<PAGE>

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


                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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

                 For the quarterly period ended: MARCH 31, 2002

                                       Or

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

                For the transition period from         to
                                               -------    -------

                        Commission File Number 333-85503

                     TELECOMUNICACIONES DE PUERTO RICO, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>
<S>                                           <C>
         COMMONWEALTH OF PUERTO RICO                     66-0566178
       (STATE OR OTHER JURISDICTION OF        (IRS EMPLOYER IDENTIFICATION NO.)
        INCORPORATION OR ORGANIZATION)

           1515 FD ROOSEVELT AVENUE
            GUAYNABO, PUERTO RICO                           00968

   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)
</Table>

        Registrant's telephone number, including area code: 787-792-6052


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                              YES [X]  NO [ ]


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


                                       1
<PAGE>


                                      INDEX


            TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES



<Table>
<S>               <C>                                                                         <C>
PART I. FINANCIAL INFORMATION

     Item 1.      Financial Statements (Unaudited)                                             3

                  Condensed consolidated balance sheets -- March 31, 2002 and
                  December 31, 2001                                                            3

                  Condensed consolidated statements of income and comprehensive
                  income -- Three months ended March 31, 2002 and 2001                         4

                  Condensed consolidated statements of changes in shareholders'
                  equity -- Three months ended March 31, 2002 and year ended
                  December 31, 2001                                                            5

                  Condensed consolidated statements of cash flows -- Three
                  months ended March 31, 2002 and 2001                                         6

                  Notes to condensed consolidated financial statements                         7

     Item 2.      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                   24

     Item 3.      Quantitative and Qualitative Disclosures about Market Risk                  33

PART II. OTHER INFORMATION

     Item 1.      Legal Proceedings                                                           34

     Item 2.      Changes in Securities and Use of Proceeds                                   34

     Item 3.      Defaults Upon Senior Securities                                             34

     Item 4.      Submission of Matters to a Vote of Security Holders                         34

     Item 5.      Other Information                                                           34

     Item 6.      Exhibits and Reports on Form 8-K                                            34

SIGNATURES                                                                                    35

EXHIBIT INDEX                                                                                 36
</Table>


                                       2
<PAGE>


PART I    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

            TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

<Table>
<Caption>
                                                                                          (UNAUDITED)
                                                                                           MARCH 31,       DECEMBER 31,
                                                                                              2002             2001
                                                                                          -----------      ------------
<S>                                                                                       <C>              <C>
                ASSETS

                CURRENT ASSETS:
                     Cash and cash equivalents                                            $    15,115      $     34,797
                     Accounts receivable, net of allowance for doubtful accounts
                       of $109,003 and $107,436 in 2002 and 2001, respectively                358,742           359,914
                     Inventory and supplies, net                                               23,191            24,755
                     Prepaid expenses                                                          18,700            11,610
                                                                                          -----------      ------------
                         Total current assets                                                 415,748           431,076
                PROPERTY, PLANT AND EQUIPMENT, net                                          1,604,293         1,631,770
                GOODWILL, net                                                                 178,094           178,094
                INTANGIBLES, net                                                              181,412           180,370
                DEFERRED INCOME TAX                                                           214,018           221,499
                OTHER ASSETS                                                                  106,277           105,441
                                                                                          -----------      ------------
                TOTAL ASSETS                                                              $ 2,699,842      $  2,748,250
                                                                                          ===========      ============

                LIABILITIES AND SHAREHOLDERS' EQUITY

                CURRENT LIABILITIES:
                      Short-term debt                                                     $   439,189      $    494,335
                      Other current liabilities                                               353,703           345,203
                                                                                          -----------      ------------
                         Total current liabilities                                            792,892           839,538
                LONG-TERM DEBT, excluding current portion                                     701,100           701,441
                PENSION AND OTHER POST-EMPLOYMENT BENEFITS                                    469,556           531,636
                OTHER NON-CURRENT LIABILITIES                                                 126,808           126,561
                                                                                          -----------      ------------
                          Total liabilities                                                 2,090,356         2,199,176
                                                                                          -----------      ------------

                MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY                                   11,124            10,759
                                                                                          -----------      ------------

                COMMITMENTS AND CONTINGENCIES

                SHAREHOLDERS' EQUITY:
                    Common stock                                                              701,952           701,952
                    Deferred ESOP compensation                                                (28,793)          (28,793)
                    Subscription receivable                                                   (71,809)         (109,959)
                    Retained earnings                                                          75,489            53,592
                    Accumulated other comprehensive loss                                      (78,477)          (78,477)
                                                                                          -----------      ------------
                          Total shareholders' equity                                          598,362           538,315
                                                                                          -----------      ------------
                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $ 2,699,842      $  2,748,250
                                                                                          ===========      ============
</Table>

   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>


            TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                 (In thousands)


<Table>
<Caption>
                                                        FOR THE THREE MONTHS ENDED
                                                                 MARCH 31,
                                                           2002            2001
                                                        ----------      ----------
                                                                (UNAUDITED)
<S>                                                     <C>             <C>
REVENUES:
  Local services                                        $  142,709      $  140,324
  Long distance services                                    38,792          46,703
  Access services                                           81,098          90,061
  Cellular services                                         42,223          39,015
  Paging services                                            1,924           5,500
  Directory services                                           101              90
  Other services and sales                                  13,850          18,813
                                                        ----------      ----------
        Total revenues                                     320,697         340,506
                                                        ----------      ----------

OPERATING COSTS AND EXPENSES:
  Labor and benefits                                        97,759          97,307
  Other operating expenses                                 106,139          93,245
  Early retirement provision                                    --           3,846
  Depreciation and amortization                             66,300          69,188
                                                        ----------      ----------
        Total operating costs and expenses                 270,198         263,586
                                                        ----------      ----------

OPERATING INCOME                                            50,499          76,920
                                                        ----------      ----------

OTHER INCOME (EXPENSE):
  Interest expense, net                                    (14,121)        (14,986)
  Equity income from joint venture                             576             530
  Minority interest in consolidated subsidiary                (365)             --
                                                        ----------      ----------
        Total other income (expense), net                  (13,910)        (14,456)
                                                        ----------      ----------

INCOME BEFORE INCOME TAX EXPENSE                            36,589          62,464

INCOME TAX EXPENSE                                          13,585          26,001
                                                        ----------      ----------

NET INCOME AND COMPREHENSIVE INCOME                     $   23,004      $   36,463
                                                        ==========      ==========
</Table>

The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>


            TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                 (In thousands)


<Table>
<Caption>

                                                                                                       ACCUMULATED
                                                            DEFERRED                     RETAINED         OTHER
                                               COMMON         ESOP        SUBSCRIPTION   EARNINGS     COMPREHENSIVE
                                                STOCK     COMPENSATION    RECEIVABLE     (DEFICIT)         LOSS         TOTAL
                                              ---------   ------------    ------------   ---------    -------------   ---------
<S>                                           <C>         <C>             <C>            <C>          <C>             <C>
BALANCE, DECEMBER 31, 2000                    $ 700,220   $    (28,653)   $   (141,323)  $  (7,002)   $     (25,475)  $ 497,767

  Net income                                         --             --              --     118,456               --     118,456
  Dividends paid                                     --             --              --     (57,862)              --     (57,862)
  Accretion of discount on
       subscription receivable                       --             --          (8,636)         --               --      (8,636)
  PRTA capital contribution                          --             --          40,000          --               --      40,000
  Release of ESOP shares                          1,732          1,420              --          --               --       3,152
  Advance to ESOP                                    --         (1,535)             --          --               --      (1,535)
  Other ESOP contribution                            --            (25)             --          --               --         (25)
  Minimum pension liability adjustment               --             --              --          --          (53,002)    (53,002)
                                              ---------   ------------    ------------   ---------    -------------   ---------

BALANCE, DECEMBER 31, 2001                    $ 701,952   $    (28,793)   $   (109,959)  $  53,592    $     (78,477)  $ 538,315
(UNAUDITED)

  Net income, for the three months ended
       March 31, 2002                                --             --              --      23,004               --      23,004
  Dividends paid                                     --             --              --      (1,107)              --      (1,107)
  Accretion of discount on
       subscription receivable                       --             --          (1,850)         --               --      (1,850)
  PRTA capital contribution                          --             --          40,000          --               --      40,000
                                              ---------   ------------    ------------   ---------    -------------   ---------

BALANCE, MARCH 31, 2002                       $ 701,952   $    (28,793)   $    (71,809)  $  75,489    $     (78,477)  $ 598,362
                                              =========   ============    ============   =========    =============   =========
</Table>

The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>


            TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

<Table>
<Caption>
                                                                 FOR THE THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                     2002            2001
                                                                 ----------      ----------
                                                                        (UNAUDITED)
<S>                                                              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                     $   23,004      $   36,463
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                                    66,300          69,188
    Provision for uncollectible accounts                             16,209          11,535
    Deferred income tax                                               7,481             529
    Accretion of discount on subscription receivable                 (1,850)         (2,453)
    Equity income from joint venture                                   (576)           (530)
    Early retirement provision                                           --           3,846
    Release of ESOP shares                                               --           2,567
    Minority interest in consolidated subsidiary                        365              --
    Changes in assets and liabilities:
        Accounts receivable                                         (15,037)            334
        Inventory and supplies                                        1,564          (6,386)
        Prepaid expenses and other assets                            (8,479)         (9,469)
        Other current and non-current liabilities                     8,747          38,643
        Pension and other post-employment benefits                  (62,080)        (54,306)
                                                                 ----------      ----------
              Net cash provided by operating activities              35,648          89,961
                                                                 ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, including removal costs                    (39,437)        (30,751)
   Net salvage on retirements and other                                 345           1,336
                                                                 ----------      ----------
              Net cash used in investing activities                 (39,092)        (29,415)
                                                                 ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Capital contribution                                              40,000          40,000
   Net repayments of short-term debt, including
      capital leases                                                (55,131)        (76,965)
   Dividends paid                                                    (1,107)             --
                                                                 ----------      ----------
              Net cash used in financing activities                 (16,238)        (36,965)
                                                                 ----------      ----------

NET (DECREASE) INCREASE IN CASH
  AND CASH EQUIVALENTS                                              (19,682)         23,581
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                                          34,797          30,834
                                                                 ----------      ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                       $   15,115      $   54,415
                                                                 ==========      ==========
</Table>

The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>


TELECOMUNICACIONES DE PUERTO RICO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

1.   BUSINESS

     Telecomunicaciones de Puerto Rico, Inc. (the "Company") holds 100% of the
     common stock of Puerto Rico Telephone Company, Inc. ("PRTC"), Verizon
     Wireless Puerto Rico, Inc. ("Verizon Wireless") (formerly Celulares
     Telefonica, Inc.) and Datacom Caribe, Inc. ("Datacom"). The Company also
     holds a 67% interest in Coqui.net Corporation ("Coqui.net") (formerly
     Coqui.com Corporation) and a 25% interest in Verizon Information Services,
     Inc. ("VISI"). The Company is the largest telecommunications service
     provider in Puerto Rico. PRTC, a Puerto Rico corporation, is the incumbent
     local exchange carrier for the island of Puerto Rico. Wireline service is
     provided by PRTC and cellular and paging services are provided by Verizon
     Wireless. The Company's dial-up Internet access service is provided by
     Coqui.net. The Company's directory publishing revenues are generated by
     VISI. See Note 18.

     GTE Corporation ("GTE") acquired a 40% interest in and management control
     over the Company on March 2, 1999 from Puerto Rico Telephone Authority
     ("PRTA"), an entity of the Commonwealth of Puerto Rico (the "Acquisition").
     In the Acquisition, Popular, Inc. acquired a 10% interest in the Company.
     GTE and Bell Atlantic Corporation merged on June 30, 2000 to form Verizon
     Communications Inc. ("Verizon"). On January 25, 2002, Verizon, through its
     subsidiary GTE Holdings (Puerto Rico) LLC, and Popular, Inc., acquired an
     additional 12% and 3% interest in the Company, respectively, by exercising
     an option each held since the Acquisition (the "Option Exercise"). Verizon
     and Popular obtained the additional ownership interest from PRTA Holdings
     Corp., an entity of the PRTA ("PRTA Holdings"). Verizon and Popular paid
     PRTA Holdings $138 million and $34 million, respectively, for a total of
     $172 million in cash for the additional 3,750,000 shares at a $45.9364 per
     share price established in the Share Option Agreement. The Company is an
     affiliate of Verizon, which now consolidates the Company's financial
     results with its own financial results.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION

     The unaudited condensed consolidated financial statements have been
     prepared pursuant to rules and regulations of the Securities and Exchange
     Commission ("SEC"). Certain information and footnote disclosures normally
     included in financial statements prepared in accordance with accounting
     principles generally accepted in the United States of America have been
     condensed or omitted pursuant to such rules and regulations. Management
     believes the financial statements include all adjustments and recurring
     accruals necessary to fairly present the results of operations and
     financial condition for the interim periods shown. The December 31, 2001
     condensed consolidated balance sheet was derived from audited financial
     statements and should be read in conjunction with the notes thereto
     included in the Company's Annual Report on Form 10-K for the fiscal year
     ended December 31, 2001.

     RECLASSIFICATIONS

     Reclassifications of prior periods' data have been made to conform to the
     current period's presentation.

3.   SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS

     BUSINESS COMBINATIONS AND ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLES

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
     Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
     Combinations," and No. 142, "Goodwill and Other Intangible Assets." SFAS
     No. 141, which applies to business combinations occurring after June 30,
     2001, requires that the purchase method of accounting be used and includes
     guidance on the initial recognition and measurement of goodwill and other
     intangible assets acquired in the combination. The adoption of SFAS No. 141
     did not have a material effect on the Company's financial statements.

     SFAS No. 142 no longer permits the amortization of goodwill and other
     indefinite-lived intangible assets. Instead, these assets must be reviewed
     annually (or, under certain conditions, more frequently) for impairment in
     accordance with this statement.


                                       7
<PAGE>


     This impairment test uses a fair value approach rather than the
     undiscounted cash flow approach previously required by SFAS No. 121,
     "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to Be Disposed Of."

     Intangible assets that do not have indefinite lives will continue to be
     amortized over their useful lives and reviewed for impairment in accordance
     with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
     Assets." The discontinuation of amortizing goodwill and other long-lived
     assets will result in reducing annual amortization expense by approximately
     $15 million for 2002. The Company adopted SFAS No. 142 effective January 1,
     2002. The Company, together with an independent appraiser, has evaluated
     its assets using the fair value approach for each reporting unit, to
     determine if there is an impairment exposure (transitional impairment test)
     and the impact it would have in the Company's results of operations for
     2002. The evaluation of the three reporting units revealed no impairment
     exposure.

     The following financial information represents the adjusted condensed
     consolidated results of operations of the Company as if the adoption of
     SFAS 142 had been applied to the prior period presented. The adjusted
     results presented below exclude the effects (net of tax) of the
     amortization of goodwill and other indefinite life intangibles.


<Table>
<Caption>
                                                           FOR THE THREE MONTHS ENDED
                                                                  MARCH 31,
                                                                  (ADJUSTED)     (AS REPORTED)
                                                      2002           2001            2001
                                                   ----------     ----------     -------------
                                                                (In thousands)
<S>                                                <C>            <C>            <C>
         Revenues                                  $  320,697     $  340,506     $     340,506

         Operating costs                              270,198        259,730           263,586
                                                   ----------     ----------     -------------

         Operating income                              50,499         80,776            76,920

         Other expense, net                            13,910         14,456            14,456
                                                   ----------     ----------     -------------

         Income before income tax expense              36,589         66,320            62,464

         Income tax expense                            13,585         27,091            26,001
                                                   ----------     ----------     -------------

         Net income                                $   23,004     $   39,229     $      36,463
                                                   ==========     ==========     =============
</Table>

     The following reconciles net income reported for the quarter ended March
     31, 2001 to adjusted net income for the same period as required by the
     provisions of SFAS 142.

<Table>
<Caption>
                                                      FOR THE THREE
                                                       MONTHS ENDED
                                                         MARCH 31,
                                                           2001
                                                      --------------
     RECONCILIATION:                                  (In thousands)
     ---------------
<S>                                                   <C>
         Net income, as reported                      $       36,463
         Discontinued amortization of goodwill                 1,818
         Discontinued amortization of other
            indefinite life intangibles                        2,038
         Tax effect                                           (1,090)
                                                      --------------
            Adjusted net income                       $       39,229
                                                      ==============
</Table>


                                       8
<PAGE>


     ASSET RETIREMENT OBLIGATIONS

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations." This standard provides the accounting for the cost
     of legal obligations associated with the retirement of long-lived assets.
     SFAS No. 143 requires that companies recognize the fair value of a
     liability for asset retirement obligations in the period in which the
     obligations are incurred and capitalize that amount as a part of the book
     value of the long-lived asset. That cost is then depreciated over the
     remaining life of the underlying long-lived asset. The Company is required
     to adopt SFAS No. 143 effective January 1, 2003. The adoption of this new
     standard is not expected to have an impact on the Company's future results
     of operations or financial position.

     ACCOUNTING FOR IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

     In August 2001, the FASB issued SFAS No. 144. This standard supersedes SFAS
     No. 121 and the provisions of Accounting Principles Board ("APB") Opinion
     No. 30, "Reporting the Results of Operations-Reporting the Effects of
     Disposal of a Segment of a Business, and Extraordinary, Unusual and
     Infrequently Occurring Events and Transactions" with regard to reporting
     the effects of a disposal of a segment of a business. SFAS No. 144
     establishes a single accounting model for assets to be disposed of by sale
     and addresses several SFAS No. 121 implementation issues. The Company
     adopted SFAS No. 144 effective January 1, 2002 without any impact on its
     financial statements.

4.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of:

<Table>
<Caption>

                                                             USEFUL       MARCH 31,    DECEMBER 31,
                                                           LIVES (YRS)      2002           2001
                                                           -----------   -----------   ------------
                                                                              (In thousands)
<S>                                                        <C>           <C>           <C>
        Outside plant                                         7.2        $ 1,985,694   $  1,978,670
        Central office and transmission equipment             4.6          1,254,029      1,228,540
        Equipment and other                                   3.7            361,635        357,885
        Buildings                                            19.0            331,740        334,307
        Land                                                  N/A             25,302         25,309
                                                                         -----------   ------------
             Gross plant in service                                        3,958,400      3,924,711
        Less accumulated depreciation                                      2,457,247      2,407,760
                                                                         -----------   ------------
             Net plant in service                                          1,501,153      1,516,951
        Construction in progress                                             103,140        114,819
                                                                         -----------   ------------
             Total                                                       $ 1,604,293   $  1,631,770
                                                                         ===========   ============
</Table>

5.   GOODWILL

     The Company has three reporting units, which are; (i) PRTC (wireline); (ii)
     Verizon Wireless (wireless); and (iii) Coqui.net (Internet dial-up service
     provider). Following is a break-down of goodwill by reporting unit as of
     March 31, 2002 and December 31, 2001:

<Table>
<Caption>
                                               COST       ACC AMORT.     BOOK VALUE
                                             ---------    ----------     ----------
                                                        (In thousands)
<S>                                          <C>           <C>           <C>
        Wireline (PRTC)                      $ 173,540     $ 19,642      $  153,898
        Dial-up Internet (Coqui.net)            30,542        6,346          24,196
                                             ---------     --------      ----------
               Total                         $ 204,082     $ 25,988      $  178,094
                                             =========     ========      ==========
</Table>


                                       9
<PAGE>


6.  INTANGIBLES

    Intangibles consist of:

<Table>
<Caption>
                                                MARCH 31, 2002                          DECEMBER 31, 2001
                                   --------------------------------------     --------------------------------------
    (In thousands)
                                     COST        ACC AMORT.    BOOK VALUE       COST        ACC AMORT.    BOOK VALUE
                                   ---------     ----------    ----------     ---------     ----------     ----------
<S>                                <C>           <C>           <C>            <C>           <C>           <C>
    INDEFINITE LIFE
    Wireline concession            $  96,000     $  10,880     $   85,120     $  96,000     $  10,880     $   85,120
    FCC Cellular licenses             30,361         6,506         23,855        30,361         6,506         23,855

    DEFINITE LIFE
    Wireline trade name               48,400         5,969         42,431        48,400         5,485         42,915
    Customer base                     15,544        14,232          1,312        15,544        14,112          1,432
    Software licenses                 38,798        10,104         28,694        35,501         8,453         27,048
    Other                                500           500             --           500           500             --
                                   ---------     ---------     ----------     ---------     ---------     ----------
           Total                   $ 229,603     $  48,191     $  181,412     $ 226,306     $  45,936     $  180,370
                                   =========     =========     ==========     =========     =========     ==========
</Table>

7.   OTHER ASSETS

     Other assets consist of:

<Table>
<Caption>
                                                                MARCH 31,    DECEMBER 31,
                                                                  2002           2001
                                                               -----------   ------------
                                                                      (In thousands)
<S>                                                            <C>           <C>
         Deferred activation and installation costs            $    53,557   $     49,744
         Notes receivable-equipment sales                           19,414         21,394
         Deferred pension asset                                     15,010         15,010
         Deferred financing costs, net                               4,663          5,044
         Other deferred costs                                        5,595          6,205
         Interest rate swap                                            791          1,147
         Investment in Verizon Information Services                  4,695          4,119
         Other assets                                                2,552          2,778
                                                               -----------   ------------
              Total                                            $   106,277   $    105,441
                                                               ===========   ============
</Table>


8.   EARLY RETIREMENT AND VOLUNTARY SEPARATION PROGRAMS

     In December 2000, an early retirement program was offered to management
     employees. Those choosing to retire received a credit for three years
     additional service, five years of additional age, and were immediately
     eligible for retiree medical benefits. As a result of the early retirement
     program, the Company recorded a $4 million non-cash provision, which is
     reflected in the Company's results of operations for the first quarter of
     2001, based on 13 employees electing to participate in this program during
     the first quarter of 2001.

9.   DEFERRED ESOP COMPENSATION

     The Employee Stock Ownership Plan ("ESOP") acquired a 3% interest in the
     Company in 1999 with a $26 million, twenty-year note borrowed from the
     Company to establish a contributory investment fund for employees. The ESOP
     only invests in Company shares. Shares are maintained in a suspense account
     until released to participants. The yearly release of shares to
     participants is based on the greater of participant contributions plus a
     Company match of 30% up to 5% of wages or a minimum based on an
     amortization schedule. The minimum is based on the ratio of annual debt
     service to total debt service multiplied by the initial 750,000 shares.

     The ESOP obtained a $2 million advance from the Company in 2001 that was
     used to purchase Company shares from retired employees.


                                       10
<PAGE>


     The capital contribution was reflected as additional deferred ESOP
     compensation in equity.

     Compensation expense is recorded based on the release of shares at market
     value, based on an independent appraisal performed annually. The ESOP
     released approximately 40,800 shares in 2001. This release resulted in
     compensation expense of $3 million reflecting the market value of the
     shares. The release of shares, based upon the per share price established
     at the Acquisition, amounted to approximately $1 million for December 31,
     2001, which is reflected as a reduction of deferred ESOP compensation in
     equity.

10.  OTHER CURRENT LIABILITIES

     Other current liabilities consist of:

<Table>
<Caption>
                                                  MARCH 31,    DECEMBER 31,
                                                    2002           2001
                                                 -----------   ------------
                                                        (In thousands)
<S>                                              <C>           <C>
             Accounts payable                    $    86,049   $    126,316
             Accrued expenses                        102,817         83,631
             Employee benefit accruals                55,127         57,770
             Carrier payables                         45,914         36,774
             Taxes                                    39,877         32,739
             Interest                                 23,919          7,973
                                                 -----------   ------------
                  Total                          $   353,703   $    345,203
                                                 ===========   ============
</Table>

11.  DEBT

     Debt consists of:

<Table>
<Caption>
                                                  MARCH 31,    DECEMBER 31,
                                                    2002           2001
                                                 -----------   ------------
                                                        (In thousands)
<S>                                              <C>           <C>
     Senior notes
        Due May 15, 2002 at 6.15%                $   299,997   $    299,991
        Due May 15, 2006 at 6.65%                    399,905        399,900
        Due May 15, 2009 at 6.80%                    299,870        299,866
     Interest rate swap                                  791          1,147
     Commercial paper                                115,500         94,100
     Working capital credit facility                  23,500        100,000
     Capital leases                                      726            772
                                                 -----------   ------------
          Total                                    1,140,289      1,195,776
     Less short-term debt                            439,189        494,335
                                                 -----------   ------------
          Long-term debt                         $   701,100   $    701,441
                                                 ===========   ============
</Table>

     The 2002 senior notes are classified as short-term. The senior notes,
     commercial paper, working capital facility, and bank notes are unsecured
     and non-amortizing. PRTC and Verizon Wireless are guarantors of these
     instruments.

     The Company has a $500 million commercial paper program, which is backed by
     a bank note facility, with maturities not to exceed 365 days. The
     commercial paper dealer agreement was signed in November 2000. The bank
     note is a syndicated five-year revolving facility expiring in March 2004.
     Amounts outstanding under this facility bear interest at 32.5 basis points
     over six months LIBOR. The bank note credit agreement includes financial
     covenants, the most significant being that the outstanding principal
     balance will not exceed four times adjusted Earnings Before Interest,
     Taxes, Depreciation, and Amortization ("EBITDA"), as defined in the
     facility agreement.

     The Company also has a $100 million working capital facility with two banks
     for $50 million each. Amounts outstanding under this facility bear interest
     at a rate of 30 basis points over LIBOR. This facility was renewed in June
     2001 with a term of one year and is expected to be renewed for another
     year.


                                       11
<PAGE>


     The Company entered into an interest rate swap contract on August 31, 2001
     at a notional amount of $150 million. The purpose of the swap is to hedge
     against changes in the fair value of the Company's senior notes to achieve
     a targeted mix of fixed and variable rate debt. The swap receives interest
     at a fixed rate of 6.65% and pays interest at a variable rate equal to six
     month LIBOR plus 170 basis points, with semiannual settlements and reset
     dates every May 15 and November 15 until maturity of the May 15, 2006
     senior note. The swap was entered into "at market" and as a result, there
     was no exchange of premium at the initial date of the swap. The Company
     designates the swap as a hedge of the changes in fair value of the senior
     note due to changes in the designated benchmark interest rate. PRTC and
     Verizon Wireless are guarantors of the interest rate swap.

     Aggregate maturities of the senior notes are as follows (in thousands):

<Table>
<Caption>
           YEAR                                             AMOUNT
           ----                                          -----------
<S>                                                      <C>
           2002                                          $   300,000
           2006                                              400,000
           2009                                              300,000
                                                         -----------
                   Total                                 $ 1,000,000
                                                         ===========
</Table>

12.  OTHER NON-CURRENT LIABILITIES

     Other non-current liabilities consist of:

<Table>
<Caption>
                                                          MARCH 31,    DECEMBER 31,
                                                            2002           2001
                                                        ------------   ------------
                                                              (In thousands)
<S>                                                     <C>            <C>
     Deferred activation and installation revenues      $     53,557   $     49,744
     Customer deposits                                        27,800         27,911
     Other liabilities                                        45,451         48,906
                                                        ------------   ------------
          Total                                         $    126,808   $    126,561
                                                        ============   ============
</Table>

13.  SHAREHOLDERS' EQUITY

     COMMON STOCK

     Common stock consists of fifty million authorized shares, no par value, of
     which twenty five million shares were outstanding at March 31, 2002 and
     December 31, 2001.

     SUBSCRIPTION RECEIVABLE

     The subscription receivable reflects future receipts from the PRTA at its
     present value (at an 8% discount rate). As part of the Acquisition
     agreement, the PRTA agreed to contribute cash or stock of $200 million as a
     capital contribution in equal $40 million installments over five years on
     March 2 of each year, beginning on March 2, 2000. The Company will use the
     $200 million to fund its underfunded pension and other post-employment
     benefit obligations. The stock purchase agreement requires that the Company
     contribute $66 million, which includes the $40 million received from PRTA,
     to the pension plan upon receipt of the proceeds on March 2nd of each year.
     The Company received the third $40 million installment in March 2002 and
     made the required pension payment of $66 million.

     ACCUMULATED OTHER COMPREHENSIVE LOSS

     The accumulated other comprehensive loss represents unrecognized losses,
     other than unrecognized prior service costs which are reflected as an other
     asset, associated with the hourly pension fund since the accumulated
     benefit obligation exceeds the fair value of plan assets at December 31,
     2001.


                                       12
<PAGE>


     DIVIDENDS

     The shareholders agreement requires the payment of dividends equal to at
     least 50% of net income, to be paid quarterly to the extent funds are
     legally available.

     During the first quarter of 2002, the Company paid dividends of $1 million
     pertaining to 2001 fourth quarter net income.

     The Company paid dividends of $58 million in 2001. A $17 million dividend
     applicable to third quarter 2001 net income was paid in November 2001.
     Prior to that, the Company paid dividends of $23 million in September 2001
     relating to the second quarter earnings and in June 2001, and paid $18
     million relating to the first quarter 2001 net income.

14.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts and fair values of the Company's financial instruments
     are as follows:


<Table>
<Caption>
                                                                 MARCH 31,                   DECEMBER 31,
                                                                   2002                          2001
                                                         -------------------------     -------------------------
                                                          Carrying        Fair          Carrying         Fair
                                                           Amount         Value          Amount          Value
                                                         ----------     ----------     ----------     ----------
                                                                              (In thousands)
<S>                                                      <C>            <C>            <C>            <C>
     Assets:
         Cash and cash equivalents                       $   15,115     $   15,115     $   34,797     $   34,797
         Accounts receivable                                358,742        358,742        359,914        359,914
     Liabilities:
         Other current liabilities                       $  353,703     $  353,703     $  345,203     $  345,203
         Short-term debt                                    439,189        439,189        494,335        498,649
         Long-term debt, excluding interest rate swap       700,309        700,720        700,294        697,854
         Interest rate swap                                     791            791          1,147          1,147
</Table>


                                       13
<PAGE>


15.  SEGMENT REPORTING

     The Company has two reportable segments: Wireline and Wireless.

     The Wireline segment consists of:

     o    Local services, including basic voice, telephone and
          telecommunications equipment rentals, value-added services, high-speed
          private line services, Internet access and public phone service;

     o    Access services to long distance carriers, competitive local exchange
          carriers, and cellular and paging operators to originate and terminate
          calls on our network;

     o    Long distance services including direct dial on-island and off-island,
          operator assisted calls, prepaid calling card and high-speed private
          line services;

     o    Directory publishing rights services; and

     o    Telecommunication equipment sales and billing and collection services
          to competing long distance operators in Puerto Rico.

     The Wireless segment consists of:

     o    Cellular and paging services; and

     o    Wireless equipment sales.

     The Company measures and evaluates the performance of its segments based on
     EBITDA, which is a common industry profitability and liquidity measurement.
     The accounting policies of the segments are the same as those followed by
     the Company (see Note 2). The Company accounts for intersegment revenues at
     market prices.


                                       14
<PAGE>


     Segment results for the Company are as follows:

<Table>
<Caption>
                                             FOR THE THREE MONTHS ENDED
                                                      MARCH 31,
                                                2002            2001
                                             ----------      ----------
<S>                                          <C>             <C>
WIRELINE:                                          (In thousands)
  Revenues-
    Local services                           $  144,353      $  140,152
    Long distance services                       38,924          46,730
    Access services                              82,810          90,869
    Directory services and other                 11,994          14,467
                                             ----------      ----------
  Total revenues                             $  278,081      $  293,218
                                             ==========      ==========

  EBITDA                                     $  109,216      $  137,068
                                             ==========      ==========

WIRELESS:
  Revenues-
     Cellular services                       $   42,645      $   39,015
     Paging services                              1,925           5,500
     Equipment sales and other                    1,854           4,437
                                             ----------      ----------
  Total revenues and sales                   $   46,424      $   48,952
                                             ==========      ==========

  EBITDA                                     $    7,583      $    9,040
                                             ==========      ==========

CONSOLIDATED:
  Revenues for reportable segments           $  324,505      $  342,170
  Elimination of intersegment revenues           (3,808)         (1,664)
                                             ----------      ----------
  Consolidated revenues                      $  320,697      $  340,506
                                             ==========      ==========

EBITDA:
  Operating income                           $   50,499      $   76,920
  Depreciation and amortization                  66,300          69,188
                                             ----------      ----------
  EBITDA                                     $  116,799      $  146,108
                                             ==========      ==========
</Table>


<Table>
<Caption>
                                              AS OF            AS OF
               ASSETS                       MARCH 31,       DECEMBER 31,
     -------------------------                 2002             2001
                                            ----------      ------------
<S>                                         <C>             <C>
     Wireline assets                        $2,555,606      $  2,591,488

     Wireless assets                           482,756           468,062
                                            ----------      ------------

     Segment assets                         $3,038,362      $  3,059,550

     Elimination of intersegment assets       (338,520)         (311,300)
                                            ----------      ------------

     Consolidated assets                    $2,699,842      $  2,748,250
                                            ==========      ============
</Table>


                                       15
<PAGE>


16.  CONDENSED CONSOLIDATING INFORMATION

     The Senior Notes are guaranteed by two wholly owned subsidiaries, PRTC and
     Verizon Wireless (the "Guarantor Subsidiaries") but not guaranteed by the
     Company's other two subsidiaries, Coqui.net and Datacom (the "Non-Guarantor
     Subsidiaries"). The guarantee by each of the Guarantor Subsidiaries is full
     and unconditional, joint and several.

     The following condensed consolidating financial information as of March 31,
     2002 and December 31, 2001 and for the quarters then ended presents the
     financial position, results of operations and cash flows of (i) the Company
     as if it accounted for its subsidiaries on the equity method, (ii) the
     Guarantor Subsidiaries on a combined basis and (iii) the Non-Guarantor
     Subsidiaries. The consolidation entries eliminate investments in
     subsidiaries and intercompany balances and transactions.


                                       16
<PAGE>


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 March 31, 2002
                                 (In thousands)

<Table>
<Caption>
                                                                 GUARANTOR       NON-GUARANTOR                           TOTAL
                                                 PARENT         SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      CONSOLIDATED
                                              ------------      ------------      ------------      ------------      ------------
<S>                                           <C>               <C>               <C>               <C>               <C>
 ASSETS

 CURRENT ASSETS:
      Cash and cash equivalents               $         58      $     14,153      $        904      $         --      $     15,115
      Intercompany accounts receivable           1,317,769           122,047             1,473        (1,441,289)               --
      Accounts receivable, net                          --           358,835               (93)               --           358,742
      Inventory and supplies, net                       --            23,191                --                --            23,191
      Prepaid expenses                                  --            18,253               447                --            18,700
                                              ------------      ------------      ------------      ------------      ------------
          Total current assets                   1,317,827           536,479             2,731        (1,441,289)          415,748
 PROPERTY, PLANT AND EQUIPMENT, net                     --         1,596,598             7,695                --         1,604,293
 GOODWILL AND OTHER INTANGIBLES, net                    --           333,999            25,507                --           359,506
 DEFERRED INCOME TAX                                    --           213,856               162                --           214,018
 INVESTMENT IN SUBSIDIARIES                        507,856                --                --          (507,856)               --
 OTHER ASSETS                                        5,696           106,035                --            (5,454)          106,277
                                              ------------      ------------      ------------      ------------      ------------
 TOTAL ASSETS                                 $  1,831,379      $  2,786,967      $     36,095      $ (1,954,599)     $  2,699,842
                                              ============      ============      ============      ============      ============

 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES:
       Short-term debt                        $    439,000      $    439,189      $         --      $   (439,000)     $    439,189
       Intercompany accounts payable                67,170           239,647               365          (307,182)               --
       Other current liabilities                    24,284           327,315             2,104                --           353,703
                                              ------------      ------------      ------------      ------------      ------------
          Total current liabilities                530,454         1,006,151             2,469          (746,182)          792,892
 LONG-TERM DEBT, excluding current portion         700,563           701,100                --          (700,563)          701,100
 OTHER NON-CURRENT LIABILITIES                       2,000           594,364                --                --           596,364
                                              ------------      ------------      ------------      ------------      ------------
           Total liabilities                     1,233,017         2,301,615             2,469        (1,446,745)        2,090,356
                                              ------------      ------------      ------------      ------------      ------------
 MINORITY INTEREST                                      --                --                --            11,124            11,124
 COMMITMENTS AND CONTINGENCIES
 SHAREHOLDERS' EQUITY:
     Common stock, Additional paid in
       capital and Treasury stock                  701,952           490,927            35,806          (526,733)          701,952
     Deferred ESOP compensation                    (28,793)               --                --                --           (28,793)
     Subscription receivable                       (71,809)               --                --                --           (71,809)
     Retained earnings (deficit)                    75,489            72,902            (2,180)          (70,722)           75,489
     Accumulated other comprehensive loss          (78,477)          (78,477)               --            78,477           (78,477)
                                              ------------      ------------      ------------      ------------      ------------
           Total shareholders' equity              598,362           485,352            33,626          (518,978)          598,362
                                              ------------      ------------      ------------      ------------      ------------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $  1,831,379      $  2,786,967      $     36,095      $ (1,954,599)     $  2,699,842
                                              ============      ============      ============      ============      ============
</Table>


                                       17
<PAGE>


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                December 31, 2001
                                 (In thousands)

<Table>
<Caption>
                                                               GUARANTOR        NON-GUARANTOR                            TOTAL
                                               PARENT         SUBSIDIARIES      SUBSIDIARIES       ELIMINATIONS      CONSOLIDATED
                                            ------------      ------------      -------------      ------------      ------------
<S>                                         <C>               <C>               <C>                <C>               <C>
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents              $         --      $     32,591      $       2,206      $         --      $     34,797
     Intercompany accounts receivable          1,316,922           311,067                233        (1,628,222)               --
     Accounts receivable, net                         --           359,521                393                --           359,914
     Inventory and supplies, net                      --            24,755                 --                --            24,755
     Prepaid expenses                                 --            11,200                410                --            11,610
                                            ------------      ------------      -------------      ------------      ------------
         Total current assets                  1,316,922           739,134              3,242        (1,628,222)          431,076
PROPERTY, PLANT AND EQUIPMENT, net                    --         1,623,717              8,053                --         1,631,770
GOODWILL AND OTHER INTANGIBLES, net                   --           332,836             25,628                --           358,464
DEFERRED INCOME TAX                                   --           221,324                175                --           221,499
INVESTMENT IN SUBSIDIARIES                       486,201                --                 --          (486,201)               --
OTHER ASSETS                                       6,190           105,441                 --            (6,190)          105,441
                                            ------------      ------------      -------------      ------------      ------------
TOTAL ASSETS                                $  1,809,313      $  3,022,452      $      37,098      $ (2,120,613)     $  2,748,250
                                            ============      ============      =============      ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
      Short-term debt                       $    494,100      $    494,335      $          --      $   (494,100)     $    494,335
      Intercompany accounts payable               65,715           371,007              2,688          (439,410)               --
      Other current liabilities                    8,280           335,274              1,649                --           345,203
                                            ------------      ------------      -------------      ------------      ------------
         Total current liabilities               568,095         1,200,616              4,337          (933,510)          839,538
LONG-TERM DEBT, excluding current portion        700,903           701,441                 --          (700,903)          701,441
OTHER NON-CURRENT LIABILITIES                      2,000           656,197                 --                --           658,197
                                            ------------      ------------      -------------      ------------      ------------
          Total liabilities                    1,270,998         2,558,254              4,337        (1,634,413)        2,199,176
                                            ------------      ------------      -------------      ------------      ------------
MINORITY INTEREST                                     --                --                 --            10,759            10,759
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
    Common stock, Additional paid in
      capital and Treasury stock                 701,952           490,927             35,806          (526,733)          701,952
    Deferred ESOP compensation                   (28,793)               --                 --                --           (28,793)
    Subscription receivable                     (109,959)               --                 --                --          (109,959)
    Retained earnings (deficit)                   53,592            51,748             (3,045)          (48,703)           53,592
    Accumulated other comprehensive loss         (78,477)          (78,477)                --            78,477           (78,477)
                                            ------------      ------------      -------------      ------------      ------------
          Total shareholders' equity             538,315           464,198             32,761          (496,959)          538,315
                                            ------------      ------------      -------------      ------------      ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $  1,809,313      $  3,022,452      $      37,098      $ (2,120,613)     $  2,748,250
                                            ============      ============      =============      ============      ============
</Table>


                                       18
<PAGE>


      CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                    For the three months ended March 31, 2002
                                 (In thousands)

<Table>
<Caption>
                                                              GUARANTOR        NON-GUARANTOR                           TOTAL
                                               PARENT        SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      CONSOLIDATED
                                            ------------     ------------      -------------     ------------      ------------
<S>                                         <C>              <C>               <C>               <C>               <C>
REVENUES:
  Local services                            $         --     $    138,681      $       6,465     $     (2,437)     $    142,709
  Long distance services                              --           38,907                 --             (115)           38,792
  Access services                                     --           83,962                 --           (2,864)           81,098
  Cellular services                                   --           42,645                 --             (422)           42,223
  Paging services                                     --            1,925                 --               (1)            1,924
  Directory and other services and sales              --           17,069                 --           (3,118)           13,951
                                            ------------     ------------      -------------     ------------      ------------
    Total revenues                                    --          323,189              6,465           (8,957)          320,697
                                            ------------     ------------      -------------     ------------      ------------

OPERATING COSTS AND EXPENSES:
  Labor and benefits                                  --           97,234                525               --            97,759
  Other operating expenses                            --          111,865              3,231           (8,957)          106,139
  Depreciation and amortization                       --           65,511                789               --            66,300
                                            ------------     ------------      -------------     ------------      ------------
    Total operating costs and expenses                --          274,610              4,545           (8,957)          270,198
                                            ------------     ------------      -------------     ------------      ------------

OPERATING INCOME                                      --           48,579              1,920               --            50,499
                                            ------------     ------------      -------------     ------------      ------------

OTHER INCOME (EXPENSE), NET                       23,004          (13,556)                11          (23,369)          (13,910)
                                            ------------     ------------      -------------     ------------      ------------

INCOME (LOSS) BEFORE INCOME TAX EXPENSE           23,004           35,023              1,931          (23,369)           36,589

INCOME TAX EXPENSE                                    --           12,761                824               --            13,585
                                            ------------     ------------      -------------     ------------      ------------

NET INCOME AND COMPREHENSIVE INCOME         $     23,004     $     22,262      $       1,107     $    (23,369)     $     23,004
                                            ============     ============      =============     ============      ============
</Table>


                                       19
<PAGE>


      CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                    For the three months ended March 31, 2001
                                 (In thousands)


<Table>
<Caption>
                                                                   GUARANTOR       NON-GUARANTOR                         TOTAL
                                                    PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                                 ------------     ------------     -------------     ------------     ------------
<S>                                              <C>              <C>              <C>               <C>              <C>
REVENUES:
  Local services                                 $         --     $    135,657     $       5,495     $       (828)    $    140,324
  Long distance services                                   --           46,818                --             (115)          46,703
  Access services                                          --           92,477                --           (2,416)          90,061
  Cellular services                                        --           39,351                --             (336)          39,015
  Paging services                                          --            5,505                --               (5)           5,500
  Directory and other services and sales                   --           23,862                --           (4,959)          18,903
                                                 ------------     ------------     -------------     ------------     ------------
        Total revenues                                     --          343,670             5,495           (8,659)         340,506
                                                 ------------     ------------     -------------     ------------     ------------

OPERATING COSTS AND EXPENSES:
  Labor and benefits                                       --           96,995               312               --           97,307
  Other operating expenses                                 --           98,626             3,278           (8,659)          93,245
  Early retirement provision                               --            3,846                --               --            3,846
  Depreciation and amortization                            --           67,684             1,504               --           69,188
                                                 ------------     ------------     -------------     ------------     ------------
        Total operating costs and expenses                 --          267,151             5,094           (8,659)         263,586
                                                 ------------     ------------     -------------     ------------     ------------

OPERATING INCOME                                           --           76,519               401               --           76,920
                                                 ------------     ------------     -------------     ------------     ------------

OTHER INCOME (EXPENSE), net                            36,476          (14,497)                8          (36,443)         (14,456)
                                                 ------------     ------------     -------------     ------------     ------------

INCOME BEFORE INCOME TAX EXPENSE                       36,476           62,022               409          (36,443)          62,464

INCOME TAX EXPENSE                                         13           25,518               470               --           26,001
                                                 ------------     ------------     -------------     ------------     ------------

NET INCOME (LOSS) AND COMPREHENSIVE INCOME       $     36,463     $     36,504     $         (61)    $    (36,443)    $     36,463
                                                 ============     ============     =============     ============     ============
</Table>


                                       20
<PAGE>


                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                    For the three months ended March 31, 2002
                                 (In thousands)


<Table>
<Caption>
                                                                                GUARANTOR        NON-GUARANTOR         TOTAL
                                                                PARENT         SUBSIDIARIES      SUBSIDIARIES       CONSOLIDATED
                                                             ------------      ------------      -------------      ------------
<S>                                                          <C>               <C>               <C>                <C>
 CASH PROVIDED BY (USED IN) OPERATING
 ACTIVITIES:                                                 $         --      $     36,700      $      (1,052)     $     35,648
                                                             ------------      ------------      -------------      ------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures, including removal costs                      --           (39,392)               (45)          (39,437)
    Net salvage on retirements                                         --               550               (205)              345
                                                             ------------      ------------      -------------      ------------
        Net cash used in investing activities                          --           (38,842)              (250)          (39,092)
                                                             ------------      ------------      -------------      ------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Capital contribution                                           40,000                --                 --            40,000
    Net repayments of short-term debt, including
       capital leases                                             (55,084)              (47)                --           (55,131)
    Dividends paid                                                 (1,107)               --                 --            (1,107)
    Borrowings/(repayment) intercompany loans                      16,249           (16,249)                --                --
                                                             ------------      ------------      -------------      ------------
        Net cash provided by (used in) financing activities            58           (16,296)                --           (16,238)
                                                             ------------      ------------      -------------      ------------

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  58           (18,438)            (1,302)          (19,682)
 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      --            32,591              2,206            34,797
                                                             ------------      ------------      -------------      ------------
 CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $         58      $     14,153      $         904      $     15,115
                                                             ============      ============      =============      ============
</Table>


                                       21
<PAGE>
                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                    For the three months ended March 31, 2001
                                 (In thousands)


<Table>
<Caption>
                                                                          GUARANTOR        NON-GUARANTOR         TOTAL
                                                          PARENT         SUBSIDIARIES      SUBSIDIARIES       CONSOLIDATED
                                                       ------------      ------------      -------------      ------------
<S>                                                    <C>               <C>               <C>                <C>
CASH PROVIDED BY OPERATING ACTIVITIES                  $         22      $     89,300      $         639      $     89,961
                                                       ------------      ------------      -------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, including removal costs                 --           (30,535)              (216)          (30,751)
   Net salvage on retirements                                    --             1,489               (153)            1,336
                                                       ------------      ------------      -------------      ------------
       Net cash used in investing activities                     --           (29,046)              (369)          (29,415)
                                                       ------------      ------------      -------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Capital contribution                                      40,000                --                 --            40,000
   Net borrowings (repayments) of short-term debt,
      including capital leases                              (76,986)               21                 --           (76,965)
   Borrowings/(repayments) intercompany loans                39,814           (39,814)                --                --
                                                       ------------      ------------      -------------      ------------
       Net cash provided by (used in)
         financing activities                                 2,828           (39,793)                --           (36,965)
                                                       ------------      ------------      -------------      ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                     2,850            20,461                270            23,581
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                                      --            29,950                884            30,834
                                                       ------------      ------------      -------------      ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD             $      2,850      $     50,411      $       1,154      $     54,415
                                                       ============      ============      =============      ============
</Table>


                                       22
<PAGE>


17.  CONTINGENCIES AND REGULATORY MATTERS

     The Company is a defendant in various legal matters arising in the ordinary
     course of business, including a regulatory dispute regarding intra-island
     access fees charged to long distance carriers. Management, after
     consultation with legal counsel, believe that the resolution of these
     matters will not have a material adverse effect on the Company's financial
     position and results of operations. See "Management's Discussion and
     Analysis of Financial Condition and Results of Operations - Regulatory
     Matters" for more information regarding these matters.

     In connection with the privatization of the Company, the PRTA agreed to
     indemnify, defend and hold the Company harmless for specified litigation in
     excess of $50 million in the aggregate, including one environmental matter.

     The Company is regulated by the FCC for inter-state wireline services and
     by the Puerto Rico Telecommunications Board ("TRB") for intra-state
     wireline services.

18.  SUBSEQUENT EVENT

     On May 1, 2002, the Company executed a tax-free reorganization whereby it
     merged Verizon Wireless into PRTC. Prior to the merger, the Company created
     a new wholly owned subsidiary, PRT Larga Distancia, Inc., to carry the
     off-island long distance business, previously under Verizon Wireless. The
     purposes of the reorganization were to (i) integrate the wireline and
     wireless operations without jeopardizing the continuity of the off-island
     long distance license, (ii) simplifying the overall corporate structure to
     reduce administrative costs, and (iii) to provide better control and
     monitoring of the off-island long distance business and expand its
     potential for growth in Puerto Rico. As a result of this merger, the
     Company will release a deferred tax valuation allowance, related to the
     Acquisition, of approximately $93 million, of which approximately $51
     million will be recorded against goodwill and $42 million as a deferred tax
     benefit, in the Company's consolidated statement of income during the
     second quarter of 2002. In accordance with SFAS 109, the valuation
     allowance established at the Acquisition date will be reversed against
     goodwill.


                                       23
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         In this Form 10-Q, the Company has made forward-looking statements.
These statements are based on Company estimates and assumptions and are subject
to certain risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future results of operations, as well
as those statements preceded or followed by the words "anticipates," "believes,"
"estimates," "expects," "hopes," "targets" or similar expressions.

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

         The following important factors could affect future results and could
cause those results to differ materially from those expressed in the
forward-looking statements: (1) materially adverse changes in economic
conditions in Puerto Rico; (2) material changes in available technology; (3) the
final resolution of regulatory initiatives and proceedings, including
arbitration proceedings pertaining to, among other matters, the terms of
interconnection, access charges, universal service, unbundled network elements
and resale rates; (4) changes in our accounting assumptions that may be required
by regulatory agencies, including the SEC, or that result from changes in the
accounting rules or their application, which could result in an impact on
earnings; and (5) the extent, timing, success and overall effects of competition
from others in the Puerto Rico telecommunications service industry.

CRITICAL ACCOUNTING POLICIES

GENERAL

         The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's unaudited condensed
consolidated financial statements, which have been prepared pursuant to rules
and regulations of the SEC. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations.

         The preparation of these financial statements requires the Company to
make estimates and judgments that affect the reported interim amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to bad debts, intangible assets, income taxes, financing
operations, and contingencies and litigation. The Company's management bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

         The Company believes the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
condensed consolidated financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required. Because of uncertainties inherent in the estimation
process, management's estimate of losses and the related allowance may change.
The Company is not dependent on any single customer.

DEFERRED TAXES

         The Company uses an asset and liability approach in accounting for
income taxes following the provisions of SFAS No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are established for temporary
differences between the way certain income and expense items are reported


                                       24
<PAGE>


for financial reporting and tax purposes. Deferred tax assets and liabilities
are adjusted, to the extent necessary, to reflect tax rates expected to be in
effect when temporary differences reverse.

         The Company records a valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. While the
Company has considered future taxable income and ongoing prudent and feasible
tax planning strategies in assessing the need for the valuation allowance, in
the event the Company were to determine that it would be able to realize its
deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise, should the Company determine that it would not
be able to realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the period
such determination was made.

         As discussed in Note 18 to the condensed consolidated financial
statements, the Company executed a reorganization plan, which became effective
May 1, 2002, whereby Verizon Wireless merged into PRTC. As a result of this
merger, the Company will release a deferred tax valuation allowance, related to
the Acquisition, of approximately $93 million, of which approximately $51
million will be recorded against goodwill and $42 million as a deferred tax
benefit, in the Company's consolidated statement of income during the second
quarter of 2002. In accordance with SFAS 109, the valuation allowance
established at the Acquisition date will be reversed against goodwill.
Management believes that sufficient book and tax income will be generated by the
merged company to realize the benefits of these tax assets.

GOODWILL AND INTANGIBLE IMPAIRMENT

         In assessing the recoverability of the Company's goodwill and other
intangibles, the Company must make assumptions regarding estimated future cash
flows and other factors to determine the fair value of the respective assets. If
these estimates or their related assumptions change in the future, the Company
may be required to record impairment charges for these assets not previously
recorded. Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and has
evaluated, on a reporting unit basis, its goodwill and other indefinite life
intangibles for impairment during the first quarter of 2002. See Note 3 to the
condensed consolidated financial statements for further details.

RESULTS OF OPERATIONS

         We have two reportable segments, Wireline and Wireless. See Note 15 to
the condensed consolidated financial statements for additional information on
our segments. Reclassifications of prior years' data have been made to conform
to the 2002 presentation.

     The Wireline segment consists of:

o    Local services, including basic voice, telephone and telecommunications
     equipment rentals, value-added services, high-speed private line services,
     Internet access and public phone service;

o    Access services to long distance carriers, competitive local exchange
     carriers, and cellular and paging operators to originate and terminate
     calls on our network;

o    Long distance services including direct dial on-island and off-island,
     operator assisted calls, prepaid calling card and high-speed private line
     services;

o    Directory publishing rights revenues; and

o    Telecommunication equipment sales and billing and collection services to
     competing long distance operators in Puerto Rico.

     The Wireless segment consists of:

o    Cellular and paging services; and Wireless equipment sales.


                                       25
<PAGE>
REVENUES

<Table>
<Caption>
                                       THREE MONTHS ENDED MARCH 31,
                                         2002                   2001
                                  ------------------    ------------------
                                           (DOLLARS IN MILLIONS)
<S>                               <C>           <C>     <C>           <C>
  WIRELINE:
  Local                           $   143         44%   $   140         41%
  Network Access                       81         25         90         26
  Long Distance                        39         12         47         14
  Directory and Other                  12          4         15          5
                                  -------       ----    -------       ----
     Total Wireline                   275         85%       292         86%
                                  -------       ----    -------       ----

  WIRELESS:
  Postpaid Cellular                    36         11         32          9
  Prepaid Cellular                      6          2          7          2
                                  -------       ----    -------       ----
     Total Cellular                    42         13         39         11
  Paging                                2          1          6          2
  Wireless Equipment                    2          1          4          1
                                  -------       ----    -------       ----
     Total Wireless                    46         15%        49         14%
                                  -------       ----    -------       ----
     Revenues                     $   321        100%   $   341        100%
                                  =======       ====    =======       ====
</Table>

EXPENSES AND CHARGES

<Table>
<Caption>
                                               THREE MONTHS ENDED
                                                    MARCH 31,
                                               2002          2001
                                             --------      --------
                                              (DOLLARS IN MILLIONS)
<S>                                          <C>           <C>
     WIRELINE:

     Labor and benefits                      $     90      $     89
     Other operating expenses                      79            64
                                             --------      --------
        Total Wireline                            169           153

     WIRELESS:

     Labor and benefits                      $      8      $      8
     Other operating expenses                      27            30
                                             --------      --------
        Total Wireless                             35            38

     OTHER:

     Early retirement provision                    --             4
     Depreciation and amortization                 66            69
     Interest expense and others                   15            15
     Equity income in joint venture                (1)           (1)
     Income tax expense                            14            26
                                             --------      --------
     Net income                              $     23      $     37
                                             ========      ========
</Table>

OPERATING DATA

<Table>
<Caption>
                                              THREE MONTHS ENDED
                                                   MARCH 31,
                                               2002         2001
                                             --------     --------
<S>                                          <C>          <C>
    Access Lines in Service (000's):
        Residential                               961          975
        Business                                  308          309
                                             --------     --------
    Total                                       1,269        1,284

    Cellular Customers (000's):
        Postpaid                                  214          210
        Prepaid                                   118          169
                                             --------     --------
    Total                                         332          379

    Postpaid Cellular ARPU                   $     52     $     50
    Prepaid Cellular ARPU                    $     17     $     15
    Combined Cellular ARPU                   $     39     $     35

    Paging Customers (000's)                       37           98
</Table>
                                       26
<PAGE>


     QUARTER ENDED MARCH 31, 2002 COMPARED WITH QUARTER ENDED MARCH 31, 2001

    REVENUES. Revenues for the quarter ended March 31, 2002 decreased $20
million, to $321 million from $341 million for the same comparable period in
2001.

    WIRELINE:

         Wireline revenues include local service, network access, long distance,
directory revenues and other services. Wireline revenues for the quarter ended
March 31, 2002 decreased $17 million, or 6%, to $275 million from $292 million
for the same period in 2001.

         Local service revenues include basic voice, telephone and
telecommunications equipment rental, value-added services, high-speed private
line services, Internet access, and public phone service. Local service revenues
for the quarter ended March 31, 2002 increased $3 million, or 2%, to $143
million from $140 million in the comparable 2001 period. The increase resulted
primarily from higher revenues from high-speed private lines, Internet access,
value-added services, and deferred activation and installation revenues of $3
million, $1 million, $1 million and $1 million, respectively. These increases
were offset in part by a decrease in residential basic rent revenues and
business measure service of $3 million.

         Telephone access lines decreased 15,000, or 1%, from March 31, 2001 to
March 31, 2002. This reflects a softening economy, increased wireline
competition and the proliferation of cellular service as a wireline substitute.
Increases in high-speed private lines to business and Internet access to
consumers reflect an increase in demand for this service for the quarter period
ended March 31, 2002. High-speed private lines include services such as ATM,
frame relay, DSL and ISDN. Increases in value-added service revenues reflect
successful bundling programs, which involve long distance and Internet access.
The increase in Internet access is mainly due to an increase in customers of
approximately 20,000, or 19%, to 128,000, as compared to the end of the first
quarter of 2001.

         Network access revenues include services provided to long distance
carriers, competitive local exchange carriers, and cellular and paging operators
to originate and terminate calls on our network. These revenues for the quarter
decreased $9 million, or 10%, to $81 million compared to $90 million for the
same 2001 period. The decrease was due to lower off-island access revenues of $5
million, caused by lower volumes and lower rates. The decrease was also driven
by lower interstate high cost fund subsidies of $8 million, reflecting a phasing
out of this subsidy (see "Regulatory Matters-Interstate High Cost Subsidy"), and
lower intra-island access revenues of $2 million. These decreases were partially
offset by higher subscriber line charges of $6 million.

         Long distance revenues include direct dial on-island and off-island,
operator-assisted calls, prepaid calling cards and on-island private line
revenues. Long distance revenues decreased $8 million, or 17%, to $39 million
for the quarter from $47 million for the same 2001 period. The decrease was due
to lower intra-island long distance revenues of $5 million, operator services of
$2 million and long distance public phone revenues of $1 million. Both
intra-island and off-island long distance revenues have decreased mainly due to
long distance calls being included in local cellular calling plans.

         Directory and other revenues include directory publishing rights,
telecommunication equipment and billing and collection services to competitor
long distance operators. Directory and other revenues for the quarter ended
March 31, 2002 decreased $3 million, or 20%, to $12 million, from $15 million
for the quarter ended March 31, 2001, mainly due to a decrease in wireline
equipment sales of $1 million, lower billing and collection services of $1
million and a reduction in other services to carriers of $1 million.

    WIRELESS:

         Revenues from cellular and paging services and related equipment sales
for the three months ended March 31, 2002 decreased $3 million, or 6%, to $46
million from $49 million for the comparable 2001 period. Cellular service
revenues increased $3 million, or 8%, as a result of higher ARPU of $4 and an
increase in postpaid customers of 4,000 in comparison with the quarter ended
March 31, 2001. Postpaid cellular ARPU of $52 increased by $2 as a result of
higher customer usage.

         Paging revenues declined $4 million, or 67%, to $2 million for the
quarter ended March 31, 2002 from $6 million for the comparable 2001 period. The
decrease was related to a reduction of 61,000 customers due to the migration of
customers to cellular services.


                                       27
<PAGE>


         Wireless equipment sales decreased $2 million, or 50%, to $2 million
for the quarter ended March 31, 2002 from $4 million for the comparable 2001
period.

    OPERATING COSTS AND EXPENSES. Operating costs and expenses for the quarter
ended March 31, 2002 increased $13 million, or 7%, to $204 million from $191
million reported for the first quarter in 2001.

    WIRELINE:

         Wireline expenses for the quarter ended March 31, 2002 increased $16
million, or 10%, to $169 million from the $153 million incurred for the quarter
ended March 31, 2001.

         Labor and benefit expenses increased $1 million to $90 million from
$89 million reported for the quarter ended March 31, 2001, mainly due to
increases in pension and other post-employment benefits ("OPEBs") of $3 million,
higher contractor expenses of $1 million and medical and life insurance expenses
of $1 million. These increases were partially offset by a decrease in salaries
of $1 million and overtime of $2 million. The minimal labor increase reflects
the effect of early retirements and voluntary separation programs.

         Other operating expenses of $79 million for the quarter ended March 31,
2002, increased $15 million, or 23%, compared to the same 2001 period. The
increase is primarily due to higher operating tax provisions of $7 million, an
increase in bad debt provisions of $4 million, increased activation charges of
$2 million, higher interconnection charges of $2 million and higher cost of
equipment sold of $1 million. The increase in other operating expenses was
partially offset by lower consulting expenses of $2 million.

    WIRELESS:

         Wireless expenses for the quarter ended March 31, 2002, decreased $3
million, or 8%, to $35 million from the $38 million reported for the quarter
ended March 31, 2001. Labor and benefit expenses remained constant at $8 million
for the quarter ended March 31, 2001 and 2000.

         Other operating expenses decreased $3 million, or 10%, to $27 million
from the $30 million reported for the comparable 2001 period. The decrease was
due to lower costs from equipment sales of $4 million and a decrease in
outsource billing charges of $1 million. These decreases were offset by
increases in roaming charges of $1 million and interconnection charges of $1
million.

         EARLY RETIREMENT PROVISION. A total of $4 million was recorded for
early retirement program during the first quarter of 2001, involving 13
employees in connection with an early retirements offered to qualified employees
in December 2001.

         DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense of $66 million for the quarter ended March 31, 2002 was $3 million lower
than for the comparable 2001 period. The discontinued amortization of goodwill
and other indefinite life intangibles reduced amortization by $4 million. This
decrease was offset by $1 million in higher depreciation due to higher gross
plant balances.

         INTEREST EXPENSE. Interest expense of $15 million remained constant for
the quarter ended March 31, 2002, as compared to March 31, 2001. As a result of
lower interest rates our interest expense decreased by $2 million as debt
balances remained constant at $1.1 billion for March 31, 2002 and 2001. This was
offset by lower interest income from invested cash of $1 million due to the
lower rates and lower interest income of $1 million resulting from the accretion
of the discount on the subscription receivable.

         EQUITY INCOME FROM JOINT VENTURE. Earnings of $1 million were generated
from our approximate 25% interest in Verizon Information Services, Inc., the
largest yellow page publishing company in Puerto Rico.

         INCOME TAXES. A $14 million tax provision for the quarter ended March
31, 2002 reflects a 37% effective tax rate. The difference between the effective
and the statutory tax rate of 39%, or $1 million, primarily reflects permanent
differences related to interest accretion on the Government subscription
receivable, which is a capital contribution.


                                       28
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

CONSOLIDATED FINANCIAL CONDITION

QUARTER ENDED MARCH 31, 2002 COMPARED WITH QUARTER ENDED MARCH 31, 2001


<Table>
<Caption>
                                              THREE MONTHS ENDED MARCH 31,
                                          -----------------------------------
                                          2002           2001          CHANGE
                                          ----           ----          ------
                                                  (DOLLARS IN MILLIONS)
<S>                                       <C>            <C>           <C>
Cash provided by (used in):
    Operations                            $ 36           $ 90          $  (54)
    Investing                              (39)           (29)            (10)
    Financing                              (16)           (37)             21
</Table>

OVERALL LIQUIDITY ASSESSMENT

         The Company believes that cash from operations is sufficient to meet
working capital needs. While current liabilities exceeded current assets at
March 31, 2002 by $377 million, we believe our sources of funds, from operations
and from readily available external financing arrangements, are sufficient to
meet ongoing operating, financing and investing requirements. We expect that
presently foreseeable capital requirements will continue to be financed through
internally generated funds.

         The Company has a $500 million undrawn revolving credit facility
maturing in March 2004, as well as a $100 million working capital facility which
matures in June 2002 and is expected to be renewed for another year. At March
31, 2002, the Company had $24 million outstanding under the working capital
credit facility. $300 million of the Company's senior notes mature on May 15,
2002. The Company expects to refinance these notes with commercial paper.

OPERATIONS

         Cash from operations continued to be our primary source of funds. The
decrease in cash from operations of $54 million for the quarter ended March 31,
2002 as compared to the same period in 2001 was primarily due to lower revenues
of $20 million, voluntary separation payments of $14 million, higher pension
contributions of $9 million, and a net increase in working capital of $11
million.

         In December 2001, the Company offered voluntary separation packages to
qualified employees. Liquidation payments to the employees who accepted the
program were made during the first quarter of 2002, as described above. Also,
the Company recorded the non-cash provision related to this voluntary separation
program in the fourth quarter of 2001.

INVESTING

         Net cash used in investing activities for the quarter ended March 31,
2002 was $39 million compared to $29 million for the same period in 2001. The
capital expenditure program for the quarter ended March 31, 2002 amounted to $39
million, which was financed from internally generated funds.

         We have invested approximately $730 million from the date of the
Acquisition through March 31, 2002 to expand and enhance our networks. In 2002,
we expect to make up to approximately $234 million in capital expenditures.

FINANCING

         Debt, excluding capital leases, decreased $55 million for the quarter
ended March 31, 2002. Borrowings under bank loans, working capital facilities
and commercial paper decreased from $194 million at December 31, 2001 to $139
million at March 31, 2002. We expect to refinance the $300 million senior notes
maturing in May 2002 with commercial paper and/or bank loans.


                                       29
<PAGE>


         The shareholders' agreement requires the payment of dividends equal to
at least 50% of net income, payable quarterly to the extent funds are legally
available. For the quarter ended March 31, 2002, the Company paid dividends
amounting to $1.1 million corresponding to the fourth quarter 2001. The senior
note indentures and credit facility agreements do not contain dividend
restrictions.

         In the Acquisition, the PRTA agreed to contribute cash or stock worth a
total of $200 million as a capital contribution in five even $40 million
installments over five years beginning on March 2, 2000 to fund its underfunded
pension and other post-employment benefit obligations. In March 2002, $40
million in cash was received from the PRTA for the third installment. See Note
13.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

<Table>
<Caption>
CONTRACTUAL OBLIGATIONS &
OTHER COMMERCIAL COMMITMENTS:                                     PAYMENTS DUE BY PERIOD
-----------------------------             ----------------------------------------------------------------------

                                                         Less Than                                     After 5
(Amounts in Thousands)                       Total         1 year       1-3 Years      4-5 Years        Years
                                          ----------     ----------     ----------     ----------     ----------
<S>                                       <C>            <C>            <C>            <C>            <C>
Long Term Debt                            $  700,566     $       --     $       --     $  400,696     $  299,870
Pension Benefit Obligations (1)              432,600        109,900        264,100         58,600             --
Current Portion of Long Term Debt (2)        299,997        299,997             --             --             --
Working capital facilities                    23,500         23,500             --             --             --
Commercial Paper                             115,500        115,500             --             --             --
Operating Leases                              45,198          8,710         17,764          2,838         15,886
Capital Lease Obligations                        726            189            522             15             --
                                          ----------     ----------     ----------     ----------     ----------

Total                                     $1,618,087     $  557,796     $  282,386     $  462,149     $  315,756
                                          ==========     ==========     ==========     ==========     ==========
</Table>

(1) Pension obligations represent contributions based on ERISA minimum rules.

(2) The current portion of the senior notes matures on May 15, 2002. We expect
    to refinance the $300 million senior notes with commercial paper.


                                       30
<PAGE>


REGULATORY MATTERS

REGULATORY AND COMPETITIVE TRENDS

         Regulatory activity at the federal and local levels has been primarily
directed at appropriately balancing downward pressure on access rates and the
impact of reductions in those rates on the cost of local exchange services. We
are also addressing local number portability requirements and dial-around
compensation relating to the pay phone business.

         We continued to meet the wholesale requirements of new competitors and
have signed agreements with wireless and wireline carriers. These agreements
permit them to purchase unbundled network elements, to resell retail services,
and to interconnect their networks with ours.

INTRA-ISLAND LONG DISTANCE ACCESS RATE DISPUTE

         On February 28, 2002, the TRB issued a Resolution and Order (the
"February 2002 Order") with respect to the reconsideration requested by the
Company of the TRB October 10, 2001 order to reduce the access rates the Company
charges to long distance carriers to originate and terminate intra-island long
distance calls through the Company's network.

         The February 2002 Order requires new rates for intra-island access to
be implemented through phased rate reductions over four years and directs PRTC
to make a cash refund to end-user customers. The prospective access rate
reductions (on a two-way basis) were ordered to take place on April 1st of each
year as follows:

         April 2002: From 9.3 cents per minute to 7.9 cents per minute
         April 2003: From 7.9 cents per minute to 6.5 cents per minute
         April 2004: From 6.5 cents per minute to 5.0 cents per minute
         April 2005: From 5.0 cents per minute to 2.1 cents per minute

         The February 2002 Order also requires PRTC to pay a $68 million refund
to end-user customers. The TRB calculated this amount based on the difference
between the 9.3 cents and 7.9 cents rate for TRB estimated traffic from the
period April 1, 2000 through March 31, 2002. The refund can be made in 12
quarterly, equal installments starting April 1, 2002.

         The Company filed with the Puerto Rico Circuit Court of Appeals
("Court") an appeal of the February 2002 Order in which the Company alleges the
TRB made errors of law and procedure in its determination of access charges and
its order to make the cash refund. The Court stayed the refund and the rate
reduction on March 27, 2002 and is hearing the appeal.

         On April 2, 2002, AT&T, Sprint and Telefonica Larga Distancia
("Carriers") filed a petition with the Court for review of the February 2002
Order, requesting the Court to order the rate reduction without a phase-in
period, remand the case back to the TRB and direct the TRB to calculate the
refund from and after April 1997 instead of April 2000, with the Carriers
receiving the refund instead of the end-user customers.

         At this preliminary stage it is too early to assess the probability of
success in the appeals process. The Company also believes the Carriers' petition
for review is without merit.

PUBLIC TELEPHONE SERVICE PROVIDER DISPUTE

         Telefonos Publicos de Puerto Rico, Inc. ("TPPR") the largest
competitive provider of public pay phones in Puerto Rico filed a suit in the
United States District Court for the District of Puerto Rico on November 8,
2001, claiming predatory, exclusionary and anticompetitive acts and seeking
damages of $75 million. We have filed a motion to dismiss the case and are
awaiting a decision of the court. No provision has been made for this case, as
management believes the claim is without merit.

PRICE CAP REGULATION

         The FCC requires that companies which set interstate access rates
based on a price cap formula must use the price cap formula for all their
affiliates. This rule, which is referred to as the all-or-nothing rule, further
states that a company that has been using the rate of return method and that is


                                       31
<PAGE>


acquired by a price cap company has twelve months following the acquisition date
to adopt price caps. Under this rule PRTC would have been required to adopt
price caps instead of rate of return, since Verizon is a price cap company.

         The Company has requested waivers of this rule since 1999 and has been
granted successive one-year extensions by the FCC. On April 18, 2002, the FCC
granted a further waiver of the requirement that PRTC adopt price caps to June
30, 2003. The waiver, which was granted to the Company and to other local
exchange carriers in similar circumstances, also noted that the FCC was
considering in another ongoing proceeding whether to modify or eliminate the
all-or-nothing rule and how to resolve the associated universal support issues.
The impact of this to the Company is that it may continue as a rate of return
carrier and receive long-term support subsidies through its participation in the
common carrier line pool administered by NECA at least until June 30, 2003.

INTERSTATE HIGH COST SUBSIDY

         On October 21, 1999, the FCC adopted a new high cost support mechanism,
which will result in the phase out of the Company's High Cost Subsidy revenues.
These revenues were $48 million in 2000, $33 million in 2001 and are expected to
be approximately $3 million for 2002.

RECENT ACCOUNTING PRONOUNCEMENTS

BUSINESS COMBINATIONS AND ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLES

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141, which applies to business combinations occurring after June 30, 2001,
requires that the purchase method of accounting be used and includes guidance on
the initial recognition and measurement of goodwill and other intangible assets
acquired in the combination. The adoption of SFAS No. 141 did not have a
material effect on the Company's financial statements.

         SFAS No. 142 no longer permits the amortization of goodwill and other
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or, under certain conditions, more frequently) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flow approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."

         Intangible assets that do not have indefinite lives will continue to be
amortized over their useful lives and reviewed for impairment in accordance with
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
The discontinuation of amortizing goodwill and other long-lived assets will
result in reducing annual amortization expense by approximately $15 million for
2002. The Company adopted SFAS No. 142 effective January 1, 2002. The Company,
together with an independent appraiser, has evaluated its assets using the fair
value approach for each reporting unit, to determine if there is an impairment
exposure (transitional impairment test) and the impact it would have in the
Company's results of operations for 2002. The evaluation of the three reporting
units, as of January 1, 2002, revealed no impairment exposure.

ASSET RETIREMENT OBLIGATIONS

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard provides the accounting for the cost of
legal obligations associated with the retirement of long-lived assets. SFAS No.
143 requires that companies recognize the fair value of a liability for asset
retirement obligations in the period in which the obligations are incurred and
capitalize that amount as a part of the book value of the long-lived asset. That
cost is then depreciated over the remaining life of the underlying long-lived
asset. The Company is required to adopt SFAS No. 143 effective January 1, 2003.
The adoption of this new standard is not expected to have an impact on the
Company's future results of operations or financial position.

ACCOUNTING FOR IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

         In August 2001, the FASB issued SFAS No. 144. This standard supersedes
SFAS No. 121 and the provisions of Accounting Principles Board ("APB") Opinion
No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" with regard to reporting the effects of a
disposal of a segment of a business. SFAS No. 144 establishes a single
accounting model for assets to be disposed of by sale and addresses several SFAS
No. 121 implementation issues. The Company adopted SFAS No. 144 effective
January 1, 2002 without an impact on its financial statements.


                                       32
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

         We are exposed to market risk in the normal course of business,
resulting primarily from interest rate changes on our senior notes and interest
rate swap agreements.

         The following table summarizes the fair value of our senior notes and
interest rate swap at March 31, 2002 and December 31, 2001 and provides a
sensitivity analysis of the fair values of these instruments assuming a 100
basis point increase or decrease in the yield curve. The sensitivity analysis
does not include the fair values of our floating-rate debt since it is not
significantly affected by changes in market interest rates.

<Table>
<Caption>
                                                                   FAIR VALUE
                                                               AT 100 BASIS POINTS
                                                            ------------------------
                              BOOK VALUE     FAIR VALUE     INCREASE       DECREASE
                              ----------     ----------     --------      ----------
                                                 (In thousands)
<S>                           <C>            <C>            <C>           <C>
March 31, 2002:

   Senior notes               $  999,772     $1,000,183     $969,840      $1,032,273
   Interest rate swap                791            791       (4,455)          6,273
                              ----------     ----------     --------      ----------
      Total                   $1,000,563     $1,000,974     $965,385      $1,038,546
                              ==========     ==========     ========      ==========

December 31, 2001:

   Senior notes               $  999,757     $1,001,874     $969,805      $1,035,800
   Interest rate swap              1,147          1,147       (4,081)          6,635
                              ----------     ----------     --------      ----------
      Total                   $1,000,904     $1,003,021     $965,724      $1,042,435
                              ==========     ==========     ========      ==========
</Table>


                                       33
<PAGE>


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         We are a defendant in various legal matters arising in the ordinary
course of business, including a regulatory dispute regarding intra-island access
fees charged to long distance carriers. We, after consultation with legal
counsel, believe that the resolution of these matters will not have a material
adverse effect on the Company's financial position and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Regulatory Matters" for more information regarding these matters.

         In connection with the privatization of the Company, the PRTA agreed to
indemnify, defend and hold the Company harmless for specified litigation in
excess of $50 million in the aggregate, including one environmental matter.

         We are regulated by the FCC for inter-state wireline services and by
the TRB for intra-state wireline services.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

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

            See Exhibit Index.

         b) Reports on Form 8-K.

         The following Current Reports on Form 8-K were filed during the quarter
         ended March 31, 2002:

              1)  A Current Report on Form 8-K, dated January 25, 2002, was
                  filed regarding the exercise of an option held by Verizon and
                  Popular, Inc., since the Acquisition in March 2, 1999, to
                  acquire an additional 15% ownership interest in the Company
                  from the PRTA, the current government shareholder.

              2)  A Current Report on Form 8-K, dated February 28, 2002, was
                  filed regarding the TRB's issuance of a Resolution and Order
                  with respect to the Company requested reconsideration of the
                  TRB October 10, 2001 Order to reduce the access rates the
                  Company charges to long distance carriers to originate and
                  terminate intra-island long distance calls through its
                  network.


                                       34
<PAGE>


                                   SIGNATURES

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

         TELECOMUNICACIONES DE PUERTO RICO, INC.


                                      By:       /s/ Jon E. Slater
                                          --------------------------------------
                                          Name:  Jon E. Slater
                                          Title: Chief Executive Officer
                                          Date:  May 14, 2002


                                      By:      /s/ W. Jack Reagan
                                         ---------------------------------------
                                          Name:  W. Jack Reagan
                                          Title: Chief Financial Officer
                                          Date:  May 14, 2002


                                      By:      /s/ Robert P. Huberty
                                         ---------------------------------------
                                          Name:  Robert P. Huberty
                                          Title: Chief Accounting Officer
                                          Date:  May 14, 2002


                                       35
<PAGE>
                                  EXHIBIT INDEX

<Table>
<Caption>
       EXHIBIT
       NUMBER                            DESCRIPTION
       -------                           -----------
<S>               <C>
          3.1     Certificate of Incorporation of Telecomunicaciones de Puerto
                  Rico, Inc. (Incorporated by reference to Exhibit 3.1 of the
                  Company's Registration Statement filed on Form S-4 (File
                  333-85503)).

          3.2     Certificate of Amendment to the Certificate of Incorporation
                  of Telecomunicaciones de Puerto Rico, Inc. (Incorporated by
                  reference to Exhibit 3.2 of the Company's Annual Report on
                  Form 10-K for the year ended December 31, 1999 (File
                  333-85503)).

          3.3     By-Laws of Telecomunicaciones de Puerto Rico, Inc.
                  (Incorporated by reference to Exhibit 3.4 of the Company's
                  Registration Statement filed on Form S-4 (File 333-85503)).

          3.4     Certificate of Incorporation of Celulares Telefonica, Inc.
                  (Incorporated by reference to Exhibit 3.3 of the Company's
                  Registration Statement filed on Form S-4 (File 333-85503)).

          3.5     Certificate of Amendment to the Certificate of Incorporation
                  of Celulares Telefonica, Inc., as amended. (Incorporated by
                  reference to Exhibit 3.5 of the Company's Annual Report on
                  Form 10-K for the year ended December 31, 2001 (File
                  333-85503)).

          4.1     Trust Indenture dated as of May 20, 1999 between
                  Telecomunicaciones de Puerto Rico, Inc. and The Bank of New
                  York. (Incorporated by reference to Exhibit 4.1 of the
                  Company's Registration Statement filed on Form S-4 (File
                  333-85503)).

         10.1     Shareholders Agreement, dated as of March 2, 1999, by and
                  among Telecomunicaciones de Puerto Rico, Inc., GTE Holdings
                  (Puerto Rico) LLC, GTE International Telecommunications
                  Incorporated, Popular, Inc., Puerto Rico Telephone Authority
                  and the shareholders of Telecomunicaciones de Puerto Rico,
                  Inc., who shall from time to time be parties thereto as
                  provided therein. (Incorporated by reference to Exhibit 10.5
                  of the Company's Registration Statement filed on Form S-4
                  (File 333-85503)).

         10.2     Amended and Restated Puerto Rico Management Agreement, dated
                  as of March 2, 1999, by and among Telecomunicaciones de Puerto
                  Rico, Inc., Puerto Rico Telephone Company, and GTE
                  International Telecommunications Incorporated. (Incorporated
                  by reference to Exhibit 10.6 of the Company's Registration
                  Statement filed on Form S-4 (File 333-85503)).

         10.3     Amended and Restated U.S. Management Agreement, dated as of
                  March 2, 1999, by and among Telecomunicaciones de Puerto Rico,
                  Inc., Puerto Rico Telephone Company, and GTE International
                  Telecommunications Incorporated. (Incorporated by reference to
                  Exhibit 10.7 of the Company's Registration Statement filed on
                  Form S-4 (File 333-85503)).

         10.4     Amended and Restated Technology Transfer Agreement, dated as
                  of March 2, 1999, by and among Telecomunicaciones de Puerto
                  Rico, Inc., Puerto Rico Telephone Company, and GTE
                  International Telecommunications Incorporated. (Incorporated
                  by reference to Exhibit 10.8 of the Company's Registration
                  Statement filed on Form S-4 (File 333-85503)).

         10.5     Non-Competition Agreement, dated as of March 2, 1999, by and
                  among Telecomunicaciones de Puerto Rico, Inc, GTE Holdings
                  (Puerto Rico) LLC, GTE International Telecommunications
                  Incorporated, Popular, Inc., Puerto Rico Telephone Authority,
                  and the Government Development Bank for Puerto Rico.
                  (Incorporated by reference to Exhibit 10.9 of the Company's
                  Registration Statement filed on Form S-4 (File 333-85503)).

         10.6     Share Option Agreement, dated as of March 2, 1999, by and
                  among Puerto Rico Telephone Authority, Telecomunicaciones de
                  Puerto Rico, Inc, GTE Holdings (Puerto Rico) LLC, and GTE
                  International Telecommunications Incorporated. (Incorporated
                  by reference to Exhibit 10.10 of the Company's Registration
                  Statement filed on Form S-4 (File 333-85503)).

         10.7     Trust Agreement of the Employee Stock Ownership Plan of
                  Telecomunicaciones de Puerto Rico, Inc., dated as of March 2,
                  1999, by and between U.S. Trust, National Association and
                  Telecomunicaciones de Puerto Rico, Inc. (Incorporated by
                  reference
</Table>


                                       36

<PAGE>


<Table>
<S>               <C>

                  to Exhibit 10.12 of the Company's Registration Statement filed
                  on Form S-4 (File 333-85503)).

         10.8     ESOP Loan Agreement, dated as of March 2, 1999, by and between
                  the Trust of the Employee Stock Ownership Plan of
                  Telecomunicaciones de Puerto Rico, Inc. and Telecomunicaciones
                  de Puerto Rico, Inc. (Incorporated by reference to Exhibit
                  10.13 of the Company's Registration Statement filed on Form
                  S-4 (File 333-85503)).

         10.9     Stock Purchase Agreement, dated as of March 2, 1999, by and
                  between Puerto Rico Telephone Authority and the Trust of the
                  Employee Stock Ownership Plan of Telecomunicaciones de Puerto
                  Rico, Inc. (Incorporated by reference to Exhibit 10.14 of the
                  Company's Registration Statement filed on Form S-4 (File
                  333-85503)).

         10.10    Pledge Agreement, dated as of March 2, 1999, by and between
                  the Trust of the Employee Stock Ownership Plan of
                  Telecomunicaciones de Puerto Rico, Inc. and Telecomunicaciones
                  de Puerto Rico, Inc. (Incorporated by reference to Exhibit
                  10.15 of the Company's Registration Statement filed on Form
                  S-4 (File 333-85503)).

         10.11    Tag Along Agreement, dated as of March 2, 1999, by and among
                  GTE Holdings (Puerto Rico) LLC, GTE International
                  Telecommunications Incorporated, and the Trust of the Employee
                  Stock Ownership Plan of Telecomunicaciones de Puerto Rico,
                  Inc. (Incorporated by reference to Exhibit 10.16 of the
                  Company's Registration Statement filed on Form S-4 (File
                  333-85503)).

         10.12    $500,000,000 Five-Year Credit Agreement, dated as of March 2,
                  1999, among Telecomunicaciones de Puerto Rico, Inc., as
                  Borrower, Puerto Rico Telephone Company and Celulares
                  Telefonica, as Guarantors, the Initial Lenders named therein,
                  Citibank, N.A., as Administrative Agent, Bank of America
                  National Trust and Savings Association, as Syndication Agent,
                  and The Chase Manhattan Bank and Morgan Guaranty Trust Company
                  of New York, as Documentation Agents. (Incorporated by
                  reference to Exhibit 10.17 of the Company's Registration
                  Statement filed on Form S-4 (File 333-85503)).

         10.13    Letter Amendment to the Five-Year Credit Agreement, dated May
                  7, 1999. (Incorporated by reference to Exhibit 10.18 of the
                  Company's Registration Statement filed on Form S-4 (File
                  333-85503)).

         10.16    Collective Bargaining Agreement between the Puerto Rico
                  Telephone Company and the Independent Union of Telephone
                  Employees of Puerto Rico effective from January 18, 2000 until
                  January 17, 2003. Approved on October 6, 2000. (Incorporated
                  by reference to Exhibit 10.23 of the Company's Annual Report
                  on Form 10-K for the year ended December 31, 2000 (File
                  333-85503)).

         10.17    Collective Bargaining Agreement between the Puerto Rico
                  Telephone Company and the Independent Brotherhood of Telephone
                  Company Employees effective from October 23, 1999 until
                  October 22, 2003. Approved on October 20, 2000. (Incorporated
                  by reference to Exhibit 10.24 of the Company's Annual Report
                  on Form 10-K for the year ended December 31, 2000 (File
                  333-85503)).

         10.18    Commercial Paper Dealer Agreement 4(2) Program among
                  Telecomunicaciones de Puerto Rico, Inc., as Issuer; Puerto
                  Rico Telephone Company, Inc. and Celulares Telefonica, Inc.,
                  as Guarantors; and Merrill Lynch Money Markets Inc., as Dealer
                  for notes with maturities up to 240 days; Merrill Lynch,
                  Pierce, Fenner & Smith Incorporated, as Dealer for notes with
                  maturities over 270 days up to 365 days. Concerning notes to
                  be issued pursuant to an Issuing and Paying Agency Agreement
                  dated as of November 9, 2000 between the Issuer and The Chase
                  Manhattan Bank, as Issuing and Paying Agent. (Incorporated by
                  reference to Exhibit 10.25 of the Company's Annual Report on
                  Form 10-K for the year ended December 31, 2000 (File
                  333-85503)).

         10.19    Commercial Paper Dealer Agreement 4(2) Program among
                  Telecomunicaciones de Puerto Rico, Inc., as Issuer; Puerto
                  Rico Telephone Company, Inc. and Celulares Telefonica, Inc.,
                  as Guarantors; and Salomon Smith Barney Inc., as Dealer.
                  Concerning notes to be issued pursuant to an Issuing and
                  Paying Agency Agreement dated as of November 9, 2000 between
                  the Issuer and The Chase Manhattan Bank, as Issuing and Paying
                  Agent. (Incorporated by reference to Exhibit 10.26 of the
                  Company's Annual Report on Form 10-K for the year ended
                  December 31, 2000 (File 333-85503)).
</Table>

                                       37
<PAGE>


<Table>
<S>               <C>
         10.20    Commercial Paper Dealer Agreement 4(2) Program among
                  Telecomunicaciones de Puerto Rico, Inc., as Issuer; Puerto
                  Rico Telephone Company, Inc. and Celulares Telefonica, Inc.,
                  as Guarantors; and Banc of America Securities LLC. Concerning
                  notes to be issued pursuant to an Issuing and Paying Agency
                  Agreement dated as of November 9, 2000 between the Issuer and
                  The Chase Manhattan Bank, as Issuing and Paying Agent.
                  (Incorporated by reference to Exhibit 10.27 of the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  2000 (File 333-85503)).

         10.21    Commercial Paper Dealer Agreement 4(2) Program among
                  Telecomunicaciones de Puerto Rico, Inc., as Issuer; Puerto
                  Rico Telephone Company, Inc. and Celulares Telefonica, Inc.,
                  as Guarantors; and Popular Securities, Inc., as Dealer for
                  notes with maturities up to 365 days. Concerning notes to be
                  issued pursuant to an Issuing and Paying Agency Agreement
                  dated as of November 9, 2000 between the Issuer and The Chase
                  Manhattan Bank, as Issuing and Paying Agent. (Incorporated by
                  reference to Exhibit 10.28 of the Company's Annual Report on
                  Form 10-K for the year ended December 31, 2000 (File
                  333-85503)).

         10.22    Issuing and Paying Agency Agreement dated as of November 9,
                  2000, by and among Telecomunicaciones de Puerto Rico, Inc., as
                  Issuer, Puerto Rico Telephone Company and Celulares
                  Telefonica, Inc., as Guarantors, and The Chase Manhattan Bank,
                  as Issuing and Paying Agent. (Incorporated by reference to
                  Exhibit 10.29 of the Company's Annual Report on Form 10-K for
                  the year ended December 31, 2000 (File 333-85503)).

         10.23    $50,000,000 working capital revolving credit agreement dated
                  as of June 28, 2001, among Telecomunicaciones de Puerto Rico,
                  Inc., as Borrower, Puerto Rico Telephone Company, Inc., and
                  Celulares Telefonica, Inc., as Guarantors, and Banco Bilbao
                  Vizcaya Argentaria S.A. and Banco Bilbao Vizcaya Puerto Rico,
                  as Lenders. (Incorporated by reference to Exhibit 10.23 of the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  June 30, 2001 (File 333-85503)).

         10.24    $50,000,000 working capital revolving credit agreement dated
                  as of June 28, 2001, among Telecomunicaciones de Puerto Rico,
                  Inc., as Borrower, Puerto Rico Telephone Company, Inc. and
                  Celulares Telefonica, Inc., as Guarantors, and Banco Popular
                  de Puerto Rico, as Lender and Administrative Agent.
                  (Incorporated by reference to Exhibit 10.24 of the Company's
                  Quarterly Report on Form 10-Q for the period ended June 30,
                  2001 (File 333-85503)).

         10.25    Letter Amendment, to the March 2, 1999 Shareholders Agreement,
                  dated as of May 25, 2001, by and among Telecomunicaciones de
                  Puerto Rico, Inc., GTE Holdings (Puerto Rico) LLC, GTE
                  International Telecommunications Incorporated, Popular, Inc.,
                  and the Puerto Rico Telephone Authority. (Incorporated by
                  reference to Exhibit 10.25 of the Company's Quarterly Report
                  on Form 10-Q for the period ended June 30, 2001 (File
                  333-85503)).

         10.26    Third Letter Amendment, dated August 3, 2001, to the Five-Year
                  Credit Agreement with Citibank, N.A., dated as of March 2,
                  1999, as amended by the Letter Amendment to Five-Year Credit
                  Agreement dated as of May 7, 1999 and as further amended by
                  the second Letter Amendment to Five-Year Credit Agreement
                  dated as of February 15, 2001. (Incorporated by reference to
                  Exhibit 10.26 of the Company's Quarterly Report on Form 10-Q
                  for the period ended September 31, 2001 (File 333-85503)).

         10.27    ISDA Master Agreement, dated August 29, 2001, by and among
                  Telecomunicaciones de Puerto Rico, Inc., as the Counterparty,
                  Puerto Rico Telephone Company and Celulares Telefonica, Inc.,
                  as Guarantors, and Bank of America, N.A., as the Bank.
                  (Incorporated by reference to Exhibit 10.27 of the Company's
                  Quarterly Report on Form 10-Q for the period ended September
                  31, 2001 (File 333-85503)).

         10.28    ISDA Master Agreement, dated August 29, 2001, by and among
                  Telecomunicaciones de Puerto Rico, Inc., as the Counterparty,
                  Puerto Rico Telephone Company and Celulares Telefonica, Inc.,
                  as Guarantors, and Citibank, N.A., as the Bank. (Incorporated
                  by reference to Exhibit 10.28 of the Company's Quarterly
                  Report on Form 10-Q for the period ended September 31, 2001
                  (File 333-85503)).
</Table>


                                       38