Verizon Communications (VZ)

Interest Expense

Total interest costs on debt balances in 2009 increased by $1,463 million compared to 2008, primarily due to the $23 billion increase in the average debt levels. The increase in average debt outstanding compared to 2008 was primarily driven by borrowings to finance the acquisition of Alltel. The increase in capitalized interest costs during 2009 primarily related to capitalization of interest on wireless licenses under development for commercial service primarily as a result of the spectrum acquired in the 700 MHz auction (see “Consolidated Financial Condition”).

Total interest costs on debt balances in 2008 increased by $308 million, compared to 2007, due to an increase in the average debt level, partially offset by lower interest rates compared to 2007. Interest expense in 2008 decreased $10 million compared to 2007 primarily due to higher capitalized interest costs. The increase in capitalized interest costs was related to the development of wireless licenses. The increase in average debt outstanding was primarily driven by the issuance of $8,000 million of fixed rate notes with varying maturities, in the first half of 2008, and to a lesser extent, the Verizon Wireless borrowings during the second half of 2008 (see “Consolidated Financial Condition”).

Interest Expense

Total interest costs in 2008 increased $308 million, compared to 2007, due to an increase in the weighted-average debt level, partially offset by lower interest rates compared to last year. Interest Expense in 2008 decreased $10 million compared to 2007 primarily due to higher capitalized interest costs. Capitalized interest costs include approximately $557 million related to the development of wireless licenses for commercial service, primarily as a result of the spectrum acquired in the 700 MHz auction. The increase in weighted-average debt outstanding was primarily driven by the issuance of $8,000 million of fixed rate notes with varying maturities, in the first half of 2008, and to a lesser extent, the Verizon Wireless borrowings during the second half of 2008 (see “Consolidated Financial Condition”). Partially offsetting this increase in the weighted average debt outstanding were debt reductions.

Total interest costs in 2007 decreased $553 million, compared to 2006, primarily due to a decrease in average debt levels, partially offset by slightly higher interest rates. Debt levels decreased primarily as a result of the approximately $7,100 million reduction from the spin-off of our domestic print and Internet yellow pages directories business in November 2006, as well as from debt redemptions and retirements funded by proceeds from the spin-off and the divestiture of our Caribbean and Latin American investments during 2006 and the first quarter of 2007.

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Interest Expense

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Total interest costs on debt balances in the first quarter of 2009 increased $616 million compared to the similar period in 2008 primarily due to an increase in the weighted-average debt level and higher interest rates. Capitalized interest costs during the first quarter of 2009 include approximately $184 million related to the development of wireless licenses acquired in the 700 MHz auction. The increase in weighted-average debt outstanding compared to the similar period in 2008 was primarily driven by borrowings to finance the acquisition of Alltel and the licenses acquired in the 700 MHz auction.

Interest Expense

Total interest costs in 2008 increased $308 million, compared to 2007, due to an increase in the weighted-average debt level, partially offset by lower interest rates compared to last year. Interest Expense in 2008 decreased $10 million compared to 2007 primarily due to higher capitalized interest costs. Capitalized interest costs include approximately $557 million related to the development of wireless licenses for commercial service, primarily as a result of the spectrum acquired in the 700 MHz auction. The increase in weighted-average debt outstanding was primarily driven by the issuance of $8,000 million of fixed rate notes with varying maturities, in the first half of 2008, and to a lesser extent, the Verizon Wireless borrowings during the second half of 2008 (see “Consolidated Financial Condition”). Partially offsetting this increase in the weighted average debt outstanding were debt reductions.

Total interest costs in 2007 decreased $553 million, compared to 2006, primarily due to a decrease in average debt levels, partially offset by slightly higher interest rates. Debt levels decreased primarily as a result of the approximately $7,100 million reduction from the spin-off of our domestic print and Internet yellow pages directories business in November 2006, as well as from debt redemptions and retirements funded by proceeds from the spin-off and the divestiture of our Caribbean and Latin American investments during 2006 and the first quarter of 2007.

Interest Expense

Interest Expense

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Total interest costs in the third quarter of 2008 increased $106 million and $94 million for the nine months ended September 30, 2008 compared to the similar periods in 2007 primarily due to an increase in the weighted-average debt level, partially offset by lower interest rates compared to last year. Capitalized interest costs during the third quarter of 2008 include approximately $176 million related to the development of wireless licenses for commercial service, primarily as a result of the spectrum being acquired as a result of the 700 MHz auction. The increase in weighted-average debt outstanding was primarily driven by the issuance of $8,000 million of fixed rate notes, with varying maturities, in the first half of 2008. In addition, during the second quarter of 2008, Verizon Wireless borrowed $4,795 million under a term facility primarily to complete the purchase of Alltel debt obligations and, during the third quarter of 2008, $2,750 million under a delayed draw facility to finance the acquisition of Rural Cellular. Partially offsetting this increase in our weighted-average debt outstanding were continued debt reductions.

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Table of Contents

Interest Expense

During the three months ended June 30, 2008, total interest costs increased $38 million, primarily due to an increase in the weighted-average debt level partially offset by lower interest rates compared to last year. Capitalized interest costs during the second quarter of 2008 include approximately $155 million related to the development of wireless licenses for commercial service, primarily as a result of the spectrum being acquired as a result of the 700 MHz auction. The increase in weighted-average debt outstanding was primarily driven by the issuance of $8,000 million of fixed rate notes, with varying maturities, in the first half of 2008, that resulted in net cash proceeds of $7,903 million, partially offset by continued debt reductions.

Interest Expense

During the first quarter of 2008, total interest costs decreased $50 million, compared to the similar period in 2007, primarily due to a decrease in the weighted-average debt level and lower interest rates compared to last year. The decrease in weighted-average debt outstanding was driven by continued debt reductions, partially offset by the February 2008 issuance of $4,000 million of fixed rate notes, with varying maturities, that resulted in net cash proceeds of $3,953 million.

Interest Expense

Total interest costs decreased $553 million in 2007 compared to 2006, primarily due to a decrease in average debt levels, partially offset by slightly higher interest rates. Debt levels decreased primarily as a result of the approximately $7.1 billion reduction from the spin-off of our domestic print and Internet yellow pages directories business in November 2006, as well as from debt redemptions and retirements funded by proceeds from the spin-off and the divestiture of our Caribbean and Latin American investments during 2006 and the first quarter of 2007.

In 2006, interest costs increased $330 million compared to 2005 primarily due to an increase in average debt level of $2,348 million and increased interest rates compared to 2005. Higher capital expenditures in 2006 contributed to higher capitalized interest costs.

Interest Expense

Total interest costs
decreased $553 million in 2007 compared to 2006, primarily due to a decrease in average debt levels, partially offset by slightly higher interest rates. Debt levels decreased primarily as a result of the approximately $7.1 billion reduction from the
spin-off of our domestic print and Internet yellow pages directories business in November 2006, as well as from debt redemptions and retirements funded by proceeds from the spin-off and the divestiture of our Caribbean and Latin American investments
during 2006 and the first quarter of 2007.

In 2006, interest
costs increased $330 million compared to 2005 primarily due to an increase in average debt level of $2,348 million and increased interest rates compared to 2005. Higher capital expenditures in 2006 contributed to higher capitalized interest costs.