenses, including depreciation
and amortization, corporate expenses and taxes other than income. See Note 12 to
the consolidated financial statements on pages F-16 through F-17.

    Margin from the retail services segment decreased from 1998 due to operating
expenses increasing at a greater rate than revenue growth. Revenues from the
retail services segment increased 5.4% for 1999 over 1998, primarily due to
growth in local services revenues which include wireless services, calling
services and Megabit-TM- data services. The revenue increase was more than
offset by higher operating expenses driven by growth initiatives and costs
associated with enhancing customer service. Margin from the wholesale services
segment increased as a result of greater demand for access and interconnect
services, partially offset by price reductions as mandated by both federal and
state regulators and higher

                                       12
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

access charge expenses. Margin from the network services segment decreased due
to increased volumes, service initiatives and year 2000 costs.

<TABLE>
<CAPTION>
                                                       1999       1998          INCREASE
                                                     --------   --------   -------------------
<S>                                                  <C>        <C>        <C>        <C>
Provision for income taxes.........................    $958       $815       $143       17.5%
</TABLE>

    PROVISION FOR INCOME TAXES.  The effective tax rate remained relatively
consistent at 38.0% for 1999 compared to 37.9% for 1998.

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 December 31, 1999 and 1998, approximately $218 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 December 31, 1999 and
1998, we also had $522 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 December 31, 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.

    As of December 31, 1999 and 1998, we had also entered into cross-currency
swaps with notional amounts of $133 and $204, respectively. The cross-currency
swaps synthetically transform $94 and $182 of Swiss Franc borrowings at December
31, 1999 and 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.

    Other assets at December 31, 1999 included marketable equity securities
recorded at a fair value of $334 including net unrealized gains of $325. The
securities have exposure to price risk. The estimated potential loss in fair
value resulting from a hypothetical 10% decrease in prices quoted by stock
exchanges would decrease the fair value of our equity securities by $33.

CONTINGENCIES

    We have certain pending regulatory actions. See Note 10 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,

                                       13
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

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.

COMPETITION AND REGULATORY ENVIRONMENT

    For a complete discussion of our competitive and regulatory environment, see
the U S WEST, Inc. Form 10-K--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Competition and Regulation.

YEAR 2000 COSTS

    BACKGROUND.  We conducted a comprehensive review of our computer-based
systems and related software and took measures to ensure that such systems would
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.

    COSTS RELATING TO YEAR 2000.  We spent approximately $223 from the beginning
of 1997 through the end of 1999 on year 2000 projects and activities. Virtually
all year 2000 related expenditures were funded through operations.

    SUMMARY.  As of January 26, 2000, our Network, IT and Business Unit systems
have not experienced any critical failures. To date, we have not experienced any
disruption in our operations or impairment in our ability to bill or collect
revenues relating to the year 2000. We do not expect to incur any additional
year 2000 costs in 2000.

NEW ACCOUNTING STANDARDS

    In June 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 hedge accounting criteria are met. The standard is effective for our
2001 fiscal year 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.

                                       14
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)

    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 (the "Bulletin"), "Revenue Recognition in
Financial Statements", which addresses revenue recognition issues. The Bulletin
requires, in certain cases, nonrefundable up-front fees for services to be
deferred and recognized over the expected period of performance. The Bulletin
also requires that incremental direct costs incurred in obtaining the up-front
fees be deferred and recognized over the same period as the up-front fees. The
Bulletin is required to be adopted for the quarter ending March 31, 2000. We are
assessing the types of transactions that may be impacted by this pronouncement.
The impact of the Bulletin on the consolidated financial statements is not yet
known.

                                       15
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To U S WEST Communications, Inc.:

    We have audited the accompanying consolidated balance sheets of U S WEST
Communications, Inc. (a Colorado corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U S WEST Communications,
Inc. and subsidiaries as of December 31, 1999 and 1998 and the results of their
operations, changes in stockholder's equity and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

    Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP
Denver, Colorado,
  January 26, 2000.

                                      F-1
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN MILLIONS)
<S>                                                           <C>        <C>        <C>
Revenues:
  Local services............................................   $7,773     $7,124     $6,280
  Access services...........................................    2,731      2,662      2,645
  Long-distance services....................................      568        779        885
  Other services............................................      392        306        273
                                                               ------     ------     ------
    Total revenues..........................................   11,464     10,871     10,083
Operating expenses:
  Employee-related expenses.................................    3,696      3,430      3,344
  Other operating expenses..................................    2,515      2,685      2,300
  Depreciation and amortization.............................    2,293      2,138      2,103
                                                               ------     ------     ------
    Total operating expenses................................    8,504      8,253      7,747
                                                               ------     ------     ------
Operating income............................................    2,960      2,618      2,336
Other expense:
  Interest expense..........................................      403        386        374
  Other expense (income)--net...............................       37         82        (56)
                                                               ------     ------     ------
    Total other expense--net................................      440        468        318
                                                               ------     ------     ------
Income before income taxes..................................    2,520      2,150      2,018
Provision for income taxes..................................      958        815        766
                                                               ------     ------     ------
Net Income..................................................   $1,562     $1,335     $1,252
                                                               ======     ======     ======
</TABLE>

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

                                      F-2
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                 (IN MILLIONS)
<S>                                                           <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $    61    $    68
  Accounts receivable, less allowance for uncollectibles of
    $46 and $48.............................................    1,811      1,619
  Inventories and supplies..................................      211        154
  Deferred tax asset........................................      154        113
  Prepaid and other.........................................       95         61
                                                              -------    -------
Total current assets........................................    2,332      2,015
Property, plant and equipment--net..........................   16,049     14,681
Other assets--net...........................................    1,597        882
                                                              -------    -------
Total assets................................................  $19,978    $17,578
                                                              =======    =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Short-term debt...........................................  $ 1,684    $   789
  Accounts payable..........................................    1,721      1,411
  Accrued expenses..........................................    1,560      1,383
  Advanced billings and customer deposits...................      343        326
                                                              -------    -------
Total current liabilities...................................    5,308      3,909
Long-term debt..............................................    5,408      5,154
Postretirement and other postemployment benefit
  obligations...............................................    2,462      2,458
Deferred income taxes.......................................    1,331        898
Unamortized investment tax credits..........................      161        159
Deferred credits and other..................................      588        537
Commitments and contingencies (Note 10)
Stockholder's equity:
  Common stock--one share without par value, owned by
    parent..................................................    8,140      8,080
  Cumulative deficit........................................   (3,617)    (3,617)
  Accumulated other comprehensive income....................      197         --
                                                              -------    -------
Total stockholder's equity..................................    4,720      4,463
                                                              -------    -------
Total liabilities and stockholder's equity..................  $19,978    $17,578
                                                              =======    =======
</TABLE>

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

                                      F-3
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN MILLIONS)
<S>                                                           <C>        <C>        <C>
OPERATING ACTIVITIES
Net income..................................................  $ 1,562    $ 1,335    $ 1,252
Adjustments to net income:
  Depreciation and amortization.............................    2,293      2,138      2,103
  Gains on sales of local telephone exchanges...............       --         --        (77)
  Gain on sale of investment in Bellcore....................       --         --        (53)
  Asset impairment..........................................       --         35         --
  Deferred income taxes and amortization of investment tax
    credits.................................................      206        110        (23)
Changes in operating assets and liabilities:
  Accounts receivable.......................................     (192)       (11)       (46)
  Inventories, supplies and other current assets............      (76)        28        (53)
  Accounts payable, accrued expenses and advanced
    billings................................................      300       (210)       508
  Other.....................................................      147        100        167
                                                              -------    -------    -------
Cash provided by operating activities.......................    4,240      3,525      3,778
                                                              -------    -------    -------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment..............   (3,754)    (2,566)    (2,101)
Proceeds from sales of local telephone exchanges............       --         --         67
Proceeds from sale of investment in Bellcore................       --         --         65
Proceeds from (payments on) disposals of property, plant and
  equipment.................................................      (48)       (30)        22
Other.......................................................       --        (26)       (73)
                                                              -------    -------    -------
Cash used for investing activities..........................   (3,802)    (2,622)    (2,020)
                                                              -------    -------    -------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt...........      603        399       (639)
Proceeds from issuance of long-term debt....................      782        320         29
Repayments of long-term debt................................     (336)      (443)      (142)
Dividends paid on common stock..............................   (1,494)    (1,200)    (1,367)
Equity infusions from U S WEST, Inc.........................       --         63        295
                                                              -------    -------    -------
Cash used for financing activities..........................     (445)      (861)    (1,824)
                                                              -------    -------    -------
CASH AND CASH EQUIVALENTS
Increase (decrease).........................................       (7)        42        (66)
Beginning balance...........................................       68         26         92
                                                              -------    -------    -------
Ending balance..............................................  $    61    $    68    $    26
                                                              =======    =======    =======
</TABLE>

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

                                      F-4
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                          CUMULATIVE
                                                                         DEFICIT/OTHER
                                                               COMMON    COMPREHENSIVE
                                                               STOCK        INCOME        TOTAL
                                                              --------   -------------   --------
<S>                                                           <C>        <C>             <C>
BALANCE, JANUARY 1, 1997....................................   $7,677       $(3,617)     $ 4,060
  Net income................................................       --         1,252        1,252
  Dividends declared........................................       --        (1,252)      (1,252)
  Equity infusions..........................................      295            --          295
  Other.....................................................       45            --           45
                                                               ------       -------      -------
BALANCE, DECEMBER 31, 1997..................................    8,017        (3,617)       4,400
                                                               ------       -------      -------
  Net income................................................       --         1,335        1,335
  Dividends declared........................................       --        (1,335)      (1,335)
  Equity infusions..........................................       63            --           63
                                                               ------       -------      -------
BALANCE, DECEMBER 31, 1998..................................    8,080        (3,617)       4,463
                                                               ------       -------      -------
  Net income................................................       --         1,562        1,562
  Other comprehensive income:
  Unrealized gains on securities............................       --           197          197
                                                               ------       -------      -------
  Total comprehensive income................................       --         1,759        1,759
  Dividends declared........................................       --        (1,562)      (1,562)
  Net transfers from U S WEST, Inc..........................       60            --           60
                                                               ------       -------      -------
BALANCE, DECEMBER 31, 1999..................................   $8,140       $(3,420)     $ 4,720
                                                               ======       =======      =======
</TABLE>

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

                                      F-5
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

    USE OF ESTIMATES.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

    CASH AND CASH EQUIVALENTS.  Cash and cash equivalents include highly liquid
investments with original maturities of three months or less that are readily
convertible into cash and are not subject to significant risk from fluctuations
in interest rates.

    INVENTORIES AND SUPPLIES.  New and reusable materials are carried at average
cost, except for significant individual items that are valued based on specific
costs. Nonreusable material is carried at its estimated salvage value. Wireless
inventories are carried at the lower of cost or market on a first in, first out
basis.

    PROPERTY, PLANT AND EQUIPMENT.  Property, plant and equipment is carried at
cost. The majority of property, plant and equipment is depreciated using
straight-line group methods. Under the group method, when an asset is sold or
retired, the cost is deducted from property, plant and equipment and charged to
accumulated depreciation without recognition of a gain or loss. Certain
unregulated assets are depreciated using straight-line unit methods. When such
depreciable property is retired or sold, the resulting gain or loss is included
in income. The depreciable lives used for the major categories of property,
plant, and equipment are as follows:

<TABLE>
<CAPTION>
CATEGORY                                                      LIFE (YEARS)
--------                                                      ------------
<S>                                                           <C>
Buildings...................................................    27 - 40
Telecommunications network equipment........................     8 - 14
Telecommunications outside plant............................     8 - 57
General purpose computers and other.........................     2 - 17
</TABLE>

    Interest related to qualifying construction projects is capitalized and
reflected as a reduction of interest expense. Amounts capitalized were $27, $25
and $20 in 1999, 1998 and 1997, respectively.

    VALUATION OF LONG-LIVED ASSETS.  We assess the impairment of long-lived
assets such as property, plant and equipment when changes in circumstances
indicate that their carrying value may not be recoverable. If the total expected
future cash flows or salvage value is less than the carrying value of the asset,
a loss is recognized.

    COMPUTER SOFTWARE.  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,

                                      F-6
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.

    Capitalized computer software costs of $544 and $180 at December 31, 1999
and 1998, respectively, are recorded in property, plant and equipment and other
assets--net. Amortization of capitalized computer software costs totaled $104,
$82 and $78 in 1999, 1998 and 1997, respectively.

    MARKETABLE SECURITIES.  All marketable securities are classified as
available-for-sale securities under the provisions of Statement of Financial
Accounting Standards ("FAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Unrealized holding gains and losses are determined
on the specific identification method and presented as a component of
accumulated other comprehensive income within stockholder's equity.

    FINANCIAL INSTRUMENTS.  The objective of our interest rate risk management
program is to obtain the minimum total cost of debt over time consistent with an
acceptable level of interest rate volatility. This objective is achieved through
the type of debt issued, interest rate swaps that adjust the ratio of fixed- to
variable-rate debt, cross-currency swaps that convert foreign-denominated debt
to dollar-denominated debt and forward contracts to hedge future debt issues.

    Under an interest rate swap, we agree with another party to exchange
interest payments, based on a notional amount, at specified intervals over a
defined term. Interest rate swaps are accounted for under the synthetic
instruments accounting model if the index, maturity and amount of the instrument
match the terms of the underlying debt. Net interest accrued is recognized over
the life of the instruments as an adjustment to interest expense and is a
component of cash provided by operating activities. Any gain or loss on the
termination of an instrument that qualifies for synthetic instrument accounting
would be deferred and amortized over the remaining life of the original
instrument.

    Under a cross-currency swap, we agree with another party to exchange U. S.
dollars for foreign currency based on a notional amount, at specified intervals
over a defined term. Cross-currency swaps are accounted for under the synthetic
instruments accounting model if the index, maturity and amount of the
instruments match the terms of the underlying debt. The cross-currency swaps and
the foreign currency debt are combined and accounted for as if dollar
denominated-debt was issued directly.

    Under a forward contract, we agree with another party to sell a specified
amount of U. S. Treasuries to hedge the treasury-rate component of future debt
issues. The gain or loss on the forward contract is recorded as part of the
carrying value of the related debt and is amortized as a yield adjustment.

    REVENUE RECOGNITION.  Local telephone and wireless services are generally
billed in advance with revenues recognized when services are provided. Revenues
derived from exchange access, long-distance network services and wireless
airtime usage are recognized as services are provided.

    ADVERTISING COSTS.  Costs related to advertising are expensed as incurred.
Advertising expense was $226, $208 and $188 in 1999, 1998 and 1997,
respectively.

                                      F-7
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    INCOME TAXES.  The provision for income taxes consists of an amount for
taxes currently payable and an amount for tax consequences deferred to future
periods. For financial statement purposes, investment tax credits are being
amortized over the economic lives of the related property, plant and equipment.

    We are included in the consolidated federal income tax returns of
U S WEST. We recognize federal income tax expense based upon a pro-rata
allocation agreement with U S WEST. Under the agreement, we are allocated income
tax consequences or benefits based upon our pro-rata contribution to the
consolidated group's taxable income, deductions and credits. The amount of
federal income tax expense recognized by us is not significantly different than
an amount computed on a stand-alone basis.

    We are included in combined state tax returns filed by U S WEST. We
recognize state income tax expense based upon a stand-alone allocation policy
with U S WEST.

    NEW ACCOUNTING STANDARDS.  On June 15, 1998, the Financial Accounting
Standards Board issued 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 in the consolidated balance sheets and
changes in fair value are generally recognized currently in earnings unless
specific criteria are met. This standard is effective for our 2001 fiscal year,
although 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 financial statements would not
have been material.

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (the "Bulletin"), "Revenue Recognition in Financial
Statements", which addresses revenue recognition issues. The Bulletin requires,
in certain cases, nonrefundable up-front fees for services to be deferred and
recognized over the expected period of performance. The Bulletin also requires
that incremental direct costs incurred in obtaining the up-front fees be
deferred and recognized over the same period as the up-front fees. The Bulletin
is required to be adopted for the quarter ending March 31, 2000. We are
assessing the types of transactions that may be impacted by this pronouncement.
The impact of the Bulletin on the consolidated financial statements is not yet
known.

    RECLASSIFICATION.  Certain reclassifications within the consolidated
financial statements have been made to conform to the current year presentation.

                                      F-8
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 2: PROPERTY, PLANT AND EQUIPMENT

    The components of property, plant and equipment are as follows:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Land and buildings........................................  $ 2,442    $ 2,405
Telecommunications network equipment......................   15,695     14,742
Telecommunications outside plant..........................   15,014     14,342
General purpose computers and other.......................    2,871      2,870
Construction in progress..................................    1,328        681
                                                            -------    -------
                                                             37,350     35,040
                                                            -------    -------
Less accumulated depreciation:
  Buildings...............................................      724        709
  Telecommunications network equipment....................    9,028      8,944
  Telecommunications outside plant........................    9,642      9,151
  General purpose computers and other.....................    1,907      1,555
                                                            -------    -------
                                                             21,301     20,359
                                                            -------    -------
Property, plant and equipment--net........................  $16,049    $14,681
                                                            =======    =======
</TABLE>

    ASSET IMPAIRMENT.  During 1998, we recorded a non-cash charge of $21 (net of
a $14 income tax benefit) related to the impairment of certain long-lived assets
associated with our video operations in Omaha, Nebraska. The impaired assets
primarily consist of underground cable and hardware. Recent technological
advances have permitted us to pursue and use more economical DSL technology in
cable overbuild situations. Because the projected future cash flows were less
than the assets' carrying value, an impairment loss was recognized in accordance
with FAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of". The amount of impairment was determined
based on the net present value of the expected future cash flows of the video
operations, discounted at our cost of capital. The pretax charge is recorded in
"other operating expenses" within the consolidated statements of income.

    LEASING ARRANGEMENTS.  Certain office facilities, real estate and equipment
used in operations are under operating leases. Rent expense under operating
leases for 1999, 1998 and 1997 was $227, $169, and $185, respectively. At
December 31, 1999, the future minimum rental payments under noncancelable
operating leases for the years 2000 through 2004 and thereafter are $138, $142,
$104, $89, $104 and $453, respectively.

    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 over the next two years. We
are planning the sale of approximately 270,000 additional access

                                      F-9
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 2: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
lines in New Mexico and Washington. In accordance with FAS No. 121, we ceased
depreciation on the access lines in 1999.

NOTE 3: ACCRUED EXPENSES

    Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Employee compensation.......................................   $  318     $  326
Dividends payable to U S WEST...............................      396        328
Current portion of state regulatory liability...............       35         42
Accrued property taxes......................................      206        187
Other.......................................................      605        500
                                                               ------     ------
Total accrued expenses......................................   $1,560     $1,383
                                                               ======     ======
</TABLE>

NOTE 4: DEBT

SHORT-TERM DEBT

    The components of short-term debt were as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Commercial paper............................................   $  218      $123
Due to U S WEST.............................................      846       337
Current portion of long-term debt...........................      620       329
                                                               ------      ----
Total.......................................................   $1,684      $789
                                                               ======      ====
</TABLE>

    The weighted-average interest rate on commercial paper was 7.14% and 5.49%
at December 31, 1999 and 1998, respectively. The interest rate on the debt due
to U S WEST was 7.5% at December 31, 1999 and 1998.

    We maintain commercial paper programs to finance short-term cash flow
requirements, as well as to maintain a presence in the short-term debt market.
We enter into lines of credit as backup facilities in issuing commercial paper.
We have lines of credit totaling $800 that expire in 2000. Commitment fees on
the unused portion of the lines are 0.06%. As of December 31, 1999, there was no
outstanding balance. To the extent we continue our commercial paper programs, we
plan to renew our lines of credit.

                                      F-10
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 4: DEBT (CONTINUED)

LONG-TERM DEBT

    Interest rates and maturities of long-term debt at December 31 were as
follows:

<TABLE>
<CAPTION>
                                                                 MATURITIES
                                           ------------------------------------------------------    TOTAL      TOTAL
INTEREST RATES                               2001       2002       2003       2004     THEREAFTER     1999       1998
--------------                             --------   --------   --------   --------   ----------   --------   --------
<S>                                        <C>        <C>        <C>        <C>        <C>          <C>        <C>
Up to 5%.................................    $ --       $100       $ 50       $ --       $   --      $  150     $  240
Above 5% to 6%...........................      50         --         --         99          430         579        578
Above 6% to 7%...........................     133        250         43         --        1,405       1,831      2,088
Above 7% to 8%...........................      --         --         62        749        1,556       2,367      1,618
Above 8% to 9%...........................      --         --         --         --          243         243        243
Above 9% to 10%..........................      --         --         --         --           --          --        175
                                             ----       ----       ----       ----       ------      ------     ------
                                             $183       $350       $155       $848       $3,634       5,170      4,942
                                             ====       ====       ====       ====       ======
Capital lease obligations................                                                               114        121
Other....................................                                                               124         91
                                                                                                     ------     ------
Total....................................                                                            $5,408     $5,154
                                                                                                     ======     ======
</TABLE>

    Interest paid, net of amounts capitalized, was $353, $374 and $374 for 1999,
1998 and 1997, respectively.

FINANCIAL CONTRACTS

    The following table summarizes the terms of outstanding interest rate and
cross-currency swaps at December 31, 1999 and 1998. Variable rates are indexed
to two- and ten-year constant maturity U.S. Treasuries. Cross-currency swaps are
tied to the Swiss Franc.

<TABLE>
<CAPTION>
                                       DECEMBER 31, 1999                              DECEMBER 31, 1998
                          --------------------------------------------   -------------------------------------------
                                                       WEIGHTED-                                      WEIGHTED-
                                                      AVERAGE RATE                                  AVERAGE RATE
                          NOTIONAL                --------------------   NOTIONAL                -------------------
                           AMOUNT    MATURITIES    RECEIVE      PAY       AMOUNT    MATURITIES   RECEIVE      PAY
                          --------   ----------   ---------   --------   --------   ----------   --------   --------
<S>                       <C>        <C>          <C>         <C>        <C>        <C>          <C>        <C>
Variable to fixed.......    $ --          --            --%       --%      $155          1999      5.16%      6.24%
Cross-currency..........     133        2001            --      6.51        204     1999-2001        --       6.55
</TABLE>

    At December 31, 1999, deferred credits of $7 and deferred charges of $49 on
closed forward contracts are included as part of the carrying value of the
underlying debt. The deferred credits and charges are recognized as yield
adjustments over the life of the debt that matures at various dates through
2043.

    In the event we are owed money under the swap agreements, we could be
exposed to risk in the event of nonperformance by counterparties. We manage this
exposure by monitoring the credit standing of the counterparties and
establishing dollar and term limitations that correspond to the respective
credit rating

                                      F-11
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 4: DEBT (CONTINUED)
of each counterparty. As of December 31, 1999, we do not believe that we have
any exposure to any individual counterparty.

NOTE 5: FAIR VALUES OF FINANCIAL INSTRUMENTS

    Fair values of cash equivalents and current amounts receivable and payable
approximate carrying values due to their short-term nature.

    The fair values of interest rate and cross-currency swaps are based on
estimated amounts we would receive or pay to terminate such agreements allowing
for current interest/foreign exchange rates and creditworthiness of the
counterparties.

    The fair values of long-term debt are based on quoted market prices where
available or, if not available, are based on discounting future cash flows using
current interest rates. Fair value of equity investments is based on market
prices quoted by stock exchanges.

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                         ---------------------------------------------
                                                                 1999                    1998
                                                         ---------------------   ---------------------
                                                         CARRYING                CARRYING
                                                          VALUE     FAIR VALUE    VALUE     FAIR VALUE
                                                         --------   ----------   --------   ----------
<S>                                                      <C>        <C>          <C>        <C>
Debt (includes short-term portion).....................   $7,092      $5,649      $5,943      $6,209
Swap agreements--liabilities...........................       --         (36)         --          24
Equity investments.....................................       90         415          --          --
</TABLE>

NOTE 6: STOCKHOLDER'S EQUITY

    OTHER COMPREHENSIVE INCOME.  Components of other comprehensive income
consist of the following:

<TABLE>
<CAPTION>
                                                                1999
                                                              --------
<S>                                                           <C>
Unrealized gains on marketable securities...................   $ 325
Income tax expense..........................................    (128)
                                                               -----
Other comprehensive income..................................   $ 197
                                                               =====
</TABLE>

NOTE 7: EMPLOYEE BENEFITS

    PENSION PLAN.

    We participate in a defined benefit pension plan sponsored by U S WEST which
covers substantially all management and occupational employees. Management
benefits are based upon their salary and years of service while occupational
employee benefits are based upon years of service and job classification. The
projected unit credit method is used for the determination of pension cost for
financial reporting purposes and the aggregate cost method for funding purposes.
Net pension credits for 1999, 1998 and 1997 were $116, $83 and $29,
respectively. No pension funding was required in 1999, 1998 or 1997.

                                      F-12
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 7: EMPLOYEE BENEFITS (CONTINUED)
    POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.

    We participate in plans sponsored by U S WEST which provide certain health
care and life insurance benefits to retired employees. We use the projected unit
credit method for the determination of postretirement medical and life costs for
financial reporting purposes. Net postretirement benefit costs for 1999, 1998
and 1997 were $128, $149, and $160, respectively. The amount funded by us is
based on regulatory accounting requirements.

NOTE 8: INCOME TAXES

    The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Federal:
  Current...................................................    $661       $614       $680
  Deferred..................................................     170        101        (16)
  Investment tax credits--net...............................     (15)       (14)       (15)
                                                                ----       ----       ----
                                                                 816        701        649
State and local:
  Current...................................................      91         91        109
  Deferred..................................................      51         23          8
                                                                ----       ----       ----
                                                                 142        114        117
                                                                ----       ----       ----
Provision for income taxes..................................    $958       $815       $766
                                                                ====       ====       ====
</TABLE>

    We paid $650, $642 and $797 for income taxes in 1999, 1998 and 1997,
respectively.

    The effective tax rate differs from the statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                       (IN PERCENT)
<S>                                                           <C>        <C>        <C>
Federal statutory tax rate..................................    35.0       35.0       35.0
Investment tax credit amortization..........................    (0.4)      (0.4)      (0.5)
State income taxes--net of federal effect...................     3.7        3.4        3.7
Other.......................................................    (0.3)      (0.1)      (0.2)
                                                                ----       ----       ----
Effective tax rate..........................................    38.0       37.9       38.0
                                                                ====       ====       ====
</TABLE>

                                      F-13
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 8: INCOME TAXES (CONTINUED)
    The components of the net deferred tax liability are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Property, plant and equipment...............................   $1,941     $1,630
State deferred taxes--net of federal effect.................      256        205
Investments.................................................      114         --
Other.......................................................       35         44
                                                               ------     ------
  Deferred tax liabilities..................................    2,346      1,879
                                                               ------     ------
Postretirement benefits, net of pension.....................      677        659
Unamortized investment tax credit...........................       56         56
State deferred taxes--net of federal effect.................      128        120
Other.......................................................      308        259
                                                               ------     ------
  Deferred tax assets.......................................    1,169      1,094
                                                               ------     ------
Net deferred tax liability..................................   $1,177     $  785
                                                               ======     ======
</TABLE>

    At December 31, 1999 and 1998, we had outstanding taxes payable to
U S WEST of $191 and $90, respectively.

NOTE 9: RELATED PARTY TRANSACTIONS

    We purchase various services from affiliated companies. We also provide
various services to affiliated companies. The amount paid and received for these
services is determined in accordance with the Federal Communications Commission
and state cost allocation rules, which prescribe various cost allocation
methodologies that are dependent upon the service provided. Management believes
that such cost allocation methods are reasonable. The total cost of services
purchased from affiliated companies was $683, $654 and $566 in 1999, 1998 and
1997, respectively. The total amount of revenues derived from affiliated
companies was $172, $111 and $85 in 1999, 1998 and 1997, respectively.

    It is not practicable to provide a detailed estimate of the expenses that
would be recognized on a stand-alone basis. However, we believe that corporate
services, including those related to procurement, tax, legal and human
resources, are obtained more economically through affiliates than they would be
on a stand-alone basis, since we absorb only a portion of the total costs.

    BELL COMMUNICATIONS RESEARCH, INC. ("BELLCORE").  Charges relating to
research, development and maintenance of existing technologies performed by
Bellcore, in which we had a one-seventh ownership interest, were $118 in 1997.

    In 1997, we sold our interest in Bellcore. We received cash proceeds of $65
and recorded an after-tax gain of $32. Bellcore, now name Telcordia, continues
to provide research and development and other services to us on a contract
basis.

                                      F-14
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 10: 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 December 31, 1999, we have a remaining commitment of
$48 to be paid in a combination of cash and services through 2004.

CONTINGENCIES

    REGULATORY 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 its 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. In light of
the settlement discussed below, the appellate court remanded the matter back to
the OPUC.

    On September 9, 1999, the Company and the OPUC staff reached a tentative
settlement agreement whereby we would refund approximately $247 and provide
ongoing rate reductions of $63. A hearing on the propriety of the proposed
settlement was held by the OPUC, and that agency is expected to issue its
decision sometime during March 2000. We have reserved for the proposed refunds.

    In December 1999, the Colorado Public Utilities Commission decided to fine
us $13 for violations of service quality rules between January 1998 and April
1999, although a written order has not yet been issued. We have reserved for
this fine.

    We have pending regulatory actions in local regulatory jurisdictions which
call for price decreases, refunds or both. These actions are generally routine
and incidental to our business. We will continue to monitor and evaluate the
risks associated with its local regulatory jurisdictions.

    OTHER CONTINGENCIES.  On October 1, 1999, a Fifth Amended Class Action
Complaint was filed against U S WEST and the Company purportedly on behalf of
220,000 customers in the State of Colorado. The complaint alleges, inter alia,
that from 1993 to the present, U S WEST and the Company, in violation of alleged
statutory and common law obligations, willfully delayed the provision of local
telephone service to the purported class members. In addition, the complaint
alleges that U S WEST and the Company misrepresented the date on which such
local telephone service was to be provided to the purported class members. The
complaint seeks compensatory damages for purported class members, disgorgement
of profits and punitive damages. U S WEST and the Company intend to vigorously
defend this action.

    The New Mexico Public Regulatory Commission has ordered an interim rate
reduction of $29, but the Commission stayed the implementation of its order.
Permanent resolution of this matter is expected during 2000.

                                      F-15
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 10: COMMITMENTS AND CONTINGENCIES (CONTINUED)
    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 consolidated
results of operations or financial position.

NOTE 11: QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                               FIRST      SECOND     THIRD      FOURTH
                                              QUARTER    QUARTER    QUARTER    QUARTER
                                              --------   --------   --------   --------
<S>                                           <C>        <C>        <C>        <C>
1999
Operating revenues..........................   $2,788     $2,843     $2,907     $2,926
Income before income taxes..................      585        633        662        640
Net income..................................      369        387        411        395
1998
Operating revenues..........................   $2,668     $2,692     $2,736     $2,775
Income before income taxes..................      607        454        579        510
Net income..................................      374        276        360        325
</TABLE>

    1998 second-quarter net income includes separation expenses of $68 and a $21
charge relating to the impairment of certain long-lived assets associated with
our video operations.

NOTE 12: SEGMENT INFORMATION

    We operate in three segments: retail services, wholesale services and
network services. The retail services segment provides local telephone services,
long-distance services, wireless services and data services. The wholesale
services segment provides exchange 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
customers 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, Inc. Separate segment data is not provided to
our chief operating decision maker for U S WEST Communications, Inc. Certain
revenue and expenses of U S WEST, Inc. 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 such 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 expenses. The "other"
category includes our corporate expenses. Asset information by segment is not
provided to our chief operating decision maker. The communications and related
services

                                      F-16
<PAGE>
                         U S WEST COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN MILLIONS)

NOTE 12: SEGMENT INFORMATION (CONTINUED)
column represents a total of the retail services, wholesale services and network
services segments. As a result of regulatory actions and changes in internal
reporting, the classification of certain operating revenues and expenses has
changed during 1999, 1998 and 1997. It has not been practicable to restate 1997
results to conform to the current year's presentation. Accordingly, the
operating revenues and margins may not be comparable for each year.

<TABLE>
<CAPTION>
                                                              TOTAL
                                                          COMMUNICATIONS
                         RETAIL    WHOLESALE   NETWORK     AND RELATED                RECONCILING   CONSOLIDATED
                        SERVICES   SERVICES    SERVICES      SERVICES       OTHER        ITEMS         TOTAL
                        --------   ---------   --------   --------------   --------   -----------   ------------
<S>                     <C>        <C>         <C>        <C>              <C>        <C>           <C>
1999
Operating revenues....   $9,022     $2,871     $   242        $12,135       $  --       $  (671)       $11,464
Margin................    6,111      2,157      (2,793)         5,475        (116)       (2,839)         2,520(1)
Capital
 expenditures.........      587(2)     111       3,473          4,171          (1)         (143)         4,027
1998
Operating revenues....    8,556      2,590         214         11,360          --          (489)        10,871
Margin................    6,194      1,908      (2,776)         5,326        (234)       (2,942)         2,150(1)
Capital
 expenditures.........      362(2)      --       2,376          2,738         125          (297)         2,566
1997
Operating revenues....    7,893      2,609         163         10,665          --          (582)        10,083
Margin................    5,940      2,176      (2,738)         5,378        (396)       (2,964)         2,018(1)
Capital
 expenditures.........      340(2)      --       2,214          2,554          89          (542)         2,101
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Costs and adjustments to reconcile segment data to the
  consolidated total:
Separation costs............................................   $   --     $   94     $   --
Asset impairment charge.....................................       --         35         --
Regulatory charges..........................................       --         --        230
Other expense--net..........................................      440        468        318
Taxes other than income taxes...............................      377        356        406
Other charges applicable to U S WEST, Inc...................     (271)      (149)       (93)
Depreciation and amortization...............................    2,293      2,138      2,103
                                                               ------     ------     ------
                                                               $2,839     $2,942     $2,964
                                                               ======     ======     ======
</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 these services are included in network
    services capital expenditures.

    In addition to the operating revenues disclosed above, intersegment
operating revenues of the retail services segment were $87, $28 and $30 for
1999, 1998 and 1997, respectively. Intersegment operating revenues of the
network services segment were $60, $70 and $64 for 1999, 1998 and 1997,
respectively.

    SIGNIFICANT CONCENTRATIONS.  At December 31, 1999, 74% of our employees were
represented by unions.

                                      F-17
<PAGE>
                         U S WEST COMMUNICATIONS, INC.
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                           BALANCE AT                CHARGED TO                BALANCE AT
                                           BEGINNING    CHARGED TO     OTHER                     END OF
                                           OF PERIOD     EXPENSE      ACCOUNTS    DEDUCTIONS     PERIOD
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>          <C>
Allowance for uncollectibles:
  1999...................................      $48         $118(1)      $ --         $ 120(2)     $ 46
  1998...................................       50          113(1)        --           115(2)       48
  1997...................................       37          101(1)        --            88(2)       50
</TABLE>

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

(1) Does not include amounts charged directly to expense. These amounts were $2,
    $5 and $8 for 1999, 1998 and 1997, respectively.

(2) Represents credit losses written off during the period, less collection of
    amounts previously written off.

<TABLE>
<CAPTION>
                                           BALANCE AT                CHARGED TO                BALANCE AT
                                           BEGINNING    CHARGED TO     OTHER                     END OF
                                           OF PERIOD     EXPENSE      ACCOUNTS    DEDUCTIONS     PERIOD
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>          <C>
Allowance for obsolete inventory:
  1999...................................      $--          $ 4          $--          $--          $ 4
  1998...................................       --           --           --           --           --
  1997...................................       --           --           --           --           --
</TABLE>

                                      F-18