Verizon Communications (VZ)

Alltel Acquisition and Integration

On June 5, 2008, Verizon Wireless entered into an agreement and plan of merger with Alltel, a provider of wireless voice and data services to consumer and business customers in 34 states, and its controlling stockholder, Atlantis Holdings LLC, to acquire, in an all-cash merger, 100% of the equity of Alltel for cash consideration of $5.9 billion and the assumption of approximately $24 billion of aggregate principal amount of Alltel debt. Verizon Wireless closed the transaction on January 9, 2009. See – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments” in the 2009 Annual Report to Shareowners.

As a condition of the regulatory approvals from the Department of Justice (DOJ) and the Federal Communications Commission (FCC) that were required to complete the Alltel acquisition, Verizon Wireless is required to divest overlapping wireless properties in 105 operating markets in 24 states (Alltel Divestiture Markets). These markets consist primarily of Alltel operations, but also include a small number of pre-merger operations of Verizon Wireless. As a result of these divestiture requirements, we placed the wireless licenses and assets in the Alltel Divestiture Markets in a management trust that will continue to operate the properties under their current brands until they are sold. In May 2009, Verizon Wireless entered into a definitive agreement with AT&T Mobility LLC (AT&T Mobility), a subsidiary of AT&T Inc. (AT&T) pursuant to which AT&T Mobility agreed to acquire 79 of the 105 Alltel Divestiture Markets, including licenses and network assets for approximately $2.4 billion in cash. In June 2009, Verizon Wireless entered into an agreement with Atlantic Tele-Network, Inc. pursuant to which it agreed to acquire the remaining 26 Alltel Divestiture Markets that were not included in the transaction with AT&T Mobility, including licenses and network assets for $200 million in cash. Verizon Wireless expects to close both transactions during the first half of 2010. Completion of each of the foregoing transactions is subject to receipt of regulatory approvals from the DOJ and the FCC.

Substantially all of the Alltel markets that are not subject to divestiture have been re-branded to “Verizon Wireless.” As a result of the acquisition of Alltel, we have experienced cost savings from reduced roaming costs, the elimination of duplicate facilities and reduced overall expenses relating to advertising, overhead and headcount. We also expect to experience reduced overall combined capital expenditures as a result of greater economies of scale and the redeployment of redundant network assets. Our network and Alltel’s network both employ code division multiple access (CDMA) technology, which is facilitating the integration of Alltel’s network operations with ours. We cannot, however, ensure that we will be able to achieve all of the anticipated cost savings and other benefits discussed above.

3

Table of Contents

Alltel Acquisition and Integration

As a condition of the regulatory approvals from the Department of Justice and the FCC that were required to complete the Alltel acquisition, we will divest overlapping wireless properties in 105 operating markets in 24 states (“Alltel Divestiture Markets”). These properties consist primarily of Alltel operations, but also include the pre-merger operations of Verizon Wireless in four markets as well as operations in Southern Minnesota and Western Kansas that we acquired from Rural Cellular in 2008. As a result of these divestiture requirements, we have placed the wireless licenses and assets in the Alltel Divestiture Markets in a management trust that will continue to operate the properties under their current brands until they are sold, and these properties will not be integrated with our other operations.

We expect to experience substantial operational benefits from the Alltel acquisition, including reduced overall combined capital expenditures as a result of greater economies of scale and the rationalization of network assets. In addition, we anticipate combined overall cost savings from reduced roaming costs as a result of moving more traffic to the Verizon Wireless network, reduced network-related costs resulting from the elimination of duplicate facilities, and reduced overall expenses relating to advertising, overhead and headcount.

Alltel’s CDMA network covered a population of approximately 77 million, as of September 30, 2008. As of the completion of the Alltel acquisition on January 9, 2009, our combined overall network coverage expanded to approximately 288 million people, including the Alltel Divestiture Markets.

Alltel uses the same primary network platform technology as Verizon Wireless – CDMA – and it has deployed 1XRTT technology in virtually its entire CDMA network. Alltel also provides EV-DO coverage to approximately 79% of the population covered by its network, as of September 30, 2008. Because our and Alltel’s networks employ CDMA, we anticipate that we will be able to rapidly integrate Alltel’s network operations with ours, and that the majority of Alltel customers will be able to continue to use their current handsets after the integration is completed.

The Alltel markets that will be retained and combined with our operations will continue to use the Alltel brand for the next several months, as we work to integrate networks, convert billing systems and upgrade Alltel’s high-speed wireless broadband service. We will maintain Alltel’s existing GSM networks in the retained markets to continue serving the roaming needs of GSM carriers’ customers.

We believe that Alltel’s sales, marketing and distribution efforts have been similar to ours, targeted to addressing the needs of a variety of customer segments, stimulating usage, increasing penetration and improving customer retention rates through various product offerings and pricing strategies. To accomplish these objectives, Alltel has offered competitive post-paid local, statewide and national service plans at varying prices, as well as prepaid plans.

Alltel distributes its products and services through its owned retail stores and retail kiosks, dealers and direct sales representatives, via the Internet and telemarketing.

Alltel’s retail distribution channel included approximately 750 Alltel-operated locations, as of September 30, 2008.

Alltel’s direct sales force focuses its efforts on selling and servicing larger business customers who have multiple lines of service. Direct sales representatives are trained to sell to and service the demands of larger wireless customers who often have special service and equipment requirements.

Alltel enters into dealer agreements with national and local retailers and discounters in its markets. In exchange for a commission payment, these dealers solicit customers for Alltel’s wireless services. The majority of these dealers can service Alltel’s existing customers by offering additional services, features and accessories, and taking bill payments.

Alltel also provides consumer and business customers with the opportunity to shop for the majority of its products and services by phone or the Internet via Alltel’s web store. Utilizing direct fulfillment, phone and accessories purchased through these distribution channels are delivered directly to the customer. These channels provide customers with exclusive pricing where appropriate and provide Alltel the ability to respond quickly to market changes.

Alltel’s stores will remain open, as we work to integrate Alltel’s sales, marketing and distribution operations with those of Verizon Wireless. We will re-brand Alltel operations in the retained markets in phases, beginning in the second quarter of 2009 and continuing through the third quarter of 2009, as billing conversions are completed throughout the country. We will continue to evaluate Alltel store and agent locations to ensure that they are strategically located in order to achieve our distribution objectives.

8

Table of Contents

Alltel Acquisition and Integration

ALIGN="justify">As a condition of the regulatory approvals from the Department of Justice and the FCC that were required to complete the Alltel acquisition, we will divest overlapping wireless properties in 105
operating markets in 24 states (“Alltel Divestiture Markets”). These properties consist primarily of Alltel operations, but also include the pre-merger operations of Verizon Wireless in four markets as well as operations in Southern
Minnesota and Western Kansas that we acquired from Rural Cellular in 2008. As a result of these divestiture requirements, we have placed the wireless licenses and assets in the Alltel Divestiture Markets in a management trust that will continue to
operate the properties under their current brands until they are sold, and these properties will not be integrated with our other operations.

SIZE="2">We expect to experience substantial operational benefits from the Alltel acquisition, including reduced overall combined capital expenditures as a result of greater economies of scale and the rationalization of network assets. In addition,
we anticipate combined overall cost savings from reduced roaming costs as a result of moving more traffic to the Verizon Wireless network, reduced network-related costs resulting from the elimination of duplicate facilities, and reduced overall
expenses relating to advertising, overhead and headcount.

Alltel’s CDMA network covered a population of approximately
77 million, as of September 30, 2008. As of the completion of the Alltel acquisition on January 9, 2009, our combined overall network coverage expanded to approximately 288 million people, including the Alltel Divestiture
Markets.

Alltel uses the same primary network platform technology as Verizon Wireless – CDMA – and it has deployed 1XRTT
technology in virtually its entire CDMA network. Alltel also provides EV-DO coverage to approximately 79% of the population covered by its network, as of September 30, 2008. Because our and Alltel’s networks employ CDMA, we anticipate that
we will be able to rapidly integrate Alltel’s network operations with ours, and that the majority of Alltel customers will be able to continue to use their current handsets after the integration is completed.