Back to GetFilings.com
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
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 1-8606
BELL ATLANTIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2259884
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
1717 Arch Street
Philadelphia, Pennsylvania 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 963-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------------------
Common Stock, $1 par value .......... New York, Philadelphia, Boston,
Chicago and Pacific Stock Exchanges
Preference Stock Purchase Rights .... New York, Philadelphia, Boston,
Chicago and Pacific Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
At February 28, 1994, the aggregate market value of the registrant's voting
stock held by non-affiliates was approximately $23,876,000,000.
At February 28, 1994, 436,185,312 shares of the registrant's Common Stock were
outstanding, after deducting 49,959 shares held in treasury.
Documents incorporated by reference:
Portions of the registrant's Annual Report to Shareowners for the year ended
December 31, 1993 (Part II).
Portions of the registrant's Proxy Statement dated March 1, 1994 prepared in
connection with the Annual Meeting of Shareowners (Part III).
================================================================================
TABLE OF CONTENTS
Item No. Page
- -------- ----
PART I
1. Business.................................................. 1
2. Properties................................................ 25
3. Legal Proceedings......................................... 26
4. Submission of Matters to a Vote of
Security Holders....................................... 28
Executive Officers of the Registrant.......................... 29
PART II
5. Market for Registrant's Common Equity
and Related Stockholder Matters........................ 29
6. Selected Financial Data................................... 30
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 30
8. Financial Statements and Supplementary Data............... 30
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 30
PART III
10. Directors and Executive Officers of the Registrant........ 30
11. Executive Compensation.................................... 30
12. Security Ownership of Certain Beneficial Owners
and Management......................................... 30
13. Certain Relationships and Related Transactions............ 30
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ 31
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 24, 1994.
PART I
Item 1. Business
GENERAL
Bell Atlantic Corporation (the "Company" or "Bell Atlantic") is one of the
seven regional holding companies ("RHCs") formed in connection with the court-
approved divestiture (the "Divestiture"), effective January 1, 1984, of those
assets of the American Telephone and Telegraph Company ("AT&T") related to
exchange telecommunications, exchange access functions, printed directories and
cellular mobile communications.
Pursuant to the Divestiture, AT&T transferred to the Company, among other
assets, its 100% ownership interest in seven Bell System operating companies
("BOCs"): New Jersey Bell Telephone Company; The Bell Telephone Company of
Pennsylvania; The Diamond State Telephone Company; The Chesapeake and Potomac
Telephone Company; The Chesapeake and Potomac Telephone Company of Maryland; The
Chesapeake and Potomac Telephone Company of Virginia; and The Chesapeake and
Potomac Telephone Company of West Virginia (collectively, the "Network Services
Companies"). In January 1994, to facilitate the creation of a uniform "Bell
Atlantic" brand name across the territories served by these seven telephone
subsidiaries, the names of the Network Services Companies were changed to Bell
Atlantic - New Jersey, Inc. ("Bell Atlantic - New Jersey"), Bell Atlantic -
Pennsylvania, Inc. ("Bell Atlantic - Pennsylvania"), Bell Atlantic - Delaware,
Inc. ("Bell Atlantic - Delaware"), Bell Atlantic - Washington, D.C., Inc. ("Bell
Atlantic - Washington, D.C."), Bell Atlantic - Maryland, Inc. ("Bell Atlantic -
Maryland"), Bell Atlantic - Virginia, Inc. ("Bell Atlantic - Virginia") and Bell
Atlantic - West Virginia, Inc. ("Bell Atlantic - West Virginia"), respectively.
The Company's business currently encompasses two segments: (1) Communications
and Related Services, and (2) Financial, Real Estate, and Other Services.
Financial information with respect to the Company's industry segments is set
forth in Note 15 to the Consolidated Financial Statements incorporated by
reference in this Annual Report on Form 10-K.
The Communications and Related Services segment includes the Network Services
Companies as well as subsidiaries which are engaged in the business of providing
wireless communications products and services, including cellular mobile
service; selling directory advertising and providing photocomposition services;
servicing and repairing computers; and providing software for telecommunications
and computer networking. During 1993, Bell Atlantic reorganized certain
functions performed by each of the Network Services Companies into nine lines of
business ("LOBs") organized across the Network Services Companies around
specific market segments. See "Communications and Related Services - The
Network Services Companies - Operations".
The Financial, Real Estate, and Other Services segment is comprised of
subsidiaries of the Company which are engaged in lease financing of commercial,
industrial, medical and high-technology equipment, and other forms of financing;
real estate investment and management; and the sale and distribution of
liquefied petroleum gas. In line with its continuing de-emphasis of financial
services businesses over the past several years and its intensified focus on
core communications businesses, the Company announced in October 1993 that it
had begun evaluating possible strategies for exiting its financial services
businesses. In March 1994, the Company announced an agreement to sell a
significant portion of its diversified leasing business to GFC Financial
Corporation. This sale is expected to close in the second quarter of 1994,
subject to the receipt of regulatory approvals. See "Financial, Real Estate,
and Other Services".
1
The communications industry is currently undergoing fundamental changes driven
by the accelerated pace of technological innovation, the convergence of the
telecommunications, cable television, information services and entertainment
businesses, and a regulatory environment in which many traditional regulatory
barriers are being lowered and competition permitted or encouraged. Although no
definitive prediction can be made of the market opportunities these changes will
present or whether Bell Atlantic will be able successfully to take advantage of
these opportunities, the Company is positioning itself to be a leading
communications, information services and entertainment company.
The Company was incorporated in 1983 under the laws of the State of Delaware
and has its principal executive offices at 1717 Arch Street, Philadelphia,
Pennsylvania 19103 (telephone number 215-963-6000).
LINE OF BUSINESS RESTRICTIONS
The consent decree entitled "Modification of Final Judgment" ("MFJ") approved
by the United States District Court for the District of Columbia (the "D.C.
District Court") which, together with the Plan of Reorganization ("Plan")
approved by the D.C. District Court, set forth the terms of Divestiture also
established certain restrictions on the post-Divestiture activities of the RHCs,
including Bell Atlantic. The MFJ's principal restrictions on post-Divestiture
RHC activities included prohibitions on (i) providing interexchange
telecommunications, (ii) providing information services, (iii) engaging in the
manufacture of telecommunications equipment and customer premises equipment
("CPE"), and (iv) entering into any non-telecommunications businesses, in each
case without the approval of the D.C. District Court. Since Divestiture, the
D.C. District Court has retained jurisdiction over the construction,
modification, implementation and enforcement of the MFJ.
In September 1987, the D.C. District Court rendered a decision which
eliminated the need for the RHCs to obtain its approval prior to entering into
non-telecommunications businesses. However, the D.C. District Court refused to
eliminate the restrictions relating to equipment manufacturing or providing
interexchange services. With respect to information services, the Court issued
a ruling in March 1988 which permitted the RHCs to engage in a number of
information transport functions as well as voice storage and retrieval services,
including voice messaging, electronic mail and certain information gateway
services. However, the RHCs were generally prohibited from providing the
content of the data they transmitted. As the result of an appeal of the D.C.
District Court's September 1987 and March 1988 decisions by the RHCs and other
parties, the United States Court of Appeals for the District of Columbia Circuit
ordered the D.C. District Court to reconsider the RHCs' request to provide
information content and determine whether removal of the restrictions thereon
would be in the public interest. In July 1991, the D.C. District Court removed
the remaining restrictions on RHC participation in information services, but
imposed a stay pending appeal of that decision. In October 1991, the United
States Court of Appeals for the District of Columbia Circuit vacated the stay,
thereby permitting the RHCs to provide information services, and in May 1993
affirmed the D.C. District Court's July 1991 decision. The United States
Supreme Court denied certiorari in November 1993.
Several bills have been introduced in the current session of Congress
pursuant to which the line of business restrictions established by the MFJ could
be eliminated or modified. No definitive prediction can be made as to whether
or when any such legislation will be enacted, the provisions thereof or their
impact on the business or financial condition of the Company.
2
COMMUNICATIONS AND RELATED SERVICES
The Network Services Companies
General
The Network Services Companies presently serve a territory ("Territory")
consisting of 19 Local Access and Transport Areas ("LATAs"). These LATAs are
generally centered on a city or based on some other identifiable common
geography and, with certain limited exceptions, each LATA marks the boundary
within which a Network Services Company may provide telephone service.
The Network Services Companies provide two basic types of telecommunications
services. First, they transport telecommunications traffic between subscribers
located within the same LATA ("intraLATA service"), including both local and
toll services. Local service includes the provision of local exchange ("dial
tone"), local private line and public telephone services (including dial tone
service for pay telephones owned by the Company and other pay telephone
providers). Among other local services provided are Centrex (telephone company
central office-based switched telephone service enabling the subscriber to
make both intercom and outside calls) and a variety of special and custom
calling services. Toll service includes message toll service (calling service
beyond the local calling area) within LATA boundaries, and intraLATA Wide Area
Toll Service (WATS)/800 services (volume discount offerings for customers with
highly concentrated demand). As permitted by the Plan, Bell Atlantic - New
Jersey and Bell Atlantic - Pennsylvania also earn toll revenue from the
provision of telecommunications service between LATAs ("interLATA service") in
corridors between the cities (and certain surrounding counties) of (i) New
York, New York and Newark, New Jersey and (ii) Philadelphia, Pennsylvania and
Camden, New Jersey. Second, the Network Services Companies provide exchange
access service, which links a subscriber's telephone or other equipment to the
transmission facilities of interexchange carriers which, in turn, provide
interLATA service to their customers. Bell Atlantic - Pennsylvania, Bell
Atlantic -Delaware, Bell Atlantic - Maryland and Bell Atlantic - West Virginia
also provide exchange access service to interexchange carriers which provide
intrastate intraLATA long distance telecommunications service. See
"Communications and Related Services -The Network Services Companies -
Competition - IntraLATA Toll Competition".
Operations
Although the Network Services Companies remain responsible within their
respective service areas for the provision of telephone services, financial
performance and regulatory matters, during 1993, Bell Atlantic reorganized
certain functions formerly performed by each of these companies relating to
these telephone services into nine LOBs organized across the Network Services
Companies around specific market segments. These nine LOBs are:
The Consumer Services LOB markets communications services to residential
-----------------
customers within the Territory (11 million households and 29 million people) and
plans in the future to market information services and entertainment
programming. 1993 revenues generated by consumer services were approximately $4
billion, representing approximately 34% of the Network Services Companies'
aggregate revenues. These revenues were derived primarily from the provision of
telephone services to residential users.
The Carrier Services LOB markets (i) switched and special access to the
----------------
Network Services Companies' local exchange networks, and (ii) billing and
collection services, including recording, rating, bill processing and bill
rendering. 1993 revenues generated by the carrier market were approximately
$2.5 billion, representing approximately 21% of the Network Services Companies'
aggregate revenues. Approximately 93% of total carrier services revenues were
derived from interexchange carriers; AT&T is the largest single customer. Most
of the remaining revenues came from business customers and government agencies
with their own special access network connections, wireless customers and other
local exchange carriers ("LECs") which resell network connections to their own
customers.
3
The Small Business Services LOB markets communications and information
-----------------------
services to small businesses (customers having up to 20 access lines or 100
Centrex lines). The Network Services Companies have approximately 1.2 million
small business customers in the Territory which in 1993 generated approximately
$1.7 billion in revenues, representing approximately 15% of the Network Services
Companies' aggregate revenues.
The Large Business Services LOB markets communications and information
-----------------------
services to large businesses (customers having more than 20 access lines or
more than 100 Centrex lines). These services include voice
switching/processing services (e.g., dedicated private lines, custom Centrex,
----
call management and voice messaging), end-user networking (e.g., credit and
----
debit card transactions, and personal computer-based conferencing, including
data and video), internetworking (establishing links between the
geographically disparate networks of two or more companies or within the same
company), network integration (integrating multiple geographically disparate
networks into one system), network optimization (disaster avoidance, 911,
intelligent vehicle highway systems), video services (distance learning,
telemedicine, surveillance, videoconferencing) and integrated multi-media
applications services. The Network Services Companies serve more than 18,000
primarily in-Territory large business customers in the commercial, state and
local government and education markets. 1993 revenues from the large business
market were approximately $1.5 billion, representing approximately 13% of the
Network Services Companies' aggregate revenues.
The Directory Services LOB manages the provision of (i) advertising and
------------------
marketing services to advertisers, and (ii) listing information (e.g., White
----
Pages and Yellow Pages). These services are currently provided primarily
through print media, but the Company expects that use of electronic formats
will increase in the future. In addition, the Directory Services LOB manages
the provision of photocomposition, database management and other related
products and services to publishers. 1993 revenues from directory services
were approximately $1 billion, representing approximately 9% of the Network
Services Companies' aggregate revenues.
The Public and Operator Services LOB markets pay telephone and operator
----------------------------
services in the Territory to meet consumer needs for accessing public networks,
locating and identifying network subscribers, providing calling assistance and
arranging billing alternatives (e.g., calling card, collect and third party
----
calls). 1993 revenues from public and operator services were approximately $663
million, representing approximately 6% of the Network Services Companies'
aggregate revenues.
The Federal Systems LOB markets communications and information technology and
---------------
services to departments, agencies and offices of the executive, judicial and
legislative branches of the federal government. 1993 revenues from the federal
government market were approximately $200 million, representing approximately 2%
of the Network Services Companies' aggregate revenues.
The Information Services LOB has been established to provide programming
--------------------
services, including on-demand entertainment, transactions and interactive
multimedia applications within the Territory and in selected other markets. See
"Communications and Related Services - The Network Services Companies - FCC
Regulation and Interstate Rates - Telephone Company Provision of Video Dial Tone
and Video Programming".
The Network LOB manages the technologies, services and systems platforms
-------
required by the other eight LOBs and the Network Services Companies to meet the
needs of their respective customers, including, without limitation, switching,
feature development and on-premises installation and maintenance services.
4
The Network Services Companies have been making and expect to continue to make
significant capital expenditures on their networks to meet the demand for
communications services and to further improve such services. Capital
expenditures of the Network Services Companies were approximately $2.3 billion
in 1991, $2.2 billion in 1992 and $2.1 billion in 1993. The total investment in
plant, property and equipment decreased from approximately $30.7 billion at
December 31, 1991 to approximately $29.6 billion at December 31, 1992, and
increased to approximately $30.6 billion at December 31, 1993, in each case
after giving effect to retirements, but before deducting accumulated
depreciation at such date.
The Network Services Companies as a whole are projecting construction
expenditures for 1994 at approximately the same level as in the past several
years. However, subject to regulatory approvals, the Network Services Companies
plan to allocate capital resources to the deployment of broadband network
platforms (technologies ultimately capable of providing a switched facility for
access to and transport of high-speed data services, video-on-demand, and image
and interactive multimedia applications). Most of the funds for these
expenditures are expected to be generated internally. Some additional external
financing may be necessary or desirable for some of the Network Services
Companies.
FCC Regulation and Interstate Rates
The Network Services Companies are subject to the jurisdiction of the Federal
Communications Commission ("FCC") with respect to interstate services and
certain related matters. The FCC prescribes a uniform system of accounts for
telephone companies, interstate depreciation rates and the principles and
standard procedures used to separate plant investment, expenses, taxes and
reserves between those applicable to interstate services under the jurisdiction
of the FCC and those applicable to intrastate services under the jurisdiction of
the respective state regulatory authorities ("separations procedures"). The FCC
also prescribes procedures for allocating costs and revenues between regulated
and unregulated activities.
Interstate Access Charges
The Network Services Companies provide intraLATA service and, with certain
limited exceptions, do not participate in the provision of interLATA service
except through offerings of exchange access service. See "Communications and
Related Services - The Network Services Companies - General". The FCC has
prescribed structures for exchange access tariffs to specify the charges
("Access Charges") for use and availability of the Network Services Companies'
facilities for the origination and termination of interstate interLATA service.
Access Charges are intended to recover the related costs of the Network Services
Companies which have been allocated to the interstate jurisdiction ("Interstate
Costs") under the FCC's separations procedures.
In general, the tariff structures prescribed by the FCC provide that
Interstate Costs of the Network Services Companies which do not vary based on
usage ("non-traffic sensitive costs") are recovered from subscribers through
flat monthly charges ("Subscriber Line Charges"), and from interexchange
carriers through usage-sensitive Carrier Common Line ("CCL") charges. See
"Communications and Related Services - The Network Services Companies - FCC
Regulation and Interstate Rates - FCC Access Charge Pooling Arrangements".
Traffic-sensitive Interstate Costs are recovered from carriers through variable
access charges based on several factors, primarily usage.
In May 1984, the FCC authorized the implementation of Access Charge tariffs
for "switched access service" (access to the local exchange network) and of
Subscriber Line Charges for multiple line business customers (up to $6.00 per
month per line). In 1985, the FCC authorized Subscriber Line Charges for
residential and single-line business customers at the rate of $1.00 per month
per line, which increased in installments to $3.50 effective April 1, 1989.
5
As a result of the phasing in of Subscriber Line Charges, a substantial
portion of non-traffic sensitive Interstate Costs is now recovered directly from
subscribers, thereby reducing the per-minute CCL charges to interexchange
carriers. This significant reduction in CCL charges has tended to reduce the
incentive for interexchange carriers and their high-volume customers to bypass
the Network Services Companies' switched network via special access lines or
alternative communications systems. However, competition for this access
business has increased in recent years. See "Communications and Related
Services - The Network Services Companies - Competition - Alternative Access and
Local Services".
FCC Access Charge Pooling Arrangements
The FCC previously required that all LECs, including the Network Services
Companies, pool revenues from CCL and Subscriber Line Charges that cover the
non-traffic sensitive costs of the local exchange network, that is, the
Interstate Costs associated with the lines from subscribers' premises to
telephone company central offices. To administer such pooling arrangements,
the FCC mandated the formation of the National Exchange Carrier Association,
Inc. Some LECs received more revenue from the pool than they billed their
interexchange carrier customers using the nationwide average CCL rate. Other
companies, including all but one of the Network Services Companies, received
substantially less from the pool than the amount billed to their interexchange
carrier customers.
By an order adopted in 1987, the FCC changed its mandatory pooling
requirements. These changes, which became effective April 1, 1989,
permitted all of the Network Services Companies as a group to withdraw from
the pool and to charge CCL rates which more closely reflect their non-traffic
sensitive costs. The Network Services Companies are still obligated to make
contributions of CCL revenues to companies who choose to continue to pool non-
traffic sensitive costs so that the pooling companies can charge a CCL rate no
greater than the nationwide average CCL rate. In addition to this continuing
obligation, the Network Services Companies have a transitional support
obligation to high cost companies who left the pool in 1989 and 1990. This
transitional support obligation phases out over five years. These long-term
and transitional support requirements will be recovered in the Network
Services Companies' CCL rates.
Depreciation
Depreciation rates provide for the recovery of the Network Services Companies'
investment in telephone plant and equipment, and are revised periodically to
reflect more current estimates of remaining service lives and future net
salvage values. In October 1993, the FCC issued an order simplifying the
depreciation filing process by reducing the information required for certain
categories of plant and equipment whose remaining service life, salvage
estimates and depreciation rates fall within an approved range. Petitions for
reconsideration of that order were filed in December 1993. In November 1993,
the FCC issued a further order inviting comments on proposed ranges for an
initial group of categories of plant and equipment.
Price Caps
In September 1990, the FCC adopted "price cap" regulation to replace the
traditional rate of return regulation of LECs. LEC price cap regulation became
effective on January 1, 1991.
The price cap system places a cap on overall prices for interstate services
and requires that the cap decrease annually, in inflation-adjusted terms, by a
fixed percentage which is intended to reflect expected increases in
productivity. The price cap level can also be adjusted to reflect "exogenous"
changes, such as changes in FCC separations procedures or accounting rules.
LECs subject to price caps have somewhat increased flexibility to change the
prices of existing services within certain groupings of interstate services,
known as "baskets".
6
Under price cap regulation, the FCC set an authorized rate of return of 11.25%
for the years 1991 and beyond. To the extent that a company is able to earn a
higher rate of return through improved efficiency, the FCC's price cap rules
permit them to retain the full amount of this higher return up to 100 basis
points above the authorized rate of return (currently, up to a 12.25% rate of
return). If a company's rate of return is between 100 and 500 basis points
above the authorized rate of return (that is, currently, between 12.25% and
16.25%), the company must share 50% of the earnings above the 100-basis-point
level with customers by reducing rates prospectively. All earnings above the
500-basis-point level must be returned to customers in the form of prospective
rate decreases. If, on the other hand, a company's rate of return is more than
100 basis points below the authorized rate of return (that is, currently, below
10.25%), the company is permitted to increase rates prospectively to make up the
deficiency.
Under FCC-approved tariffs, the Network Services Companies are charging
uniform rates for interstate access services (with the exception of Subscriber
Line Charges) throughout the Territory and are regarded as a single unit by the
FCC for rate of return measurement.
On February 16, 1994, the FCC initiated a rulemaking proceeding to determine
the effectiveness of LEC price cap rules and decide what changes, if any, should
be made to those rules. This rulemaking is expected to be concluded by the end
of 1994.
In January 1993, the FCC denied the Network Services Companies exogenous
treatment of the increased expense for postretirement benefits required under
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which the Company adopted
effective January 1, 1991. The Network Services Companies have appealed this
decision. The appeal is likely to be decided during the second half of 1994.
Computer Inquiry III
In August 1985, the FCC initiated Computer Inquiry III to re-examine its
regulations requiring that "enhanced services" (e.g., voice messaging services,
----
electronic mail, videotext gateway, protocol conversion) be offered only through
a structurally separated subsidiary. In 1986, the FCC eliminated this
requirement, permitting the Network Services Companies to offer enhanced
services, subject to compliance with a series of nonstructural safeguards
designed to promote an effectively competitive market. These safeguards include
detailed cost accounting, protection of customer information and certain
reporting requirements.
In June 1990, the United States Court of Appeals for the Ninth Circuit vacated
and remanded the Computer Inquiry III decisions to the FCC, finding that the FCC
had not fully justified those decisions. In December 1991, the FCC adopted an
order which reinstated relief from the separate subsidiary requirement upon a
company's compliance with the FCC's Computer III Open Network Architecture
("ONA") requirements and strengthened some of the nonstructural safeguards. In
the interim, the Network Services Companies had filed interstate tariffs
implementing the ONA requirements. Those tariffs became effective in February
1992, subject to further investigation. That investigation was completed on
December 15, 1993, when an order was released making minor changes to the
Network Services Companies' ONA rates. In March 1992, the Network Services
Companies certified to the FCC that they had complied with all initial ONA
obligations and therefore should be granted structural relief for enhanced
services. The FCC granted the Network Services Companies structural relief in
June 1992. Other parties have appealed this decision, which remains in effect
pending the outcome of the appeal. A decision on the appeal is likely by the
end of 1994.
7
The FCC's December 1991 order has been appealed to the United States Court of
Appeals for the Ninth Circuit by several parties. Pending decision on those
appeals, the FCC's decision remains in effect. If a court again reverses the
FCC, the Network Services Companies' right to offer enhanced services could be
impaired.
FCC Cost Allocation and Affiliate Transaction Rules
In 1987, the FCC adopted rules governing (i) the allocation of costs between
the regulated and unregulated activities of a communications common carrier and
(ii) transactions between the regulated and unregulated affiliates of a
communications common carrier.
The cost allocation rules apply to certain unregulated activities: activities
that have never been regulated as communications common carrier offerings and
activities that have been preemptively deregulated by the FCC. The costs of
these activities are removed prior to the separations procedures process and
are allocated to unregulated activities in the aggregate, not to specific
services, for pricing purposes. Other activities must be accounted for as
regulated activities, and their costs are subject to separations procedures.
These activities include (i) those which have been deregulated by the FCC
without preempting state regulation, (ii) those which have been deregulated by
a state but not the FCC and (iii) "incidental activities," which cannot, in
the aggregate, generate more than 1% of a company's revenues. Since the
Network Services Companies engage in these types of activities, the Network
Services Companies, pursuant to the FCC's cost allocation rules, filed a cost
allocation manual, which manual has been approved by the FCC.
The affiliate transaction rules govern the pricing of assets transferred to
and services provided by affiliates. These rules generally require that assets
be transferred between affiliates at "market price", if such price can be
established through a tariff or a prevailing price actually charged to third
parties. In the absence of a tariff or prevailing price, "market price" cannot
be established, in which case (i) asset transfers from a regulated to an
unregulated affiliate must be valued at the higher of cost or fair market value,
and (ii) asset transfers from an unregulated to a regulated affiliate must be
valued at the lower of cost or fair market value. The affiliate transaction
rules require that a service provided by one affiliate to another affiliate,
which service is also provided to unaffiliated entities, must be valued at
tariff rates or market prices. If the affiliate does not also provide the
service to unaffiliated entities, the price must be determined in accordance
with the FCC's cost allocation principles. In October 1993, the FCC proposed
new affiliate transaction rules which would essentially eliminate the different
rules for the provision of services and apply the asset transfer rules to all
affiliate transactions. The Network Services Companies have filed comments
opposing the proposed rules.
The FCC has not attempted to make its cost allocation or affiliate transaction
rules preemptive. State regulatory authorities are free to use different cost
allocation methods and affiliate transaction rules for intrastate ratemaking and
to require carriers to keep separate allocation records.
Telephone Company Provision of Video Dial Tone and Video Programming
In 1987, the FCC initiated an inquiry into whether developments in the cable
and telephone industries warranted changes in the rules prohibiting telephone
companies such as the Network Services Companies from providing video
programming in their respective service territories directly or indirectly
through an affiliate.
8
In November 1991, the FCC released a Further Notice of Proposed Rulemaking in
these proceedings. In August 1992, the FCC issued an order permitting telephone
companies such as the Network Services Companies to provide "video dial tone"
service. Video dial tone permits telephone companies to provide video transport
to multiple programmers on a non-discriminatory common carrier basis. The FCC
has also ruled that neither telephone companies that provide video dial tone
service, nor video programmers that use these services, are required to obtain
local cable franchises. Other parties have appealed these orders, which remain
in effect pending the outcome of the appeal.
In late 1992, Bell Atlantic - New Jersey entered into agreements pursuant to
which, pending regulatory approval, it would provide video dial tone transport
services to two video programmers in New Jersey. As contemplated by its
contract with Sammons Communications, Incorporated ("Sammons"), Bell Atlantic -
New Jersey will deploy fiber optic technology that will enable Sammons and other
video information providers to deliver video programming in three Morris County,
New Jersey communities over a video dial tone platform. Bell Atlantic - New
Jersey's contract with Future Vision of America Corporation ("Future Vision")
contemplates that Bell Atlantic - New Jersey will deploy fiber optic technology
in the Dover Township, New Jersey telephone network to establish a video dial
tone platform that will allow Future Vision and other video information
providers to deliver competitive video programming services in that community.
Applications for approval to deploy these video dial tone systems are pending at
the FCC.
In December 1992, Bell Atlantic - Virginia and Bell Atlantic Video Services
Company filed a lawsuit against the federal government in the United States
District Court for the Eastern District of Virginia seeking to overturn the
prohibition in the Cable Communications Policy Act of 1984 against LECs
providing video programming in their respective service areas. In a decision
rendered in August 1993 and clarified in October 1993, the court struck down
this prohibition as a violation of the First Amendment's freedom of speech
protections and enjoined its enforcement against the Company, the Network
Services Companies and Bell Atlantic Video Services Company. This decision has
been appealed to the United States Court of Appeals for the Fourth Circuit.
In early 1993, the FCC granted the Company authority to test a new technology
known as Asynchronous Digital Subscriber Line ("ADSL") for use in delivering
video entertainment and information over existing copper telephone lines.
Beginning in March 1993, the Company began a one-year technical trial of ADSL
serving up to 400 Bell Atlantic employees in northern Virginia. In the Fall of
1993, Bell Atlantic petitioned the FCC for authorization to expand and convert
this technical trial, upon its completion, into a six month market trial
serving up to 2,000 customers. Bell Atlantic also requested authority to offer
a commercial video dial tone service to customers served by 25 central offices
in parts of northern Virginia and southern Maryland upon completion of the six
month market trial. These applications are pending at the FCC.
Interconnection and Collocation
In October 1992, the FCC issued an order allowing third parties to collocate
their equipment in telephone company offices to provide special access (private
line) services to the public. The FCC's stated purpose was to encourage greater
competition in the provision of interstate special access services. The order
permits collocating parties to pay LECs an interconnection charge that is lower
than the existing tariffed rates for similar non-collocated services; it allows
LECs limited additional pricing flexibility for their own special access
services when collocated interconnection is operational. In February 1993, the
Network Services Companies filed interstate tariffs to allow collocation for
special access services. These tariffs are currently effective. The Company
and certain other parties have appealed the FCC's special access collocation
order. Bell Atlantic expects the appeal to be decided in 1994.
9
On September 2, 1993, the FCC extended collocation to switched access
services. The terms and conditions for switched access collocation are similar
to those for special access collocation. On November 18, 1993, the Network
Services Companies filed interstate tariffs to allow collocation for switched
access services. These tariffs became effective on February 16, 1994. The
Company and certain other parties have appealed the FCC's switched access
collocation order. Appeals of this order have been stayed pending a decision on
the appeals of the special access collocation order.
Increased competition through collocation will adversely affect the revenues
of the Network Services Companies, although some of the lost revenues could be
offset by increased demand of the Network Services Companies' own special
access services as a result of the slightly increased pricing flexibility that
the FCC has permitted. The Company does not expect the net revenue impact of
special access collocation to be material. Revenue losses from switched access
collocation, however, may be larger than from special access collocation.
Intelligent Networks
In December 1991, the FCC issued a Notice of Inquiry into the plans of the
BOCs, including the Network Services Companies, to deploy new "modular" network
architectures, such as Advanced Intelligent Network ("AIN") technology. The
Notice of Inquiry asks what, if any, regulatory action the FCC should take to
assure that such architectures are deployed in a manner that is "open,
responsive, and procompetitive". On August 31, 1993, the FCC issued a Notice of
Proposed Rulemaking proposing a schedule for AIN deployment. The proposals in
that Notice of Proposed Rulemaking generally follow those that the Company
proposed in its response to the Notice of Inquiry. The Company cannot estimate
when the FCC will conclude this proceeding.
The results of this proposed rulemaking could include a requirement that the
Network Services Companies offer individual components of their services, such
as switching and transport, to competitors who will provide the remainder of
such services through their own facilities. Such increased competition could
divert revenues from the Network Services Companies. However, deployment of AIN
technology may also enable the Network Services Companies to respond more
quickly and efficiently to customer requests for new services. This could
result in increased revenues from new services that could at least partially
offset losses resulting from increased competition.
State Regulation and Intrastate Rates
The communications services of the Network Services Companies are subject to
regulation by the public utility commissions in the jurisdictions in which they
operate with respect to intrastate rates and services and other matters. In
1993, there were a number of proceedings dealing with such issues as the various
Network Services Companies' rates of return, the adoption of flexible regulation
procedures and the introduction of competition for local exchange and local
access services.
Bell Atlantic - New Jersey, Inc. (formerly New Jersey Bell Telephone Company)
In June 1987, the New Jersey Board of Regulatory Commissioners ("NJBRC")
(which was then known as the Board of Public Utilities) issued an order
approving a Rate Stability Plan ("RSP") that modified the way the NJBRC monitors
Bell Atlantic - New Jersey's intrastate earnings. Rather than continue to
monitor overall company financial performance, the RSP authorized financial
performance surveillance only of less competitive services. The RSP also capped
intrastate tariffed rates for its six year duration (July 1, 1987 through June
30, 1993), subject, however, to certain exceptions which would permit Bell
Atlantic - New Jersey to seek increases in tariffed rates during the RSP's
fourth through sixth years.
10
The RSP separated Bell Atlantic - New Jersey's intrastate services into two
categories: Group I (more competitive) services such as directory advertising,
Centrex, pay telephone services, billing and collection services, high
capacity channel and special access services, public data networks, central
office local area networks, pay-per-view ordering service, high capacity
digital hand-off service, Bellboy(R) paging service, 911 enhanced terminal
equipment and Home Intercom; and Group II (less competitive) services such as
local exchange service, local usage, message toll service, 800 data base
complementary service and Repeat Call and Return Call. Only the Group II
services were subject to financial performance monitoring by the NJBRC for the
purpose of determining whether or not Bell Atlantic - New Jersey was earning
the target rate of return for those services. In January 1989, the NJBRC
issued an order which established a target rate of return on equity of 12.9%
for the purpose of monitoring the financial performance of the Group II
category of services. Under the RSP, Bell Atlantic - New Jersey was allowed to
charge competitive rates for Group I services, without restriction and without
financial performance monitoring.
The New Jersey Telecommunications Act of 1992 (the "NJ Telecommunications
Act") became effective in January 1992. The NJ Telecommunications Act
authorized the NJBRC to adopt alternative regulatory frameworks that provide
incentives to telecommunications companies for aggressive deployment of new
technologies. It also deregulated services which the NJBRC has found to be
competitive. Pursuant to that legislation, Bell Atlantic - New Jersey filed its
Plan for Alternative Form of Regulation in March 1992, and a revised plan in May
1992. This revised plan was unanimously approved by the NJBRC in December 1992,
with certain modifications; the written order reflecting that approval was
issued on May 6, 1993. Bell Atlantic - New Jersey filed a plan conforming to
the NJBRC's order (the "NJ PAR"), which became effective on May 20, 1993.
Several parties have filed judicial appeals of the NJBRC's order. The briefing
schedule for this appeal extends through the middle of August 1994.
The NJ PAR, which supersedes the RSP, divides Bell Atlantic - New Jersey's
services into Rate-Regulated Services (formerly Group II services) and
Competitive Services (formerly Group I and services which have never been
regulated by the NJBRC). Under this Plan, Bell Atlantic - New Jersey's Rate-
Regulated Services are grouped in two categories:
- "Protected Services": Basic residence and business service, Touch-Tone,
access services, message toll services and the ordering, installation and
restoration of these services. Rates for Protected Services, other than basic
residence service, may be increased beginning January 1996 in an amount
limited to the prior year's increase in the Gross National Product-Price Index
("GNP-PI") less a 2% productivity offset, as long as the return on equity for
Rate-Regulated Services does not exceed 11.7%. Basic residence service rates
are frozen through December 1999.
- "Other Services": Custom calling, Custom Local Area Signaling Services
("CLASS" services which utilize Signaling System 7), operator services and 911
enhanced service. Rates for Other Services may be increased beginning January
1996 in an amount limited to the prior year's increase in the GNP-PI less a 2%
productivity offset, as long as the return on equity for Rate-Regulated Services
does not exceed 12.7%.
All earnings above a return on equity of 13.7% for Rate-Regulated Services
will be shared equally with customers. There is no point at which the earnings
are capped.
Competitive Services are deregulated under the NJ Telecommunications Act.
Other services such as premises wire maintenance, Answer Call and electronic
messaging, which have never been regulated by the NJBRC, continue to be
deregulated under the NJ Telecommunications Act.
11
Bell Atlantic - Pennsylvania, Inc. (formerly The Bell Telephone Company of
Pennsylvania)
Bell Atlantic - Pennsylvania continues to operate under traditional rate-of-
return regulation, but is pursuing regulatory reform through regulatory
channels.
In October 1992, the Pennsylvania Public Utility Commission ("PPUC") adopted
financial reporting rules that exclude revenues, expenses and investment
associated with directory advertising from quarterly earnings surveillance
reports, although these rules require Bell Atlantic - Pennsylvania to file an
annual informational filing including directory advertising earnings. The PPUC
made no finding relative to future ratemaking treatment for directory
advertising.
On July 8, 1993, legislation was enacted in Pennsylvania which enables Bell
Atlantic - Pennsylvania to petition the PPUC to regulate Bell Atlantic -
Pennsylvania under an alternative form of regulation other than rate-based
rate of return. On October 1, 1993, Bell Atlantic - Pennsylvania filed its
petition and plan with the PPUC which contained (i) six proposed competitive
services (directory advertising, billing services, Centrex, Speed Call, Repeat
Call and paging) for removal from price and earnings regulations, (ii) a price
stability mechanism which caps revenue increases through tariff rate changes
for other (noncompetitive) services in any year at the increase in the Gross
Domestic Product - Price Index in the previous year less 2.25%, and (iii) a
network deployment schedule which commits to universal broadband availability in
its telecommunications network by 2015. Hearings on this petition and plan were
held in February 1994. The PPUC must either approve or reject Bell Atlantic -
Pennsylvania's plan as filed or suggest changes thereto no later than June 30,
1994.
Bell Atlantic - Delaware, Inc. (formerly The Diamond State Telephone Company)
In August 1992, Bell Atlantic - Delaware filed an intrastate rate case with
the Delaware Public Service Commission ("DPSC") to increase intrastate net
revenues by $14.3 million annually. In November 1993, the DPSC voted to award
Bell Atlantic - Delaware a $3.8 million annual intrastate revenue increase based
on the stipulated 10.58% overall rate of return. Bell Atlantic - Delaware then
filed a petition for reargument of the decision, requesting that the DPSC
increase Bell Atlantic - Delaware's revenue award by an additional $6.3 million
annually. On December 6, 1993, Bell Atlantic - Delaware entered into an
agreement with the Office of Public Advocate of the Delaware state government
which stipulated an increase in Bell Atlantic - Delaware's revenue award of $1.5
million annually. The DPSC approved the stipulation and ordered a revised
annual intrastate revenue increase of $5.3 million. Bell Atlantic - Delaware
put final rates into effect on December 15, 1993.
The Delaware Telecommunications Technology Investment Act of 1993 (the
"Delaware Telecommunications Act") became effective on July 8, 1993. The
Delaware Telecommunications Act modified telecommunications industry regulation
for intrastate services and allows Bell Atlantic - Delaware to elect to be
regulated under an alternative regulation plan instead of traditional rate of
return regulation. The Delaware Telecommunications Act provides:
-- that the prices of "Basic Telephone Services" (e.g., dial tone and
----
local usage) will remain regulated and cannot change in any one year
by more than the rate of inflation, less 3%;
-- that the prices of "Discretionary Services" (e.g., Identa Ring(SM)
----
and Call Waiting) cannot increase more than 15% per year per service,
after an initial one-year cap;
-- that the prices of "Competitive Services" (e.g., directory advertising
----
and message toll service) will not be subject to tariff; and
-- that Bell Atlantic - Delaware develop a technology deployment plan
with a commitment to invest a minimum of $250 million in Delaware's
telecommunications network during the first five years of the plan.
12
The Delaware Telecommunications Act also provides protections to ensure that
competitors will not be unfairly disadvantaged, including a prohibition on
cross-subsidization, imputation rules, service unbundling and resale service
availability requirements, and a review by the DPSC during the fifth year of
the plan. On July 20 1993, the DPSC initiated a rulemaking to develop
regulations for the implementation of the Delaware Telecommunications Act.
On March 24, 1994, Bell Atlantic - Delaware elected to be regulated under the
alternative regulation provisions of the Delaware Telecommunications Act. On
such date, Bell Atlantic - Delaware also filed a technology deployment plan
consistent with such legislation pursuant to which it committed to (i) link
public schools, major medical facilities and state government offices to the
"information superhighway", (ii) digitize all of its telephone switches by
1998, and (iii) connect all of its central offices with fiber optic cable by
1998.
Bell Atlantic - Washington, D.C., Inc. (formerly The Chesapeake and Potomac
Telephone Company)
In January 1993, as the outcome of a process begun by a Bell Atlantic -
Washington, D.C. proposal to the District of Columbia Public Service Commission
("DCPSC") in 1988, the DCPSC adopted a regulatory reform plan for the intra-
Washington, D.C. services of Bell Atlantic - Washington, D.C. Under the plan,
the DCPSC adopted a banded rate of return on equity (based on earnings from all
services) with 12.5% as the midpoint: Bell Atlantic - Washington, D.C. would be
allowed to seek rate increases if its return on equity falls below 11.5% and
would be required to share, through prospective rate cuts, 50% of any earnings
in excess of a return on equity of 13.5%. Bell Atlantic - Washington, D.C.'s
rates for most residential services were frozen at the levels set in the prior
rate proceeding in March 1992. The DCPSC granted pricing flexibility, including
custom contracting and 14-day tariffing, for all Centrex services and for high
capacity private line services since these services were found to be subject to
competition. The DCPSC also established a screen for determining what other
services are competitive and therefore should be subject to flexible pricing in
the future. The plan will be in effect for three years, after which the DCPSC
will investigate Bell Atlantic - Washington, D.C.'s performance and determine
what regulatory structure is appropriate at that time.
Pursuant to the DCPSC's January 1993 regulatory reform plan, in December 1993,
the DCPSC re-set Bell Atlantic - Washington, D.C.'s banded rate of return on
equity to range from 10.45% to 12.45%, with a midpoint of 11.45%. However, the
DCPSC also found that Bell Atlantic - Washington, D.C. was entitled to increased
annual revenues of $15.8 million. The DCPSC increased the rates for public
telephone service, increased the message unit rate for business customers and
increased certain other business and residential rates to cover the increased
revenue requirement. Rates for basic residential service remain frozen at the
level set in March 1992. Under the plan, Bell Atlantic - Washington, D.C. also
applied for and received pricing flexibility for several competitive services,
including digital data services, paging services, speed calling, Repeat Call,
Home Intercom and Home Intercom Extra.
13
Bell Atlantic - Maryland, Inc. (formerly The Chesapeake and Potomac Telephone
Company of Maryland)
As the result of a process initiated by a joint petition of Bell Atlantic -
Maryland, the Office of People's Counsel of the Maryland state government, and
the Staff of the Public Service Commission of Maryland ("MPSC"), the MPSC in
1990 approved an agreement which instituted a regulatory reform plan (the
"Reform Plan") for regulation of intrastate services provided by Bell Atlantic -
Maryland. The Reform Plan provides for sharing of earnings on other-than-
competitive services (e.g., basic business and residential dial tone line and
----
usage, pay telephone services and intraLATA toll services) within a prescribed
rate-of-return range (12.7% to 14.5% return on equity), for the direct refund to
ratepayers of all earnings above that range and for no sharing of earnings if
earnings fall below that range. Earnings on competitive services (e.g., Centrex
----
intercom and high capacity, special access and private line services) are not
subject to a rate of return limitation. In connection with its approval of the
Reform Plan, the MPSC required Bell Atlantic - Maryland to initiate a rate
proceeding to examine Bell Atlantic - Maryland's financial and operating results
under the Reform Plan and to serve as a rate case for determining rates and rate
structure on a going-forward basis for services that the MPSC has determined are
other-than-competitive.
On January 22, 1993, at the conclusion of this rate proceeding, the MPSC
issued an order directing Bell Atlantic - Maryland to reduce rates prospectively
in the aggregate amount of $28.6 million annually. Tariffs reducing rates by
that amount became effective on January 23, 1993. Bell Atlantic - Maryland's
application for a modification or rehearing of the order was denied in part and
granted in part on March 30, 1993. Under the terms of the revised order, Bell
Atlantic - Maryland's rate reduction was upheld, but it was permitted to
accelerate the amortization of certain post-employment benefits obligations,
eliminating any refund requirement for prior periods. The decision in this case
is now final.
On July 26, 1993, MFS-Intelenet of Maryland, Inc. ("MFS-Maryland"), a
subsidiary of MFS Communications Company, Inc. ("MFS"), filed an application
with the MPSC for authority to provide and resell local exchange and
interexchange telecommunications services to business customers in areas served
by Bell Atlantic - Maryland and for an order establishing policies and
requirements for interconnection of competing local exchange networks. Hearings
have been held and a final decision is expected in April 1994.
On November 9, 1993, the MPSC instituted an investigation into legal and
policy matters relevant to the regulation of firms, including current
telecommunications providers and cable television firms, which may provide local
exchange and exchange access services in Maryland in the future. A procedural
schedule has been established and a final decision is expected this year.
Bell Atlantic - Virginia, Inc. (formerly The Chesapeake and Potomac Telephone
Company of Virginia)
In December 1988, the Virginia State Corporation Commission ("VSCC") adopted
an Experimental Plan for Alternative Regulation (the "Experimental Plan") of
Virginia telephone companies. Bell Atlantic - Virginia elected to participate
in the Experimental Plan effective January 1, 1989, and remained subject to it
through the end of 1993. The Experimental Plan marked a departure from
traditional regulation and classified services into four categories: actually
competitive, potentially competitive, discretionary and basic. Combined
earnings from potentially competitive, discretionary and basic services were
capped at a 14% return on equity.
Bell Atlantic - Virginia's financial results under the Experimental Plan for
the years 1989 through 1992 have been filed with the VSCC. The VSCC's audit of
Bell Atlantic - Virginia's 1989 and 1990 financial results found no refunds to
be due. Bell Atlantic - Virginia's financial results for 1991 and 1992, which
as filed with the VSCC indicate that no refunds are due, are still subject to
VSCC audit.
14
Following an evaluation of the Experimental Plan in 1993, the VSCC issued an
order on December 17, 1993 adopting a Modified Plan for Alternative Regulation
(the "Modified Plan"). The Modified Plan became effective January 1, 1994.
Bell Atlantic - Virginia is deemed by the VSCC to be subject to this Modified
Plan.
The Modified Plan places Bell Atlantic - Virginia's services into one of three
categories:
- "Competitive" services, for which there are readily available substitutes
which reasonably meet customer needs and for which competition in the
marketplace effectively regulates the price (e.g., Centrex intercom services,
----
directory advertising).
- "Discretionary" services, which can only be provided by the local
exchange telephone company, but which are optional, nonessential enhancements to
basic communications services or services which others are capable of
providing but which do not conform to the competitive services definition
(e.g., Caller ID and operator call completion services).
----
- "Basic" services, which are not discretionary and, due to their nature or
legal/regulatory restraints, only the local exchange telephone companies can
provide (e.g., residential and business local exchange telephone service and
----
operator directory assistance service).
The latter two categories of services are subject to rate of return
regulation. For 1994 the VSCC has established a permissible range for return on
equity for these two regulated services of 10.55% to 12.55%. In assessing
whether earnings have exceeded this permitted range, the VSCC will impute to
regulated earnings an amount equal to 25% of the net profits of Yellow Pages
advertising, which the VSCC will otherwise continue to treat as a competitive
service under the Modified Plan. If Bell Atlantic - Virginia's earnings on this
basis exceed the permitted range, refunds of the excess must be made. If Bell
Atlantic - Virginia were to seek an increase in rates for Basic service that,
taking into account rate changes in Discretionary services, results in an
increase in overall regulated operating revenue, the financial performance
considered by the VSCC would include results for all categories of services.
Earnings from Competitive services are not otherwise regulated.
In its Final Order of December 17, 1993, the VSCC also announced its intention
to hold a proceeding in the first half of 1994 to consider further modifications
to the Modified Plan or alternative regulatory plans that local exchange
companies might offer. Under legislation passed in the 1993 session of the
Virginia General Assembly, the VSCC is no longer statutorily required to
regulate telephone companies on the basis of rate of return regulation; for
example, the VSCC is free to adopt a price cap form of regulation. On February
8, 1994, Bell Atlantic - Virginia filed a proposal in this new proceeding to
have its Discretionary and Basic services regulated on a price cap basis;
competitive services would not be regulated. Bell Atlantic - Virginia's
proposal will be discussed in hearings to begin in late April 1994.
Bell Atlantic - West Virginia, Inc. (formerly The Chesapeake and Potomac
Telephone Company of West Virginia)
In April 1988, the Public Service Commission of West Virginia ("WVPSC")
approved a stipulation among Bell Atlantic - West Virginia, AT&T, MCI
Communications Corporation ("MCI"), Sprint Communications Company, L.P.
("Sprint"), the WVPSC Staff and the Consumer Advocate Division of the WVPSC
which gave Bell Atlantic - West Virginia flexibility in the pricing of
competitive services (e.g., intraLATA toll service, intraLATA "800" service,
----
intraLATA WATS service, billing and collection services and directory
advertising) and provided for a freeze on rates for basic local exchange
services through December 31, 1990 and a lifting, on January 1, 1989, of the
moratorium on intraLATA toll competition. This "Flexible Regulation Plan" was
subsequently extended through December 31, 1991. As part of the stipulation,
Bell Atlantic - West Virginia invested in excess of $300 million dollars from
1988 through 1990 to modernize West Virginia's telecommunications
infrastructure.
15
In March 1990, the West Virginia legislature enacted legislation, which became
effective on January 1, 1991, requiring the WVPSC to cease its regulation of the
rates charged by a telephone utility for any service that the WVPSC finds to be
subject to "workable competition", unless the WVPSC finds that to do so would
adversely affect the continued availability of adequate, economical and reliable
local telephone service.
In December 1991, the WVPSC approved, with some modifications, a stipulation
signed by Bell Atlantic - West Virginia, the Consumer Advocate Division of the
WVPSC, the WVPSC Staff and AT&T which set forth a new "Incentive Regulation
Plan". The Incentive Regulation Plan continues the major provisions of the
Flexible Regulation Plan, including pricing flexibility for competitive services
and a freeze on the rates for basic local exchange service. It also committed
Bell Atlantic - West Virginia to invest an additional $450 million from 1991
through 1995 in West Virginia's telecommunications infrastructure. The
Incentive Regulation Plan permitted Bell Atlantic - West Virginia to increase
operator directory assistance and Call Waiting charges, provides Bell Atlantic -
West Virginia some flexibility in setting depreciation rates and allows Bell
Atlantic - West Virginia to petition for a surcharge to reflect changes in
federally mandated separations procedures and accounting rules. The stipulation
also provides for the phased elimination of Locality Rate Area charges, which
are basic service charges paid by customers who are located farthest from the
central office. Under the WVPSC's December 1991 order, the freeze on rates for
basic service and the phase out of Locality Rate Area charges will end on
December 31, 1994 instead of the July 1, 1996 date set forth in the stipulation.
In January 1989, AT&T, MCI and Sprint filed petitions with the WVPSC to
require Bell Atlantic - West Virginia to reduce intrastate access charges by $3
million annually. On June 29, 1993, the WVPSC approved a settlement agreement
in which the parties agreed that access charges would be reduced by $1.5 million
annually, that the interexchange carriers would not seek additional reductions
until the year 2000 and that Bell Atlantic - West Virginia would not seek
additional increases until the year 2000.
New Products and Services
Bell Atlantic(R) IQ(SM) Services
All of the Network Services Companies have introduced the Bell Atlantic(R)
IQ(SM) Services family of calling features (although not all features are
available in all states). These features include Identa Ring(SM), which
-----------
allows a single line to have multiple telephone numbers, each with a distinctive
ring; Repeat Call, which allows customers automatically to redial busy phone
-----------
numbers; Return Call, which allows customers automatically to return the last
-----------
incoming call, even without knowing the number; Ultra Forward(SM), which
-------------
customers can use to program call-forwarding instructions; and Home Intercom,
-------------
which allows for phone-to-phone dialing within the home. All of the Network
Services Companies except Bell Atlantic - Pennsylvania offer Caller ID service,
---------
a Bell Atlantic IQ(SM) Service which displays the number of the calling party.
It is anticipated that Caller ID will be tariffed and available in Pennsylvania
in 1994. At the end of 1993, the Network Services Companies had over 600,000
subscribers to Caller ID.
Data Services
The Network Services Companies have introduced several high speed data
transmission services. In 1993, Switched Multi-Megabit Data Service ("SMDS", a
-----------------------------------
high-speed, public, packet-switched data transmission service) was available
under tariff from all Network Services Companies except Bell Atlantic - New
Jersey (which offers SMDS on a special rate authorization basis with informal
approval of the NJBRC) and Bell Atlantic - Delaware; Fiber Distributed Data
----------------------
Interface Network Service was available under tariff in Washington, D.C.,
- -------------------------
Maryland and Virginia; and Frame Relay Service (which allows high-speed
-------------------
interconnection of a customer's multiple locations) was available under tariff
in Pennsylvania, Washington, D.C., Maryland and Virginia.
16
Information Services
The Network Services Companies offer various types of information services,
such as message storage services, voice mail and electronic mail. Answer Call,
-----------
a telephone answering service aimed at residential and small business customers,
had more than 900,000 subscribers at the end of 1993.
Competition
Regulatory proceedings, as well as new technology, are continuing to expand
the types of available communications services and equipment and the number of
competitors offering such services. An increasing amount of this competition is
from large companies which have substantial capital, technological and marketing
resources, many of which do not face the same regulatory constraints as the
Company.
Alternative Access and Local Services
A substantial portion of the Network Services Companies' revenues from
business and government customers is derived from a relatively small number of
large, multiple-line subscribers.
The Network Services Companies face competition from alternative
communications systems, constructed by large end users, interexchange carriers
and alternative access vendors, which are capable of originating and/or
terminating calls without the use of the local telephone company's plant. MFS
has an optical fiber network which currently competes with Bell Atlantic -
Pennsylvania and Bell Atlantic - Maryland in the Philadelphia, Pittsburgh and
Baltimore metropolitan areas. In the Washington, D.C. metropolitan area,
Institutional Communications Company, in which MFS has acquired a controlling
interest, has deployed an optical fiber network to compete with Bell Atlantic -
Washington, D.C., Bell Atlantic - Maryland and Bell Atlantic - Virginia in the
provision of switched and special access services and local services. Eastern
TeleLogic Corporation is currently providing service in the Philadelphia area
over an optical fiber network, and Digital Direct of Pittsburgh, Inc. (dba Penn
Access) has multiple fiber rings in service in the Pittsburgh metropolitan area,
with additional fiber rings under construction. In July 1993, Virginia Metrotel
Inc. was granted authority by the VSCC to compete against Bell Atlantic -
Virginia in the provision of access services in the Richmond metropolitan area.
Teleport Communications Group Inc. ("Teleport") provides competitive access
service in the New York metropolitan area, including northern New Jersey. The
ability of such alternative access providers to compete with the Network
Services Companies has been enhanced by the FCC's orders requiring the
Network Services Companies to offer collocated interconnection for special and
switched access services.
Other potential sources of competition are cable television systems, shared
tenant services and other non-carrier systems which are capable of bypassing the
Network Services Companies' local plant, either partially or completely, through
substitution of special access for switched access or through concentration of
telecommunications traffic on fewer of the Network Services Companies' lines.
Well-financed competitors are seeking authority, or are likely soon to seek
authority, to offer competing local exchange services, such as dial tone and
local usage, in some of the most lucrative of the local telephone service areas
of the Network Services Companies. Southwestern Bell Corporation ("Southwestern
Bell") acquired existing cable television systems in Montgomery County, Maryland
and Arlington, Virginia. Southwestern Bell could use these systems to compete
with the Company's telephone services in these areas. Southwestern Bell also
provides cellular service in the Washington metropolitan area.
17
On July 26, 1993, MFS-Maryland filed an application with the MPSC for
authority to provide and resell local exchange and interexchange
telecommunications services to business customers in areas served by Bell
Atlantic - Maryland and for an order establishing policies and requirements for
interconnection of competing local exchange networks. Hearings have been held
and a final decision is expected in April 1994. On November 9, 1993, the MPSC
instituted an investigation into legal and policy matters relevant to the
regulation of firms, including current telecommunications providers and cable
television firms, which may provide local exchange and exchange access services
in Maryland in the future. A procedural schedule has been established and a
final decision is expected this year.
On December 10, 1993, another MFS subsidiary asked the PPUC for authority to
provide local exchange service to business customers in certain areas of Bell
Atlantic - Pennsylvania's service territory. No procedural schedule has been
set for action on this petition.
Teleport and MFS both offer local exchange service in metropolitan New York
and may seek to extend that service into northern New Jersey.
The two largest long-distance carriers are also positioning themselves to
begin to offer services that will compete with the Network Services Companies'
local exchange services. In November 1992, AT&T announced its intention to
acquire a controlling interest in McCaw Cellular Communications Inc. ("McCaw"),
the largest cellular company in the United States, and to integrate McCaw's
wireless local service network with AT&T's long distance network. In December
1993, MCI announced its intention to invest $2 billion to begin building
competing local exchange and access networks in twenty major markets in the
United States, several of which are likely to be in the Territory. In March
1994, MCI also announced its intention to acquire a substantial interest in
Nextel Communications Inc. (formerly Fleet Call Inc.), and to integrate
Nextel's wireless local service network with MCI's long distance network in at
least 10 major markets, one or more of which might be in the Territory.
The entry of these and other local exchange service competitors will almost
certainly reduce the local exchange service revenues of the Network Services
Companies, at least in the market segments and geographical areas in which the
competitors operate. Depending on such competitors' success in marketing their
services, and the conditions of interconnection established by the regulatory
commissions, these reductions could be significant. These revenue reductions
may be offset to some extent by revenues from interconnection charges to be paid
to the Network Services Companies by these competitors.
The Network Services Companies seek to meet such competition by establishing
and/or maintaining competitive cost-based prices for local exchange services (to
the extent the FCC and state regulatory authorities permit the Network Services
Companies' prices to move toward costs), by keeping service quality high and by
effectively implementing advances in technology. See "Communications and
Related Services - The Network Services Companies - FCC Regulation and
Interstate Rates - Interstate Access Charges" and "- FCC Access Charge Pooling
Arrangements".
Personal Communications Services
Radio-based personal communications services ("PCS") also constitute potential
sources of competition to the Network Services Companies and to Bell Atlantic's
cellular communications companies. PCS consists of wireless portable telephone
services which would allow customers to make and receive telephone calls from
any location using small handsets, and which could also be used for data
transmission. The FCC has authorized trials of such services, using a variety
of technologies, by numerous companies, including the Company's cellular
telecommunications subsidiaries (collectively, "Bell Atlantic Mobile").
18
In September 1993, the FCC issued a report and order allocating radio spectrum
to be licensed for use in providing PCS. Under the order, seven separate
bandwidths of spectrum, ranging in size from 10 MHz to 30 MHz, would be
auctioned to potential PCS providers in each geographic area of the United
States; five of the spectrum blocks would be auctioned by "basic trading area"
and the remaining two would be auctioned by larger "major trading area" (as such
trading areas are defined by Rand McNally). LECs and companies with LEC
subsidiaries, such as the Company, are eligible to bid for PCS licenses, except
that cellular carriers such as the Company are limited to obtaining only 10 MHz
of PCS bandwidth in areas where they provide cellular service. Bidders other
than cellular providers may obtain multiple licenses aggregating up to 40 MHz of
bandwidth in any area. Bell Atlantic has stated that it intends to pursue PCS
licenses in the auctions, which are expected to be held in 1994 or in early
1995.
In December 1993, the FCC awarded pioneer's preference PCS licenses to, among
other entities, American Personal Communications ("APC"), which is owned in part
by The Washington Post Company, and Omnipoint Communications, Inc.
("Omnipoint"). APC's license authorizes it to provide PCS service in
competition with the local exchange services of the Network Services Companies
in all or large portions of Pennsylvania, the District of Columbia, Maryland,
Virginia and West Virginia. APC has announced its intention to build out an
operational system by the first quarter of 1995. Omnipoint's license authorizes
it to provide service in the New York metropolitan area, which includes the
northern New Jersey areas served by the Company.
If implemented, PCS and other similar services would compete with services
currently offered by the Company, and could result in losses of revenues,
although the Company may be able to derive new revenues if it obtains
authorization to provide PCS or similar new services.
Centrex
The Network Services Companies offer Centrex service, which is a telephone
company central office-based communications system for business, government and
other institutional customers consisting of a variety of integrated software-
based features located in a centralized switch or switches and extended to the
customer's premises primarily via local distribution facilities. In the
provision of Centrex, the Network Services Companies are subject to significant
competition from the providers of CPE systems, such as private branch exchanges
("PBXs"), which perform similar functions with less use of the Network Services
Companies' switching facilities.
Users of Centrex systems generally require more subscriber lines than users of
PBX systems of similar capacity. The FCC increased the maximum Subscriber Line
Charge on embedded Centrex lines to $6.00 per month per line effective April 1,
1989. Increases in Subscriber Line Charges result in Centrex users incurring
higher charges than users of comparable PBX systems. Some of the state
regulatory commissions having jurisdiction over the Network Services Companies
have approved Centrex tariff revisions designed to offset the effects of such
higher Subscriber Line Charges and to provide for stability of Centrex rates.
The MPSC established a proceeding to consider the tariff for Centrex Extend
service (multi-location Centrex intercom service for a closed end user group of
a single Centrex customer), which Bell Atlantic - Maryland began offering in
August 1993. A decision on the appropriateness of this tariff is expected this
year. In Virginia and West Virginia, the intercom portion of Centrex service
has been detariffed.
19
IntraLATA Toll Competition
The ability of interexchange carriers to engage in the provision of intrastate
intraLATA toll service in competition with the Network Services Companies is
subject to state regulation. Such competition is permitted in Pennsylvania,
Delaware, Maryland and West Virginia; in addition, in Delaware, the DPSC has
initiated a proceeding to determine whether to require presubscription and
dialing parity ("1+ dialing") for intraLATA toll competitors of Bell Atlantic -
Delaware. Intrastate intraLATA competition has not been permitted in New
Jersey, but the NJBRC has initiated a proceeding in response to petitions filed
by interexchange carriers to consider whether and on what terms to permit
intraLATA competition. The issue is inapplicable to Washington, D.C. since
intraLATA toll service is not offered within the District of Columbia. The VSCC
has instituted a proceeding to consider whether, and on what terms, to permit
intraLATA competition in Virginia.
Directories
The Network Services Companies continue to face significant competition from
other providers of directories as well as competition from other advertising
media. In particular, the former sales representative of the Network Services
Companies (other than Bell Atlantic - New Jersey) publishes directories in
competition with those published by the Network Services Companies in New
Jersey, Pennsylvania, Delaware and the Washington, D.C. and Baltimore
metropolitan areas.
Public Telephone Services
The Company faces increasing competition in the provision of pay telephone
services from other pay telephone service providers. In addition, the growth of
wireless communications negatively impacts usage of public telephones.
Operator Services
Alternative operator services providers have entered into competition with the
Company's operator services product line.
Other Communications and Related Services
Domestic Wireless Communications
Bell Atlantic Mobile provides cellular telecommunications service in certain
portions of the Network Services Companies' Territory and in other parts of the
United States. These entities market cellular telecommunications service and
related equipment directly to consumers, wholesale such service to businesses
which resell the service to consumers, and authorize agents to sell such service
to consumers. They also resell paging service in some locations. On April 30,
1992, the Company acquired Metro Mobile CTS, Inc., then the second-largest
independent provider of cellular telecommunications service in the United
States.
Cellular telecommunications service is subject to FCC regulation and licensing
requirements. Some states also regulate the service. To assure competition,
the FCC awarded two competitive licenses in each market. Many such competing
cellular providers are substantial businesses with experience in broadcasting,
telecommunications, cable television and radio common carrier services.
Competition is based on the price of cellular service, the quality of the
service and the size of the geographic area served. The FCC is in the process
of authorizing additional providers of mobile services which will likely provide
competition to existing cellular carriers. See "Communications and Related
Services - The Network Services Companies - Competition - Personal
Communications Services".
20
Bell Atlantic Mobile has established cellular telecommunications service in
the standard metropolitan statistical areas ("SMSAs") for Washington, D.C.;
Wilmington, Delaware; Baltimore, Maryland; Allentown, Philadelphia, Pittsburgh
and Reading, Pennsylvania; Trenton, Vineland and Atlantic City, New Jersey;
Phoenix and Tucson, Arizona; Bridgeport, Hartford, New Haven, and New London,
Connecticut; New Bedford, Pittsfield and Springfield, Massachusetts; Albuquerque
and Las Cruces, New Mexico; Charlotte and Hickory, North Carolina; Providence,
Rhode Island; Anderson, Columbia and Greenville, South Carolina; and El Paso,
Texas.
Bell Atlantic Mobile also has established service in the rural service areas
of Kent (Dover), Delaware; Kent (Eastern Shore) and Frederick, Maryland; Ocean,
Sussex and Hunterdon, New Jersey; Greene, Jefferson, Huntingdon, Lawrence and
McKean, Pennsylvania; Madison, Caroline, Frederick (Fauquier) and Lee, Virginia;
Wetzel and Mason, West Virginia; Windham, Connecticut; Cabarrus and Anson, North
Carolina; Newport, Rhode Island; Cherokee, Lancaster and Oconee, South Carolina;
and Gila, Arizona.
Bell Atlantic Mobile also owns a significant minority interest in a
partnership providing cellular telecommunications service in the New York City
metropolitan area and the adjoining SMSAs of New Brunswick and Long Branch, New
Jersey. Under reciprocal agreements between Bell Atlantic Mobile and certain
other providers of cellular telecommunications service, the customers of Bell
Atlantic Mobile may use the services of those other providers in areas where
Bell Atlantic Mobile is not licensed to provide service.
Bell Atlantic Paging, Inc. markets paging services in portions of the Network
Services Companies' Territory.
International
Bell Atlantic International, Inc. and its subsidiaries ("International") serve
as the Company's principal vehicle for new business development outside the
United States. International provides telecommunications consulting and
software systems integration services to telecommunications authorities in
several countries, and has entered into business development agreements with
various governmental authorities.
In September 1990, wholly-owned New Zealand subsidiaries of International and
Ameritech Corporation ("Ameritech") each purchased approximately 49% of the
common shares of Telecom Corporation of New Zealand Limited ("TCNZ") for a
purchase price of approximately $2.4 billion. Under the terms of the
acquisition and subsequent agreements with the New Zealand government,
International and Ameritech were required to sell equity interests in TCNZ such
that their combined ownership would, within four years of the acquisition, be
reduced to 49.9%. In furtherance of that requirement, International and
Ameritech in 1991 sold a portion of their equity shares in TCNZ in a worldwide
public offering, thereby reducing their combined ownership in TCNZ to
approximately 68%. In March 1993 and September 1993, International privately
sold an aggregate of 9.8% of TCNZ, reducing its ownership interest in TCNZ to
approximately 24.8%, and, together with private sales by Ameritech, completing
its sell-down obligations.
International is also a shareholder in joint ventures, begun in November 1990,
with a subsidiary of U S WEST, INC. and the telecommunications administrations
of The Czech Republic and The Slovak Republic, to build and operate cellular and
packet data networks in these republics. The cellular telecommunications
system currently provides service to the public in, among other cities,
Prague, Bratislava and Brno.
In May 1991, International acquired, through a joint venture, approximately a
12.5% interest in Sky Network Television Limited, a provider of subscription
television services in New Zealand.
21
International, through a joint venture established in December 1992 with
Societa Finanziaria Telefonica p.a. and Societa Italiana per L'Esercizio delle
Telecomunicazioni p.a., develops operations support systems for
telecommunications providers worldwide.
In November 1993, International acquired for $520 million approximately 23% of
the equity ownership interest in Grupo Iusacell, S.A. de C.V. ("Iusacell"), the
second largest telecommunications company in Mexico and the primary business of
which is the provision of cellular telephone service. Under the acquisition
agreement, and provided certain conditions are met, International is obligated
to purchase additional shares of Iusacell's capital stock representing 17%-23%
of Iusacell's total outstanding shares of capital stock for up to an additional
$520 million.
In March 1994, a consortium in which International has the second largest
interest (approximately 11.5%), was awarded the second cellular license for
Italy.
Business Systems Companies
Bell Atlantic Business Systems Services, Inc. ("Business Systems Services"),
which was formerly known as Sorbus Inc., is a computer services company which
provides hardware and software maintenance, network support, disaster recovery
and other services for more than 5,000 makes and models of computer equipment
and associated peripherals. Business Systems Services provides service to more
than 60,000 customer sites from over 200 locations in the United States and
Canada. Business Systems Services' major competitors are computer equipment
manufacturers which offer to service the equipment they sell as well as other
vendors of computer maintenance and service. In some cases, Business Systems
Services is dependent on computer manufacturers and distributors for spare parts
necessary for the products it services.
The Bell Atlantic Computer Technology Services Division of Business Systems
Services provides parts repair and sales and refurbishment services for
International Business Machines Corporation, Digital Equipment Corporation, Sun
Microsystems, Inc. and other computer manufacturers' equipment to end users,
manufacturers and service companies throughout the world.
Bell Atlantic Business Systems International, Inc. provides computer
maintenance and other end user computer services in the United Kingdom, France,
Italy, Germany, Switzerland, Austria, The Netherlands and Finland through
companies which are owned jointly with International Computers Limited.
Business Systems International provides computer services in Australia and New
Zealand through a partnership with Fujitsu Australia Limited.
Other
Bell Atlantic TeleProducts Corp. sells CPE to residential, work-at-home and
small business customers and Integrated Services Digital Network CPE to a
variety of business customers.
Bell Atlantic Professional Services, Inc. recruits and contracts out temporary
professional services and provides training services to suppliers and end users
of computers and communications equipment.
During 1993 the Company began to exit the customized software and systems
businesses operated by subsidiaries of The Bell Atlantic Systems Group, Inc.
The Company has sold the stock or substantially all the assets of Bell Atlantic
Utilities Systems, Inc., Bell Atlantic Public Sector Systems, Inc. and Bell
Atlantic Integrated Systems, Inc., and is pursuing the sale of Bell Atlantic
Healthcare Systems, Inc. The Company continues to operate the operations
support systems software business of Bell Atlantic Telecommunications Systems,
Inc. as a subsidiary of International and the network integration business of
Bell Atlantic Integrated Systems, Inc. through the Large Business Services
LOB.
22
FINANCIAL, REAL ESTATE, AND OTHER SERVICES
The Financial, Real Estate, and Other Services segment comprises Bell Atlantic
Capital Corporation ("Capital Corporation") and its subsidiaries, Bell Atlantic
Properties, Inc. ("Properties") and its subsidiaries, and Vision Energy
Resources, Inc. ("Vision Energy") and its subsidiaries. In line with its
continuing de-emphasis of financial services businesses over the past several
years and its intensified focus on core communications businesses, the Company
announced in October 1993 that it had begun evaluating possible strategies for
exiting its financial services businesses.
Capital Corporation's wholly-owned subsidiary, Bell Atlantic TriCon Leasing
Corporation ("TriCon"), engages in leasing of office, medical and other
equipment sold by many vendors and also provides other types of financing. In
addition, TriCon provides leasing of CPE to customers of other Bell Atlantic
companies, and engages in a number of large leveraged leasing transactions. In
March 1994, the Company announced an agreement to sell substantially all of
Tricon's assets (other than its leveraged lease and project finance portfolios)
to GFC Financial Corporation. This sale is expected to close in the second
quarter of 1994, subject to the receipt of regulatory approvals.
In 1992, Capital Corporation entered into a joint venture agreement with
PacifiCorp Financial Services, Inc. ("PFS") with respect to both companies'
computer leasing businesses. Prior to the formation of the joint venture,
Capital Corporation's computer leasing business was operated by its subsidiary,
Bell Atlantic Systems Leasing International, Inc. ("BASLI"). Under the joint
venture, Capital Corporation and PFS established Pacific Atlantic Systems
Leasing, Inc. ("PASLI"), 50% owned by each of the companies, which both
companies use as their principal vehicle for domestic operating leases of
computer equipment. Most of BASLI's employees have become employees of PASLI,
and PASLI is responsible for the day-to-day management of BASLI's domestic
computer leasing portfolio.
The equipment financing market is highly competitive. Equipment financing
companies must compete with substantial leasing companies which are affiliated
with major equipment suppliers, and with other well established leasing
companies, banks and other financial institutions.
Properties invests in and manages commercial real estate properties.
The Vision Energy companies are engaged in the sale and distribution of
liquefied petroleum gas primarily in the midwestern United States and Florida.
CERTAIN CONTRACTS AND RELATIONSHIPS
Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided on behalf of the
Network Services Companies on a centralized basis by Bell Atlantic's wholly-
owned subsidiary, Bell Atlantic Network Services, Inc. ("NSI"). Bell Atlantic
Network Funding Corporation provides short-term financing and cash management
services to the Network Services Companies.
Certain corporate services also are provided to other subsidiaries on a
centralized basis by NSI. Bell Atlantic Financial Services, Inc. provides
short-, medium- and long-term financing services and cash management services to
subsidiaries of the Company other than the Network Services Companies.
23
The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore furnishes the RHCs and their BOC subsidiaries with technical
assistance such as network planning, engineering and software development, as
well as various other consulting services that can be provided more effectively
on a centralized basis. Bellcore is the central point of contact for
coordinating the efforts of the RHCs in meeting the national security and
emergency preparedness requirements of the federal government. It also helps to
mobilize the combined resources of the RHCs in times of natural disasters.
EMPLOYEE RELATIONS
As of December 31, 1993, the Company and its subsidiaries employed
approximately 73,600 persons, which represents approximately a three percent
increase from the number of employees at December 31, 1992. This overall net
increase reflects growth in certain non-Network Services Companies subsidiaries,
the acquisition in 1993 of two companies which provide advertising and marketing
services through the Directory Services LOB, and the hiring of some associates
by the Network Services Companies to meet service requirements.
Approximately 65% of the employees of the Company and its subsidiaries are
represented by unions. Of those so represented, approximately 80% are
represented by the Communications Workers of America, and approximately 20% are
represented by the International Brotherhood of Electrical Workers, which are
both affiliated with the American Federation of Labor - Congress of Industrial
Organizations.
Under the terms of the three-year contracts ratified in October 1992 by unions
representing associate employees of the Network Services Companies and NSI,
represented associates received a base wage increase of 3.74% in August 1993.
Under the same contracts, associates received a Corporate Profit Sharing payment
of $495 per person in 1994 based upon the Company's 1993 financial performance.
24
Item 2. Properties
The principal properties of the Company do not lend themselves to simple
description by character and location. At December 31, 1993, the Company's
investment in plant, property and equipment consisted of the following:
Communications and Related Services:
Connecting lines............... 38%
Central office equipment....... 37
Land and buildings............. 7
Telephone instruments and related
equipment............... 2
Other.......................... 14
Financial, Real Estate, and Other Services 2
---
100%
===
"Connecting lines" consists primarily of aerial cable, underground cable,
poles, conduit and wiring. "Central office equipment" consists of switching
equipment, transmission equipment and related facilities. "Land and buildings"
consists of land owned in fee and improvements thereto, principally central
office buildings. "Telephone instruments and related equipment" consists
primarily of public telephone instruments and telephone equipment (including
PBXs) used by the Network Services Companies in their operations. "Other"
property consists primarily of furniture, office equipment, vehicles and other
work equipment, and plant under construction of the Network Services Companies,
as well as the property of the Other Communications and Related Services
companies. Financial, Real Estate, and Other Services property consists mainly
of land and buildings owned by BAP. Not included in the above properties is
$199.3 million of equipment under operating leases, net of accumulated
depreciation of $652.4 million, owned primarily by TriCon and BASLI at December
31, 1993. Additional information with respect to the Company's plant, property
and equipment is set forth in Schedule V on page F-4 of this report.
The Company's central offices are served by various types of switching
equipment. At December 31, 1993 and 1992, the number of local exchanges served
and the percent of subscriber lines served by each type of equipment were as
follows:
1993 1992
--------------------------- ---------------------------
# of Local % of Subscriber # of Local % of Subscriber
Exchanges Lines Served Exchanges Lines Served
--------- --------------- ---------- ---------------
Digital..... 2,755 62.9 2,587 59.0
Analog...... 1,419 37.0 1,499 40.8
Other....... 8 0.1 10 0.2
----- ---- ----- ----
4,182 100 4,096 100
===== ==== ===== ====
25
Item 3. Legal Proceedings
Pre-Divestiture Contingent Liabilities and Litigation
The Plan provides for the recognition and payment by AT&T and the former BOCs
(including the Network Services Companies) of liabilities that are attributable
to pre-Divestiture events but do not become certain until after Divestiture.
These contingent liabilities relate principally to litigation and other claims
with respect to the former Bell System's rates, taxes, contracts and torts
(including business torts, such as alleged violations of the antitrust laws).
Except to the extent that affected parties otherwise agree, contingent
liabilities that are attributable to pre-Divestiture events are shared by AT&T
and the BOCs in accordance with formulas prescribed by the Plan, whether or not
an entity was a party to the proceeding and regardless of whether an entity was
dismissed from the proceeding by virtue of settlement or otherwise. Each
company's allocable share of liability under these formulas depends on several
factors, including the type of contingent liability involved and each company's
relative net investment as of the effective date of Divestiture. Under the
formula generally applicable to most of the categories of these contingent
liabilities, the Network Services Companies' aggregate allocable share of
liability is approximately 10.2%.
AT&T and various of its subsidiaries and the BOCs (including in some cases one
or more of the Network Services Companies) have been and are parties to various
types of litigation relating to pre-Divestiture events, including actions and
proceedings involving environmental claims and allegations of violations of
equal employment laws. Damages, if any, ultimately awarded in the remaining
actions relating to pre-Divestiture events could have a financial impact on the
Company whether or not the Company is a defendant since such damages will be
treated as contingent liabilities and allocated in accordance with the
allocation rules established by the Plan.
While complete assurance cannot be given as to the outcome of any contingent
liabilities or litigation, in the opinion of the Company's management, any
monetary liability or financial impact to which the Company would be subject
after final adjudication of all of the remaining potential or actual pre-
Divestiture claims would not be material in amount to the financial position
of the Company.
Other Pending Cases
(1) On April 12, 1990, a letter was submitted to the Company's Board of
Directors by a law firm, purportedly on behalf of a shareowner of the Company,
requesting that the Company commence action against any present or former
director, officer or employee of the Company or any of its subsidiaries who
might be found to have violated any duty to the Company in connection with (i)
certain litigation involving Bell Atlantic - Pennsylvania and (ii) a temporary
suspension of the Company and Bell Atlantic - Washington, D.C. from eligibility
for future federal government contracts (the "Treasury suspension"). As
previously reported by the Company in its Quarterly Reports on Form 10-Q for the
quarters ended March 31 and September 30, 1990 and its Annual Reports on Form
10-K for the years ended December 31, 1990 and 1991, the Bell Atlantic -
Pennsylvania litigation involved allegations that this subsidiary had engaged in
improper practices while selling certain optional services, and resulted in a
settlement pursuant to which Bell Atlantic - Pennsylvania made payments and
refunds aggregating approximately $42 million; the Treasury suspension involved
allegations that the Company and Bell Atlantic - Washington, D.C. had
misrepresented certain facts in connection with a bid for a particular
government contract, and was terminated approximately one month later after the
Company agreed to re-emphasize to employees the need to verify information
provided to the government, including information supplied to the Company by
sub-contractors.
26
In response to the demand letter (a similar letter, purportedly on behalf of
a different shareowner, was received shortly thereafter), the Board of Directors
of the Company (the "Board) on April 24, 1990 appointed a committee of three
outside directors (James H. Gilliam, Jr. (Chairman), William G. Copeland and
John F. Maypole) to investigate these matters and present its recommendation to
the Board (the "Special Committee").
On May 11, 1990, the Company was served with a complaint filed in the Court of
Common Pleas of Philadelphia County, Pennsylvania, naming certain then-current
directors and officers as defendants in a shareholder derivative suit. The
complaint alleged that the defendants had breached their fiduciary duties to the
Company and its shareowners by failing to implement and enforce adequate
safeguards to prevent the activities which resulted in the Bell Atlantic -
Pennsylvania litigation and the Treasury suspension referred to above. The
Company is not a defendant in this litigation.
The Special Committee retained independent outside counsel and conducted a
five-month investigation. After completion of its investigation, the Special
Committee concluded that it would not be in the best interest of the Company and
its shareowners to assert claims or take any other action against any director
or officer of the Company or any of its subsidiaries with respect to either the
Bell Atlantic - Pennsylvania litigation or the Treasury suspension.
Accordingly, the Special Committee recommended that the Board reject the demands
expressed in the shareowner letters, and the Board on October 23, 1990 adopted
this recommendation. Counsel for each of the demanding shareowners was advised
of the Board's determination.
The defendants' motion to dismiss the Court of Common Pleas litigation on
jurisdictional grounds was denied and, as reported in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1991, in September 1991
the Pennsylvania Supreme Court refused to hear the defendants' appeal of the
trial court's denial of their motion to dismiss the Court of Common Pleas
litigation.
A related case filed in the United States District Court for the Eastern
District of Pennsylvania was settled and is discussed below under "Prior
Cases."
(2) In its Annual Reports on Form 10-K for the years ended December 31, 1990
and 1991, the Company reported that in January 1991, the Company, its Chief
Executive Officer and its former Chief Financial Officer were named as
defendants in several identical class action complaints. These complaints,
which have been consolidated in a single proceeding in the United States
District Court for the Eastern District of Pennsylvania and have subsequently
been amended, allege that, during a class period from June 14, 1990 through
January 22, 1991, the plaintiffs purchased shares of Bell Atlantic stock at
inflated prices as a result of the defendants' alleged failure to disclose
material information regarding certain aspects of the Company's financial
performance and prospects. The trial court's earlier decision granting
defendants' motion to dismiss this action has been reversed by the United States
Court of Appeals for the Third Circuit upon appeal by the plaintiffs. Discovery
in this action is in progress.
While complete assurance cannot be given as to the outcome of any litigation,
in the opinion of the Company's management, any monetary liability or financial
impact to which the Company would be subject after final adjudication of the
foregoing actions would not be material in amount to the financial position of
the Company.
Prior Cases
On June 19, 1991, the Company was served with a complaint filed in the United
States District Court for the Eastern District of Pennsylvania naming all of
the then-current directors of the Company and one former officer as defendants
in a shareowner class action and derivative suit. This lawsuit made
allegations very similar to the Court of Common Pleas suit referenced above in
"Other Pending Cases" with respect to the Bell Atlantic - Pennsylvania
litigation and Treasury suspension matters and, in addition, alleged that the
Company violated federal proxy rules and regulations and its duty of candor
under state law by failing to disclose, in its 1987-1991 proxy materials,
information about the Bell Atlantic - Pennsylvania litigation, the Treasury
suspension, the appointment of the Special Committee and the Court of Common
Pleas litigation referenced above.
27
On March 25, 1992, the parties to the federal court action reached an
agreement to settle that action, subject to court approval after notice to the
Company's shareowners, without the payment of any damages but subject to payment
of the plaintiffs' attorneys fees up to $450,000. In June 1992, this settlement
agreement was approved by the United States District Court for the Eastern
District of Pennsylvania. A single shareowner, who is also the plaintiff in the
related Court of Common Pleas litigation, filed an appeal with the United States
Court of Appeals for the Third Circuit challenging the approval of the
settlement agreement by the lower court. On August 18, 1993, the Third
Circuit affirmed the lower court approval of the settlement agreement. After
expiration of the time in which to file an appeal of the Third Circuit
affirmation, the Company paid the plaintiffs' attorneys fees stipulated by the
settlement agreement and the federal court action was dismissed.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
28
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to the Company's executive
officers.
Held
Name Age Office Since
---- --- ------ -----
Raymond W. Smith........... 56 Chairman of the Board and Chief Executive Officer 1989
James G. Cullen............ 51 President 1993
William O. Albertini....... 50 Vice President and Chief Financial Officer 1991
Joseph T. Ambrozy.......... 54 Vice President - Strategic Planning 1992
Lawrence T. Babbio, Jr..... 49 Chairman, President and Chief Executive Officer, 1991
Bell Atlantic Enterprises International, Inc.
P. Alan Bulliner........... 50 Vice President - Corporate Secretary and Counsel 1992
Barbara L. Connor.......... 43 Vice President - Finance and Controller and Treasurer 1993
Charles W. Crist........... 50 Vice President - Human Resources 1990
John F. Gamba.............. 55 Group President, Network Technologies and Systems, 1993
Bell Atlantic Network Services, Inc.
Bruce S. Gordon............ 48 Group President - Consumer and Small Business Services, 1993
Bell Atlantic Network Services, Inc.
Stuart C. Johnson.......... 51 Group President, Large Business and Information 1993
Services, Bell Atlantic Network Services, Inc.
Brian J. Kelly............. 59 Group President, Network Operations, 1993
Bell Atlantic Network Services, Inc.
Robert M. Valentini........ 50 President and Chief Executive Officer, Bell Atlantic - 1988
Pennsylvania, Inc.
James R. Young............. 42 Vice President and General Counsel 1992
Prior to serving as an executive officer of the Company, each of the above
officers, with the exception of Mr. Johnson, has held high level managerial
positions with the Company or one of its subsidiaries for at least five years.
From 1987 until joining the Company in 1992, Mr. Johnson served as President,
GTE-Contel Federal Sector for GTE Corporation.
Mr. Kelly is retiring on April 7, 1994.
Officers are not elected for a fixed term of office but are removable at the
discretion of the Board of Directors of the Company.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The principal market for trading in the common stock of Bell Atlantic
Corporation is the New York Stock Exchange. The common stock is also listed in
the United States on the Boston, Chicago, Pacific, and Philadelphia stock
exchanges. As of December 31, 1993, there were 1,026,371 shareowners of record.
High and low stock prices, as reported on the New York Stock Exchange
Composite Transactions, and dividend data are as follows:
Market Price Cash
---------------- Dividends
High Low Declared
------- ------- --------
1993: First Quarter....................... $56 3/4 $49 5/8 $.67
Second Quarter...................... 59 1/8 50 3/4 .67
Third Quarter....................... 64 7/8 55 5/8 .67
Fourth Quarter...................... 69 1/8 57 .67
1992: First Quarter....................... 49 41 1/4 .65
Second Quarter...................... 45 40 1/4 .65
Third Quarter....................... 49 3/4 44 1/4 .65
Fourth Quarter...................... 53 7/8 44 1/2 .65
29
Item 6. Selected Financial Data
The Selected Financial and Operating Data on page 6 of the Company's 1993
Annual Report to Shareowners is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Management's Discussion and Analysis of Results of Operations and
Financial Condition on pages 7 through 12 of the Company's 1993 Annual Report to
Shareowners is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Report of Independent Accountants, Consolidated Statements of Income,
Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and Notes to
Consolidated Financial Statements on pages 14 through 39 of the Company's 1993
Annual Report to Shareowners are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
For information with respect to the executive officers of the Company, see
"Executive Officers of the Registrant" at the end of Part I of this Report. For
information with respect to the Directors of the Company, see "Election of
Directors" on pages 1 through 5 of the Proxy Statement for the Company's 1994
Annual Meeting of Shareowners, which is incorporated herein by reference.
Item 11. Executive Compensation
For information with respect to executive compensation, see "Executive
Compensation" on pages 9 through 14, "Stock Performance Graphs" on page 16, and
"Employment Agreements" on page 17 of the Proxy Statement for the Company's 1994
Annual Meeting of Shareowners, which are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
For information with respect to the security ownership of the Directors and
Executive Officers of the Company, see "Ownership of Bell Atlantic Common Stock"
on page 15 of the Proxy Statement for the Company's 1994 Annual Meeting of
Shareowners, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See Index to Financial Statements and Financial Statement
Schedules appearing on Page F-1.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement
Schedules appearing on Page F-1.
(3) Exhibits
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.
Exhibit Number
- --------------
3a Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"), dated October 7, 1983. (Exhibit 3a to Registration
Statement on Form S-1 No. 2-87842, File No. 1-8606.)
3b Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 9, 1986 and filed May 16, 1986. (Exhibit 3b to
Form SE dated March 27, 1987, File No. 1-8606.)
3c Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 6, 1987 and filed May 8, 1987. (Exhibit 3c to
Form SE dated March 28, 1988, File No. 1-8606.)
3d Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 10, 1990 and filed June 29, 1990. (Exhibit 3d to
Form SE dated March 28, 1991, File No. 1-8606.)
3e By-Laws of Bell Atlantic, as amended through June 23, 1992. (Exhibit
3e to Form SE dated March 29, 1993, File No. 1-8606.)
4 No instrument which defines the rights of holders of long and
intermediate term debt, of the Company and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, Bell Atlantic hereby
agrees to furnish a copy of any such instrument to the SEC upon
request.
31
Exhibit Number
- --------------
10a Agreement Concerning Contingent Liabilities, Tax Matters and
Termination of Certain Agreements among AT&T, Bell Atlantic, the
Network Services Companies, and certain other parties, dated as of
November 1, 1983.
10a(i) Agreement Concerning Allocation of Contingent Liabilities
between AT&T and Bell Atlantic, dated as of January 28, 1985.
(Exhibit 10h(i) to Form SE filed on March 28, 1985, File No.
1-8606.)
10b Agreement among Bell Atlantic Network Services, Inc. (formerly named
Bell Atlantic Management Services, Inc.) and the Network Services
Companies, dated November 7, 1983.
10c Bell Atlantic Senior Management Short Term Incentive Plan, as amended
and restated effective as of January 1, 1993. (Exhibit 10c to Form SE
dated March 29, 1993, File No. 1-8606.)*
10d Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March
27, 1986, File No. 1-8606.)*
10d(i) Resolutions amending the Plan, effective as of January 1, 1989.
(Exhibit 10d to Form SE dated March 29, 1989, File No.
1-8606.)*
10e Bell Atlantic Senior Management Transfer Program. (Exhibit 10ee to
1983 Form 10-K, File No. 1-8606.)*
10e(i) Resolutions terminating the Program for transfers on or after
November 1, 1992. (Exhibit 10e to Form SE dated March 29,
1993, File No. 1-8606.)*
10f Bell Atlantic Personal Financial Services Program for Senior and
Executive Managers and Key Employees, effective as of July 1, 1990, as
amended. (Exhibit 10f to Form SE dated March 28, 1991, File No.
1-8606.)*
10g Bell Atlantic Deferred Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1993. (Exhibit 10g to Form SE
dated March 29, 1993, File No. 1-8606.)*
10h Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to
Registration Statement on Form S-1 No. 2-87842, File No. 1-8606.)*
10i Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on Form
S-1 No. 2-87842, File No. 1-8606.)*
10j Article V from Bell Atlantic Management Pension Plan regarding
limitations on payment of pension amounts which exceed the limitations
contained in the Employee Retirement Income Security Act of 1974.
(Exhibit 10j to Form SE dated March 26, 1992, File No. 1-8606.)*
32
Exhibit Number
- --------------
10k Bell Atlantic Senior Management Retirement Income Plan, as amended and
restated effective as of January 1, 1993. (Exhibit 10k to Form SE
dated March 29, 1993, File No. 1-8606)*
10k(i) Resolutions amending the Bell Atlantic Senior Management
Retirement Income Plan effective as of December 31, 1993.*
10l Bell Atlantic Deferred Compensation Plan (formerly the Bell Atlantic
Senior Management Incentive Award Deferral Plan), as amended and
restated effective as of January 1, 1993. (Exhibit 10l to Form SE
dated March 29, 1993, File No. 1-8606)*
10l(i) Resolutions amending the Bell Atlantic Deferred Compensation
Plan, effective October 25, 1993.*
10m Bell Atlantic Stock Incentive Plan, consisting of (1) The Bell
Atlantic 1985 Performance Share Plan as amended and restated effective
as of January 1, 1993 and (2) The Bell Atlantic 1985 Incentive Stock
Option Plan as amended and restated effective as of January 1, 1993.
(Exhibit 10m to Form SE dated March 29, 1993, File No. 1-8606)*
10m(i) Resolutions amending The Bell Atlantic 1985 Incentive Stock
Option Plan, subject to the approval of the shareowners of
the Company.*
10n Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1993. (Exhibit 10n to Form SE dated March
29, 1993, File No. 1-8606)*
10o Bell Atlantic Stock Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1993. (Exhibit 10o to Form SE
dated March 29, 1993, File No. 1-8606)*
10p Bell Atlantic Corporation Directors' Charitable Giving Program.
(Exhibit 10p to Form SE dated March 29, 1990, File No. 1-8606)*
10p(i) Resolutions amending and partially terminating the Program.
(Exhibit 10p to Form SE dated March 29, 1993, File No. 1-8606)*
10q Employment Agreement dated January 24, 1994 between the Company and
William O. Albertini.*
10r Employment Agreement dated January 24, 1994 among the Company, Bell
Atlantic Enterprises International, Inc. and Lawrence T. Babbio, Jr.*
10s Resolution dated January 24, 1994 granting Lawrence T. Babbio, Jr.
certain nonqualified stock options to purchase American Depositary
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V.*
33
Exhibit Number
- --------------
10t Employment Agreement dated January 24, 1994 between the Company and
James G. Cullen.*
10u Non-Compete and Proprietary Information Agreement dated August 10,
1993 between the Company and James G. Cullen.*
10v Employment Agreement dated January 24, 1994 among the Company, Bell
Atlantic Network Services, Inc. and Stuart C. Johnson.*
10w Non-Compete and Proprietary Information Agreement dated August 9, 1993
among the Company, Bell Atlantic Network Services, Inc. and Stuart C.
Johnson.*
10x Employment Agreement dated January 24, 1994 between the Company and
James R. Young.*
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 1993 Annual Report to Shareowners (for the fiscal year ended December
31, 1993). Except for the portions of such Annual Report which are
expressly incorporated herein by reference, such Annual Report is
furnished for the information of the Securities and Exchange
Commission and is not deemed to be "filed" as part of this Annual
Report on Form 10-K .
21 List of subsidiaries of Bell Atlantic.
23 Consent of Coopers & Lybrand.
24 Powers of attorney.
99a Annual report on Form 11-K for the Bell Atlantic Savings Plan for
Salaried Employees for the year ended December 31, 1993. (To be filed
by amendment.)
99b Annual report on Form 11-K for the Bell Atlantic Savings and Security
Plan (Non-Salaried Employees) for the year ended December 31, 1993.
(To be filed by amendment.)
____________
* Indicates management contract or compensatory plan or arrangement.
34
Shareowners may request a copy of any of the exhibits to this Annual Report on
Form 10-K by writing to the Corporate Secretary, Bell Atlantic Corporation, 1717
Arch Street, Philadelphia, Pennsylvania 19103.
(b) Current Reports on Form 8-K filed during the quarter ended December 31,
1993:
A Current Report on Form 8-K, dated October 11, 1993, was filed reporting on
Item 5 (Other Events) that the Company had formed a strategic partnership with
Grupo Iusacell, S.A. de C.V.
A Current Report on Form 8-K, dated October 12, 1993, was filed reporting on
Item 5 (Other Events) and Item 7 (Financial Statements and Exhibits) that the
Company, Tele-Communications, Inc. (TCI), and Liberty Media Corporation
(Liberty) had entered into a letter of intent which sets forth the terms and
conditions upon which the parties proposed to negotiate a combination of TCI and
Liberty into the Company pursuant to a series of transactions.
A Current Report on Form 8-K, dated October 19, 1993, was filed regarding the
Company's third quarter 1993 financial results. This report contained unaudited
condensed consolidated statements of income for the three- and nine-month
periods ended September 30, 1993 and 1992.
A Current Report on Form 8-K, dated December 15, 1993, was filed reporting on
Item 5 (Other Events) and Item 7 (Financial Statements and Exhibits) regarding
an amendment to the letter of intent among the Company, TCI, and Liberty.
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BELL ATLANTIC CORPORATION
By /s/ William O. Albertini
-----------------------------
William O. Albertini
Vice President and
Chief Financial Officer
March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Executive Officer: +++++++
Raymond W. Smith Chairman of the Board +
and Chief Executive Officer +
+
Principal Financial Officer: +
William O. Albertini Vice President and +
Chief Financial Officer +
+
Principal Accounting Officer: +
Barbara L. Connor Vice President - Finance +
and Controller and Treasurer +
+++++
+
+ By /s/ William O. Albertini
+ -------------------------
Directors: + William O. Albertini
William W. Adams + (individually and as
Thomas E. Bolger + attorney-in-fact)
Frank C. Carlucci + March 29, 1994
William G. Copeland +
James H. Gilliam, Jr. +
Thomas H. Kean +
John C. Marous, Jr. +
John F. Maypole +
Thomas H. O'Brien +
Rozanne L. Ridgway +
Raymond W. Smith +
Shirley Young +
+++++++
36
BELL ATLANTIC CORPORATION
Index to Financial Statements and Financial Statement Schedules
Page Number
-------------------
Annual
Form Report
10-K to Shareowners
----- --------------
Report of Independent Accountants.................... F-2 14
Consolidated Statements of Income-For the years ended
December 31, 1993, 1992 and 1991.................... -- 15
Consolidated Balance Sheets-December 31, 1993 and 1992 -- 16
Consolidated Statements of Cash Flows-For the years ended
December 31, 1993, 1992 and 1991................... -- 17
Notes to Consolidated Financial Statements........... -- 18-39
Schedule II-Amounts Receivable from Related Parties and
Underwriters, Promotors, and Employees Other Than
Related Parties - For the years ended December 31, 1993,
1992 and 1991...................................... F-3 --
Schedule V-Consolidated Plant, Property and Equipment-
For the years ended December 31, 1993, 1992 and 1991 F-4 --
Schedule VI-Accumulated Depreciation-For the years
ended December 31, 1993, 1992 and 1991............. F-8 --
Schedule VIII-Valuation and Qualifying Accounts-For the
years ended December 31, 1993, 1992 and 1991....... F-9 --
Schedule IX-Short-Term Borrowings-For the years
ended December 31, 1993, 1992 and 1991............. F-10 --
Schedule X-Supplementary Income Statement Information-
For the years ended December 31, 1993, 1992 and 1991 F-11 --
Schedules other than those listed above have been omitted because the required
information is contained in the financial statements and the notes thereto, or
because such schedules are not required or applicable.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareowners of
Bell Atlantic Corporation
Our report on the consolidated financial statements of Bell Atlantic
Corporation and subsidiaries has been incorporated by reference in this Form 10-
K from page 14 of the 1993 Annual Report to shareowners of Bell Atlantic
Corporation and subsidiaries. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index on page F-1 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 7, 1994
F-2
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in Thousands)
Deductions Balance at
Balance at -------------------------------- End of Period
Beginning of Amounts Amounts ------------------
Name of Debtor Period Additions Collected Written Off Other Current Noncurrent
- ------------- ------------ --------- ---------- ----------- ----- ------- ----------
Year 1993
L. Kasarjian, Jr.
(a)(b).......... $ 177 $ --- $ --- $ --- $ 177(e) $ --- $ ---
T. Ryan (a)(c)..... 177 --- --- --- 177(e) --- ---
Year 1992
L. Kasarjian, Jr.
(a)(b).......... 831 --- 504 --- 150(f) 177 ---
T. Ryan (a)(c)..... 831 --- 504 --- 150(f) 177 ---
O. Swanky (a)...... 1,940 --- 1,940 --- --- --- ---
P. Kelley (d)...... 376 --- 376 --- --- --- ---
Year 1991
L. Kasarjian, Jr.
(a)............. 1,058 77 304 --- --- 831 ---
T. Ryan (a)........ 1,058 77 304 --- --- 831 ---
O. Swanky (a)...... 2,468 180 708 --- --- 1,940 ---
P. Kelley (d)...... 376 --- --- --- --- 376 ---
- -----------
(a) Loans made in connection with the 1986 acquisition of Greyhound Capital
Corporation, used for the employee's purchase of venture capital assets
from Greyhound Corporation and continued portfolio management.
(b) In February 1992, the term of this loan was extended to February 28, 1995.
The loan bears interest at 7% per annum and is collateralized by
certain securities, as well as by certain payments owed to the debtor by
the Company.
(c) In March 1992, the term of this loan was extended to February 28, 1995.
The loan bears interest at 7% per annum and is collateralized by
certain securities, as well as by certain payments owed to the debtor by
the Company.
(d) Note payable on demand, bearing interest at 8%.
(e) During 1993, the loan was transferred to a 50%-owned joint venture and was
collected in full.
(f) Amounts settled in consideration of individuals foregoing entitlements to
future long-term contingent compensation.
F-3
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE V - CONSOLIDATED PLANT, PROPERTY AND EQUIPMENT
For the Year Ended December 31, 1993
(Dollars in Millions)
Balance at Additions Retire- Balance
Beginning at Cost- ments- Other at End
Classification of Period Note(a) Note(b) Changes of Period
-------------- --------- --------- ------- ------- ---------
Communications and Related Services:
Network Services
Land....................................... $ 138.8 $ 2.6 $ .3 $ (.3) $ 140.8
Buildings.................................. 2,178.9 78.3 22.3 -- 2,234.9
Central Office Equipment................... 11,498.4 1,128.9 717.2 (4.5) 11,905.6
Telephone Instruments and
Related Equipment........................ 511.1 62.8 14.5 3.4 562.8
Poles...................................... 674.7 26.9 8.9 -- 692.7
Cable and Wiring........................... 9,305.6 484.3 137.3 -- 9,652.6
Conduit.................................... 1,904.1 81.5 2.8 -- 1,982.8
Office Equipment and
Furniture................................ 1,780.3 233.5 198.5 (2.5) 1,812.8
Vehicles and Other Work
Equipment................................ 622.8 40.0 56.5 -- 606.3
Capital Leases and Leasehold
Improvements............................. 354.4 19.3 10.3 -- 363.4
--------- -------- -------- ----- ---------
Total in Service(c)...................... 28,969.1 2,158.1 1,168.6 (3.9) 29,954.7
Plant under Construction................... 563.8 43.1 .4 .2 606.7
Other...................................... 34.7 3.9 1.4 1.1 38.3
--------- -------- -------- ----- ---------
Total Network Services
Plant.................................. 29,567.6 2,205.1 1,170.4 (2.6) 30,599.7
Other Communications and
Related Services.......................... 878.4 280.8 27.2 20.7(d) 1,152.7
--------- -------- -------- ----- ---------
Total Communications and
Related Services....................... 30,446.0 2,485.9 1,197.6 18.1 31,752.4
--------- -------- -------- ----- ---------
Financial, Real Estate, and Other Services:
Land........................................ 105.6 15.4 8.8 (1.3) 110.9
Buildings................................... 247.3 49.3 37.0 (2.7) 256.9
Equipment................................... 53.4 6.1 4.1 .4 55.8
Other....................................... 145.4 8.6 2.4 .1 151.7
Construction-in-progress.................... 48.5 (46.3) -- -- 2.2
--------- -------- -------- ----- ---------
Total Financial, Real Estate,
and Other Services...................... 600.2 33.1 52.3 (3.5) 577.5
--------- -------- -------- ----- ---------
Total Plant, Property
and Equipment......................... $31,046.2 $2,519.0 $1,249.9 $14.6 $32,329.9
========= ======== ======== ===== =========
The notes on Page F-7 are an integral part of this Schedule.
F-4
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE V - CONSOLIDATED PLANT, PROPERTY AND EQUIPMENT
For the Year Ended December 31, 1992
(Dollars in Millions)
Balance at Additions Retire- Balance
Beginning at Cost- ments- Other at End
Classification of Period Note(a) Note(b) Changes of Period
-------------- --------- ------- ------- ------- ---------
Communications and Related
Services:
Network Services
Land...................... $ 133.4 $ 5.5 $ -- $ (.1) $ 138.8
Buildings................. 2,114.8 80.0 15.5 (.4) 2,178.9
Central Office Equipment.. 11,147.8 1,048.9 697.7 (.6) 11,498.4
Telephone Instruments and
Related Equipment....... 495.8 59.9 44.3 (.3) 511.1
Poles..................... 654.6 28.7 8.4 (.2) 674.7
Cable and Wiring.......... 11,216.3 540.3 2,450.8 (.2) 9,305.6
Conduit................... 1,827.2 85.2 8.3 -- 1,904.1
Office Equipment and
Furniture............... 1,721.7 192.6 138.0 4.0 1,780.3
Vehicles and Other Work
Equipment............... 607.7 49.0 33.7 (.2) 622.8
Capital Leases and
Leasehold Improvements... 344.8 29.5 16.1 (3.8) 354.4
--------- -------- -------- ----- ---------
Total in Service(c)..... 30,264.1 2,119.6 3,412.8 (1.8) 28,969.1
Plant under Construction.. 423.2 140.2 -- .4 563.8
Other..................... 21.7 14.7 .5 (1.2) 34.7
--------- -------- -------- ----- ---------
Total Network Services
Plant................... 30,709.0 2,274.5 3,413.3 (2.6) 29,567.6
Other Communications and
Related Services......... 670.5 235.6 25.9 (1.8) 878.4
--------- -------- -------- ----- ---------
Total Communications and
Related Services........ 31,379.5 2,510.1 3,439.2 (4.4) 30,446.0
--------- -------- -------- ----- ---------
Financial, Real Estate, and
Other Services:
Land....................... 97.0 36.6 28.0 -- 105.6
Buildings.................. 441.5 3.5 199.0 1.3 247.3
Equipment.................. 58.1 3.8 3.4 (5.1) 53.4
Other...................... 124.9 9.1 39.6 51.0 145.4
Construction-in-progress... 65.3 (16.3) .5 -- 48.5
--------- -------- -------- ----- ---------
Total Financial, Real
Estate, and Other
Services................ 786.8 36.7 270.5 47.2 600.2
--------- -------- -------- ----- ---------
Total Plant, Property
and Equipment........... $32,166.3 $2,546.8 $3,709.7 $42.8 $31,046.2
========= ======== ======== ===== =========
The notes on Page F-7 are an integral part of this Schedule.
F-5
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE V - CONSOLIDATED PLANT, PROPERTY AND EQUIPMENT
For the Year Ended December 31, 1991
(Dollars in Millions)
Balance at Additions Retire- Balance
Beginning at Cost- ments- Other at End
Classification of Period Note(a) Note(b) Changes of Period
-------------- --------- ------- ------- ------- ---------
Communications and Related
Services:
Network Services
Land...................... $ 130.8 $ 2.8 $ -- $ (.2) $ 133.4
Buildings................. 2,023.0 110.7 18.0 (.9) 2,114.8
Central Office Equipment.. 10,857.0 1,069.5 776.9 (1.8) 11,147.8
Telephone Instruments and
Related Equipment....... 540.1 62.2 107.2 .7 495.8
Poles..................... 636.7 32.9 15.0 -- 654.6
Cable and Wiring.......... 10,909.9 588.1 281.3 (.4) 11,216.3
Conduit................... 1,731.9 101.2 5.9 -- 1,827.2
Office Equipment and
Furniture............... 1,600.8 249.8 131.8 2.9 1,721.7
Vehicles and Other Work
Equipment............... 548.6 99.1 40.2 .2 607.7
Capital Leases and
Leasehold
Improvements............ 288.7 71.5 15.3 (.1) 344.8
--------- -------- -------- ------ ---------
Total in Service(c)..... 29,267.5 2,387.8 1,391.6 .4 30,264.1
Plant under Construction.. 448.0 (23.5) 1.2 (.1) 423.2
Other..................... 17.9 5.1 1.2 (.1) 21.7
--------- -------- -------- ------ ---------
Total Network Services
Plant................... 29,733.4 2,369.4 1,394.0 .2 30,709.0
Other Communications and
Related Services......... 611.6 117.5 47.1 (11.5) 670.5
--------- -------- -------- ------ ---------
Total Communications and
Related Services........ 30,345.0 2,486.9 1,441.1 (11.3) 31,379.5
--------- -------- -------- ------ ---------
Financial, Real Estate, and
Other Services:
Land....................... 112.1 13.6 .1 (28.6) 97.0
Buildings.................. 362.1 79.1 .1 .4 441.5
Equipment.................. 55.7 4.1 2.6 .9 58.1
Other...................... 60.9 42.5 .8 22.3 124.9
Construction-in-progress... 123.2 17.9 75.8 -- 65.3
--------- -------- -------- ------ ---------
Total Financial, Real
Estate,
and Other Services...... 714.0 157.2 79.4 (5.0) 786.8
--------- -------- -------- ------ ---------
Total Plant, Property
and Equipment........... $31,059.0 $2,644.1 $1,520.5 $(16.3) $32,166.3
========= ======== ======== ====== =========
The notes on Page F-7 are an integral part of this Schedule.
F-6
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
NOTES TO SCHEDULE V - PLANT, PROPERTY
AND EQUIPMENT
_________
(a) These additions include (1) the original cost (estimated if not specifically
determinable) of reused material, which is concurrently credited to material
and supplies, and (2) allowance for funds used during construction.
Transfers between Plant in Service, Plant under Construction and Other are
included in Additions at Cost.
(b) Items of plant, property and equipment are deducted from the property
accounts when retired or sold at the amounts at which they are included
therein, estimated if not specifically determinable.
(c) The telephone subsidiaries' provision for depreciation is based on the
remaining life method and straight-line composite rates prescribed by
regulatory authorities. The remaining life method provides for the full
recovery of the remaining net investment in plant, property and equipment.
During 1993, 1992, and 1991, the telephone subsidiaries implemented changes
in depreciation rates approved by the regulators. These changes will more
closely align the recovery of the Company's investment in plant, property
and equipment with current estimates of its remaining economic useful
life. For the years 1993, 1992, and 1991, depreciation expressed as a
percentage of average depreciable plant was 7.7%, 7.0%, and 6.4%,
respectively.
(d) For 1993, Other Changes includes $24.5 million related to the acquisition of
certain Other Communications and Related Services businesses.
(e) See Note 1 of the Notes to Consolidated Financial Statements in the 1993
Annual Report to shareowners for the Company's depreciation policies.
F-7
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in Millions)
Balance at Additions Balance
Beginning Charged to Retire- Other at End
Classification of Period Expenses ments Changes of Period
- -------------- ---------- ---------- -------- ------- ---------
Year 1993
Communications and
Related Services
Network Services................ $10,309.7 $2,249.5 $1,145.3 $ 39.5 $11,453.4
Other Communications and
Related Services.............. 303.4 117.1 17.6 6.4 409.3
--------- -------- -------- --------- ---------
10,613.1 2,366.6 1,162.9 45.9 11,862.7
Financial, Real Estate, and
Other Services................. 103.1 23.6 4.2 (21.2) 101.3
--------- -------- -------- --------- ---------
$10,716.2 $2,390.2 $1,167.1 $ 24.7 $11,964.0
========= ======== ======== ========= =========
Year 1992
Communications and
Related Services
Network Services................ $11,664.3 $2,088.1 $3,434.5 $ (8.2) $10,309.7
Other Communications and
Related Services.............. 234.7 90.5 6.1 (15.7) 303.4
--------- -------- -------- --------- ---------
11,899.0 2,178.6 3,440.6 (23.9) 10,613.1
Financial, Real Estate, and
Other Services................. 82.0 25.5 14.3 9.9 103.1
--------- -------- -------- --------- ---------
$11,981.0 $2,204.1 $3,454.9 $ (14.0) $10,716.2
========= ======== ======== ========= =========
Year 1991
Communications and
Related Services
Network Services................ $11,154.7 $1,917.7 $1,412.5 $ 4.4 $11,664.3
Other Communications and
Related Services.............. 196.1 78.5 32.9 (7.0) 234.7
--------- -------- -------- --------- ---------
11,350.8 1,996.2 1,445.4 (2.6) 11,899.0
Financial, Real Estate, and
Other Services................. 52.4 24.4 2.8 8.0 82.0
--------- -------- -------- --------- ---------
$11,403.2 $2,020.6 $1,448.2 $ 5.4 $11,981.0
========= ======== ======== ========= =========
F-8
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in Millions)
Additions
-------------------------------
Balance at Charged Charged to Balance
Beginning to Other Accounts Deductions at End
Description of Period Expenses -Note (a) -Note (b) of Period
- ----------- ---------- -------- -------------- ----------- ---------
Allowance for Uncollectible
Accounts Receivable:
Year 1993............... $170.4 $176.2 $163.7 $317.7 $192.6
====== ====== ====== ====== ======
Year 1992............... $166.0 $132.1 $170.5 $298.2 $170.4
====== ====== ====== ====== ======
Year 1991............... $126.2 $128.7 $170.3 $259.2 $166.0
====== ====== ====== ====== ======
Allowance for Uncollectible
Finance Lease Receivables:
Year 1993............... $ 52.2 $ 25.1 $ 9.5 $ 37.9 $ 48.9
====== ====== ====== ====== ======
Year 1992............... $ 46.3 $ 32.8 $ 6.4 $ 33.3 $ 52.2
====== ====== ====== ====== ======
Year 1991............... $ 37.0 $ 29.9 $ 4.7 $ 25.3 $ 46.3
====== ====== ====== ====== ======
Allowance for Obsolete
Inventory:
Year 1993............... $ 10.4 $ 3.5 $ 11.8 $ 7.4 $ 18.3
====== ====== ====== ====== ======
Year 1992............... $ 31.9 $ 5.0 $ -- $ 26.5 $ 10.4
====== ====== ====== ====== ======
Year 1991............... $ 15.2 $ 20.1 $ 3.9 $ 7.3 $ 31.9
====== ====== ====== ====== ======
Valuation Allowance for
Deferred Tax Assets:
Year 1993............... $ 39.7(c) $ 35.1 $ -- $ -- $ 74.8
====== ====== ====== ====== ======
Other Allowances (d):
Year 1993............... $ 21.7 $ 4.7 $ .6 $ 16.3 $ 10.7
====== ====== ====== ====== ======
Year 1992............... $ 45.4 $ 11.8 $ .3 $ 35.8 $ 21.7
====== ====== ====== ====== ======
Year 1991............... $ 29.3 $ 41.9 $ .9 $ 26.7 $ 45.4
====== ====== ====== ====== ======
- --------
(a) In 1992, amounts include beginning balances for businesses acquired
during the year. Allowance for Uncollectible Accounts Receivable includes
(1) amounts previously written off which were credited directly to this
account when recovered, and (2) accruals charged to accounts payable for
anticipated uncollectible charges on purchases of accounts receivable
from others which were billed by the Company.
(b) Amounts written off as uncollectible or obsolete or transferred to other
accounts.
(c) Represents the valuation allowance at implementation of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
effective January 1, 1993.
(d) Other Allowances include allowances for obsolete equipment and allowances
for probable losses incurred in the directory businesses arising in the
normal course of operations.
F-9
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in Millions)
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-Term at End Interest During the During the During the
Borrowings of Period Rate Period Period(a) Period(b)
---------- --------- -------- ---------- ---------- ----------
Year 1993
Bank loans........ $ 582.0 3.7% $ 808.0 $ 593.4 3.4%
Commercial paper.. 1,334.6 3.4% 1,334.6 805.3 3.2%
--------
$1,398.7
========
Year 1992
Bank loans........ $ 336.2 4.0% $ 947.2 $ 626.3 4.1%
Commercial paper.. 1,358.2 3.5% 1,555.2 989.8 3.8%
--------
$1,616.1
========
Year 1991
Bank loans........ $ 304.1 5.4% $ 658.9 $ 537.9 6.4%
Commercial paper.. 817.2 5.0% 1,771.9 1,267.4 6.2%
Other notes (c)... -- -- 97.7 16.6 13.3%
--------
$1,821.9
========
- ----------
(a) Represents average daily face amount.
(b) Computed by dividing aggregate interest expense by average daily face
amount.
(c) Includes both domestic and international borrowings.
F-10
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in Millions)
Charged to
Costs and
Item Expenses
---- ----------
Year 1993
Maintenance and repairs..................... $2,214.1
========
Taxes other than payroll and income taxes:
Gross receipts........................... $ 251.6
Property................................. 261.5
Capital stock............................ 56.9
Other.................................... 28.0
--------
$ 598.0
========
Advertising................................. $ 169.0
========
Year 1992
Maintenance and repairs..................... $2,199.7
========
Taxes other than payroll and income taxes:
Gross receipts........................... $ 242.6
Property................................. 247.7
Capital stock............................ 47.3
Other.................................... 26.4
--------
$ 564.0
========
Advertising................................. $ 195.7
========
Year 1991
Maintenance and repairs..................... $2,155.5
========
Taxes other than payroll and income taxes:
Gross receipts........................... $ 228.2
Property................................. 236.2
Capital stock............................ 62.6
Other.................................... 23.0
--------
$ 550.0
========
Advertising................................. $ 182.7
========
- -----------
Amounts for royalties and for amortization of intangible assets are not
presented as such amounts are less than 1% of total operating revenues. Amounts
reported for 1992 and 1991 for maintenance and repairs have been revised to
include certain additional costs.
F-11
EXHIBITS TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NO. 1-8606
BELL ATLANTIC CORPORATION
EXHIBIT INDEX
Exhibit Number
- --------------
3a Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"), dated October 7, 1983. (Exhibit 3a to Registration Statement
on Form S-1 No. 2-87842, File No. 1-8606)
3b Certificate of Amendment of Certificate of Incorporation of Bell Atlantic,
dated May 9, 1986 and filed May 16, 1986. (Exhibit 3b to Form SE dated
March 27, 1987, File No. 1-8606)
3c Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 6, 1987 and filed May 8, 1987. (Exhibit 3c to Form SE
dated March 28, 1988, File No. 1-8606)
3d Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 10, 1990 and filed June 29, 1990. (Exhibit 3d to Form
SE dated March 28, 1991, File No. 1-8606)
3e By-Laws of Bell Atlantic, as amended through June 23, 1992. (Exhibit 3e to
Form SE dated March 29, 1993, File No. 1-8606)
4 No instrument which defines the rights of holders of long and intermediate
term debt, of the Company and all of its consolidated subsidiaries, is
filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A).
Pursuant to this regulation, Bell Atlantic hereby agrees to furnish a copy
of any such instrument to the SEC upon request.
10a Agreement Concerning Contingent Liabilities, Tax Matters and Termination of
Certain Agreements among AT&T, Bell Atlantic, the Network Services
Companies, and certain other parties, dated as of November 1, 1983.
10a(i) Agreement Concerning Allocation of Contingent Liabilities between
AT&T and Bell Atlantic, dated as of January 28, 1985. (Exhibit
10h(i) to Form SE filed on March 28, 1985, File No. 1-8606)
10b Agreement among Bell Atlantic Network Services, Inc. (formerly named Bell
Atlantic Management Services, Inc.) and the Network Services Companies,
dated November 7, 1983.
10c Bell Atlantic Senior Management Short Term Incentive Plan, as amended and
restated effective as of January 1, 1993. (Exhibit 10c to Form SE dated
March 29, 1993, File No. 1-8606)*
10d Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March 27,
1986, File No. 1-8606)*
Exhibit Number
- --------------
10d(i) Resolutions amending the Plan, effective as of January 1, 1989.
(Exhibit 10d to Form SE dated March 29, 1989, File No. 1-8606)*
10e Bell Atlantic Senior Management Transfer Program. (Exhibit 10ee to 1983
Form 10-K, File No. 1-8606)*
10e(i) Resolutions terminating the Program for transfers on or after
November 1, 1992. (Exhibit 10e to Form SE dated March 29, 1993,
File No. 1-8606)*
10f Bell Atlantic Personal Financial Services Program for Senior and Executive
Managers and Key Employees, effective as of July 1, 1990, as amended.
(Exhibit 10f to Form SE dated March 28, 1991, File No. 1-8606)*
10g Bell Atlantic Deferred Compensation Plan for Outside Directors, as amended
and restated as of January 1, 1993. (Exhibit 10g to Form SE dated March
29, 1993, File No. 1-8606)*
10h Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to Registration
Statement on Form S-1 No. 2-87842, File No. 1-8606)*
10i Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on Form S-1
No. 2-87842, File No. 1-8606)*
10j Article V from Bell Atlantic Management Pension Plan regarding limitations
on payment of pension amounts which exceed the limitations contained in the
Employee Retirement Income Security Act of 1974. (Exhibit 10j to Form SE
dated March 26, 1992, File No. 1-8606)*
10k Bell Atlantic Senior Management Retirement Income Plan, as amended and
restated effective as of January 1, 1993. (Exhibit 10k to Form SE dated
March 29, 1993, File No. 1-8606)*
10k(i) Resolutions amending the Bell Atlantic Senior Management Retirement
Income Plan effective as of December 31, 1993.*
10l Bell Atlantic Deferred Compensation Plan (formerly the Bell Atlantic Senior
Management Incentive Award Deferral Plan), as amended and restated
effective as of January 1, 1993. (Exhibit 10l to Form SE dated March 29,
1993, File No. 1-8606)*
10l(i) Resolutions amending the Bell Atlantic Deferred Compensation Plan,
effective October 25, 1993.*
10m Bell Atlantic Stock Incentive Plan, consisting of (1) The Bell Atlantic
1985 Performance Share Plan as amended and restated effective as of January
1, 1993 and (2) The Bell Atlantic 1985 Incentive Stock Option Plan as
amended and restated effective as of January 1, 1993. (Exhibit 10m to Form
SE dated March 29, 1993, File No. 1-8606)*
Exhibit Number
- --------------
10m(i) Resolutions amending The Bell Atlantic 1985 Incentive Stock Option
Plan, subject to the approval of the shareowners of the Company.*
10n Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1993. (Exhibit 10n to Form SE dated March 29,
1993, File No. 1-8606)*
10o Bell Atlantic Stock Compensation Plan for Outside Directors, as amended and
restated as of January 1, 1993. (Exhibit 10o to Form SE dated March 29,
1993, File No. 1-8606)*
10p Bell Atlantic Corporation Directors' Charitable Giving Program. (Exhibit
10p to Form SE dated March 29, 1990, File No. 1-8606)*
10p(i) Resolutions amending and partially terminating the Program.
(Exhibit 10p to Form SE dated March 29, 1993, File No. 1-8606)*
10q Employment Agreement dated January 24, 1994 between the Company and William
O. Albertini.*
10r Employment Agreement dated January 24, 1994 among the Company, Bell
Atlantic Enterprises International, Inc. and Lawrence T. Babbio, Jr.*
10s Resolution dated January 24, 1994 granting Lawrence T. Babbio, Jr. certain
nonqualified stock options to purchase American Depositary Receipts
representing Series L shares of the capital stock of Grupo Iusacell,
S.A. de C.V.*
10t Employment Agreement dated January 24, 1994 between the Company and James
G. Cullen.*
10u Non-Compete and Proprietary Information Agreement dated August 10, 1993
between the Company and James G. Cullen.*
10v Employment Agreement dated January 24, 1994 among the Company, Bell
Atlantic Network Services, Inc. and Stuart C. Johnson.*
10w Non-Compete and Proprietary Information Agreement dated August 9, 1993
among the Company, Bell Atlantic Network Services, Inc. and Stuart C.
Johnson.*
10x Employment Agreement dated January 24, 1994 between the Company and James
R. Young.*
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
Exhibit Number
- --------------
13 1993 Annual Report to Shareowners (for the fiscal year ended December 31,
1993). Except for the portions of such Annual Report which are expressly
incorporated herein by reference, such Annual Report is furnished for the
information of the Securities and Exchange Commission and is not deemed to
be "filed" as part of this Annual Report on Form 10-K.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Coopers & Lybrand.
24 Powers of attorney.
99a Annual report on Form 11-K for the Bell Atlantic Savings Plan for Salaried
Employees for the year ended December 31, 1993. (To be filed by
amendment.)
99b Annual report on Form 11-K for the Bell Atlantic Savings and Security Plan
(Non-Salaried Employees) for the year ended December 31, 1993. (To be
filed by amendment.)
- -------------
* Indicates management contract or compensatory plan or arrangement.