DBRS Confirms Verizon Communications Inc. Long-Term Rating at “A”, Short-Term Rating at R-1 (low)

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Verizon Communications Inc.’s (“Verizon” or the “Company”) Senior Unsecured Notes at “A” and Commercial Paper at R-1 (low). All trends are Stable. DBRS has also confirmed the ratings of Verizon Wireless Capital LLC (“Verizon Wireless”) (please see separate press release).

The Verizon ratings remain supported by its dominant wireless operations that are expected to become an even more integral part of future free cash flow generation at Verizon and its significant wireline operations that help the Company in terms of size and scale and facilitate the launch of new broadband-based services. DBRS notes that Verizon continues to maintain the financial flexibility and balance sheet strength, which is required given that the competitive environment is expected to remain intense over the medium term.

DBRS acknowledges that Verizon will face business pressures attributable to continued access line erosion, mainly attributable to cable telephony offerings and the implementation of its fiber-to-the-premises (FTTP) strategy that will result in higher capex and marketing expenses. In addition, Verizon will have an increased exposure to the lower-margin business/enterprise market through its recent acquisition of MCI, Inc. (“MCI”). However, DBRS believes the Company appears to have the ability to counter some of these pressures through increased product bundling amongst its residential customers, lowering its network cost base in the medium term through its FTTP initiative along with revenue growth opportunities relating to consumer broadband/video and wireless services to MCI customers.

More importantly in the near term, Verizon Wireless is expected to maintain its strong performance, and thus continue to be the driver of cash flow from operations growth for Verizon overall. As such, the counterbalancing effect of Verizon Wireless plays a key role in the maintenance of Verizon’s current ratings both from an operational and financial perspective. DBRS notes that any change to this balance, such as wireline operations experiencing accelerated pressure, or the repurchase of the 45% ownership in Verizon Wireless held by Vodafone Group Plc that increases Verizon’s debt levels dramatically, would likely have negative rating implications.

DBRS expects that Verizon will generate over US$2 billion in free cash flow in 2006, not including the recently sold International operations. Therefore, along with existing cash and partial proceeds from the International sale, DBRS believes the Company will have the ability to reduce most of the incremental MCI debt (US$5.9 billion) during the year and maintain key financial metrics supportive of an “A” rating. Furthermore, Verizon’s intention to sell/spin-off its Information Services segment could also help reduce debt.

Despite a strong financial profile, the ability of Verizon to maintain its ratings in the long-term is still dependent on the successful execution of its shift in revenue mix, reducing its legacy cost base, while establishing a customer base that uses Verizon for the provision of voice, broadband, wireless, and video services exclusively.