BELL ATLANTIC VIRGINIA INC, 10-K405, 1997-03-25

BELL ATLANTIC VIRGINIA INC
10-K405, 1997-03-25
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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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, 1996

[ ] 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 1-6964

BELL ATLANTIC - VIRGINIA, INC.

A Virginia Corporation I.R.S. Employer Identification No. 54-0167060

600 East Main Street, Richmond, Virginia 23219

Telephone Number (804) 225-6300

-------------------------

Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.

Securities registered pursuant to Section 12(g) of the Act: None.

THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION I(2).

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
--- ---
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Bell Atlantic - Virginia, Inc.

SCHEDULE A

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
- ---------------------------------------------- ---------------------

Forty Year 7-1/4% Debentures, due June 1, 2012 New York Stock
Exchange
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Bell Atlantic - Virginia, Inc.

TABLE OF CONTENTS

Item No. Page
- -------- ----

PART I

1. Business....................................................... 1
2. Properties..................................................... 8
3. Legal Proceedings.............................................. 9
4. Submission of Matters to a Vote of Security Holders............ 10

PART II

5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 10
6. Selected Financial Data........................................ 10
7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction I(2).)............ 11
8. Financial Statements and Supplementary Data.................... 21
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 21

PART III

10. Directors and Executive Officers of the Registrant............. 21
11. Executive Compensation......................................... 21
12. Security Ownership of Certain Beneficial Owners and Management. 21
13. Certain Relationships and Related Transactions................. 21

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K....................................................... 21

UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 20, 1997.
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Bell Atlantic - Virginia, Inc.

PART I

ITEM 1. BUSINESS

GENERAL

Bell Atlantic - Virginia, Inc. (the "Company") is incorporated under the laws
of the Commonwealth of Virginia and has its principal offices at 600 East Main
Street, Richmond, Virginia 23219 (telephone number 804-225-6300). The Company
is a wholly owned subsidiary of Bell Atlantic Corporation ("Bell Atlantic"),
which 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 American Telephone and Telegraph Company
("AT&T") related to exchange telecommunications, exchange access functions,
printed directories and cellular mobile communications.

The Company presently serves a territory consisting of five complete Local
Access and Transport Areas ("LATAs") and part of a sixth LATA. 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 the Company has been permitted by the "Modification of Final
Judgment" (MFJ) to provide telephone service.

The Company currently provides two basic types of telecommunications
services. First, the Company transports 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 by other pay telephone
providers). Among other local services provided are Centrex (telephone
subsidiary 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) and 800 services (volume discount offerings for
customers with highly concentrated demand). Second, the Company provides
exchange access service, which links a subscriber's telephone or other equipment
to the transmission facilities of interexchange carriers which, in turn, provide
telecommunications service between LATAs ("interLATA service") to their
customers. The Company also provides exchange access service to interexchange
carriers which provide intrastate intraLATA toll service.

LINE OF BUSINESS RESTRICTIONS AND THE TELECOMMUNICATIONS ACT OF 1996

The consent decree entitled MFJ and the Plan of Reorganization ("Plan")
approved by the United States District Court for the District of Columbia set
forth the terms of Divestiture and established certain restrictions on the post-
Divestiture activities of the RHCs, including Bell Atlantic, and their
affiliates. The MFJ's principal restrictions on post-Divestiture RHC activities
included prohibitions on (i) providing interLATA (long distance)
telecommunications, and (ii) engaging in the manufacture of telecommunications
equipment and customer premises equipment.

The Telecommunications Act of 1996 (the "Act") became effective on February
8, 1996 and replaces the MFJ. In general, the Act includes provisions that open
local exchange markets to competition and permit Bell Atlantic to provide
interLATA services and engage in manufacturing. However, the ability of Bell
Atlantic to engage in businesses previously prohibited by the MFJ is largely
dependent on satisfying certain conditions contained in the Act and regulations
to be promulgated thereunder.

With regard to the rules governing competition in the interLATA market, the
Act takes a two-fold approach. Effective February 8, 1996, Bell Atlantic was
permitted to apply for state approval to offer interLATA services in states
outside of the geographic region in which it currently operates as a local
exchange carrier. In addition, Bell Atlantic's wireless businesses are now
permitted to offer interLATA services without having to comply with the
conditions imposed in waivers granted under the MFJ.

Secondly, each of Bell Atlantic's telephone subsidiaries, including the
Company, must demonstrate to the Federal Communications Commission ("FCC") that
it has satisfied certain requirements in order for Bell Atlantic to be permitted
to offer interLATA services for calls originating within the geographic region
in which the telephone subsidiary operates as a local exchange carrier. Among
the requirements with which the Company must comply is a 14-point "competitive

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Bell Atlantic - Virginia, Inc.

checklist" which includes steps the Company must take which will help
competitors offer local service, either through resale, through the purchase of
unbundled network elements, or through the competitors' own networks. The
Company must also demonstrate to the FCC that its entry into the interLATA
market would be in the public interest.

The FCC is required to conduct a number of rulemakings to implement the Act.
See "FCC Regulation and Interstate Rates - Access Charge and Universal Service
Reform" and "Competition - Local Exchange Services." The ultimate outcome of
FCC rulemakings could have a significant impact upon successful implementation
of the Act and the extent, nature and timing of competition in the local
exchange and interLATA markets.

No definitive prediction can be made as to the impact of the Act on the
business, results of operations or financial condition of the Company. The
financial impact on the Company will depend on several factors, including the
timing, extent and success of competition in the Company's markets, and the
timing, extent and success of the Company's pursuit of new business
opportunities resulting from the Act.

PROPOSED MERGER OF BELL ATLANTIC AND NYNEX CORPORATION

In April 1996, Bell Atlantic and NYNEX Corporation announced a definitive
agreement for a merger of equals; the agreement was amended in July 1996 (the
agreement, as amended, hereinafter the "Merger Agreement").

NYNEX is another of the RHCs created at Divestiture, and the Bell System
operating companies ("BOCs") owned by NYNEX serve the Northeastern portion of
the United States. The business of the NYNEX BOCs is qualitatively similar to
that of Bell Atlantic's telephone subsidiaries, including the Company as
described above under "General." NYNEX is also subject to the Act, and to FCC
regulation, in much the same ways as the Company is, as described above under
"Line of Business Restrictions and the Telecommunications Act of 1996" and below
under "FCC Regulation and Interstate Rates," respectively. The operations of
the NYNEX BOCs are also subject to regulation by the public utility commissions
of New York, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire
and Maine. In addition, Bell Atlantic and NYNEX have previously formed
partnerships which contain substantially all of their domestic cellular, paging
and personal communications services businesses.

Bell Atlantic believes that the proposed merger will be an effective means of
achieving the operating efficiency, scale, scope and financial resources
necessary to expand into the new markets available to Bell Atlantic under the
Act and to compete with new market entrants in its existing markets.

As a result of the merger, Bell Atlantic will incur certain transition costs,
currently estimated at $700 million to $900 million. Bell Atlantic also expects
to recognize recurring expense savings of approximately $600 million annually by
the third year following completion of the merger as a result of consolidating
operating systems and other administrative functions and reducing management
positions. Incremental savings in annual capital expenditures for Bell Atlantic
should grow to approximately $250 million to $300 million, including
efficiencies relating to purchasing, marketing trials and equipment testing. It
is anticipated that the Company will recognize a portion of these savings and
costs. See "Management's Discussion and Analysis of Results of Operations -
Other Matters, Proposed Bell Atlantic - NYNEX Merger" on page 20 for a further
discussion of this matter.

Shareowners of both companies approved the merger in November, 1996.
Completion of the merger remains subject to a number of conditions, the
principal ones relating to regulatory reviews. Bell Atlantic is unable to
predict when it will be able to complete the merger.

OPERATIONS

During 1993, Bell Atlantic reorganized certain functions formerly performed
by each of its seven telephone subsidiaries, including the Company
(collectively, the "telephone subsidiaries"), into lines of business ("LOBs")
operating across these companies. The LOBs focus on specific market segments.
The telephone subsidiaries remain responsible within their respective service
areas for the provision of telephone services, financial performance and
regulatory matters.

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Bell Atlantic - Virginia, Inc.

The Consumer Services LOB markets communications services to residential
customers within the service territories of the telephone subsidiaries.

The Carrier Services LOB markets (i) switched and special access to the
telephone subsidiaries' local exchange network, and (ii) billing and collection
services, including recording, rating, bill processing and bill rendering. The
principal customers of this LOB are interexchange carriers (IXCs); AT&T is the
largest single customer. Other customers include business customers and
government agencies with their own special access network connections, wireless
companies and other local exchange carriers ("LECs") which resell network
connections to their own customers.

The Small Business Services LOB markets communications and information
services to small businesses (customers having up to 20 access lines).

The Large Business Services LOB markets communications and information
services to large businesses (customers having more than 20 access 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 service, intelligent vehicle highway systems), video
services (distance learning, telemedicine, videoconferencing) and interactive
multimedia applications services.

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.

In order to satisfy the requirements of the Act, the Company transferred
certain assets and liabilities associated with its directory publishing
activities to a newly formed, wholly owned subsidiary, effective January 1,
1997. The stock of the subsidiary was immediately distributed to Bell Atlantic.

The Public and Operator Services LOB markets pay telephone and operator
services in the service territories of the telephone subsidiaries to meet
consumer needs for accessing public networks and locating and identifying
network subscribers, and to provide calling assistance and arrange billing
alternatives (e.g., calling card, collect and third party calls).

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.

The Network LOB manages the technologies, services and systems platforms
required by the other LOBs and the telephone subsidiaries to meet the needs of
their respective customers, including switching, feature development and on-
premises installation and maintenance services.

FCC REGULATION AND INTERSTATE RATES

The Company is subject to the jurisdiction of the FCC with respect to
interstate services and certain related matters. The FCC prescribes a uniform
system of accounts for telephone subsidiaries; 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"); and
depreciation rates applicable to assets allocated to interstate services. The
FCC also prescribes procedures for allocating costs and revenues between
regulated and unregulated activities.

The FCC has prescribed structures for exchange access tariffs to specify the
charges ("access charges") for use and availability of the Company's facilities
for the origination and termination of interstate interLATA service. In
general, the tariff structures prescribed by the FCC provide that interstate
costs of the Company which do not vary based on usage are

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Bell Atlantic - Virginia, Inc.

recovered from subscribers through flat monthly charges ("subscriber line
charges"), and from IXCs through usage-sensitive Carrier Common Line ("CCL")
charges. Traffic-sensitive interstate costs are recovered from carriers through
variable access charges based on several factors, primarily usage.

Price Caps

The FCC's price cap system, which became effective in 1991, places caps on
the Company's prices for interstate access services. The caps are modified
annually, in inflation-adjusted terms, to reflect increases in productivity, and
can also be adjusted to reflect certain "exogenous" changes, such as changes in
FCC separations procedures.

Under the current form of the price cap system, Bell Atlantic's price cap
index is adjusted by an inflation index (GDP-PI) less a fixed percentage, either
4.0%, 4.7% or 5.3% as Bell Atlantic may elect, which is intended to reflect
increases in productivity ("Productivity Factor"). If Bell Atlantic selects the
4.0% or 4.7% Productivity Factor, it is required to share a portion of its
future interstate earnings in excess of a rate of return of 12.25%. If Bell
Atlantic selects the 5.3% Productivity Factor, it is not required to share a
portion of its future interstate earnings.

In July 1996, Bell Atlantic selected the 5.3% Productivity Factor for the
July 1996 to June 1997 tariff period. The rates included in the July 1996
filing resulted in price increases for the Company totaling approximately
$3,100,000 on an annual basis.

Access Charge and Universal Service Reform

In December 1996, the FCC commenced a proceeding to reform the interstate
access charge system. The FCC is considering two approaches for establishing a
transition to access charges which more closely reflect the economic cost of
access services and for deregulating access services as competition develops in
the local exchange and exchange access markets. Under a market-based approach,
the FCC would rely on actual and potential competition from new facilities-based
service providers and market entrants purchasing unbundled network elements to
drive prices for access services toward appropriate levels. As competition
develops, the FCC would gradually relax, and ultimately remove, existing access
rate structure requirements and price cap restrictions. Under an alternative
prescriptive approach, the FCC would specify the nature and timing of changes to
the current access charge rate levels. The FCC is expected to release its order
in this proceeding in the second quarter of 1997. The Company is unable to
predict the amount of any modifications in access charges that could result from
this proceeding, the manner in which such modifications would be effectuated, or
the time period over which such modifications would occur.

The FCC has also initiated a rulemaking under the Act designed to preserve
"universal service" by ensuring that local exchange service remains reasonably
available to all residential customers, including low-income customers and
customers in areas which are expensive to serve. The FCC proposes to
restructure the current federal Universal Service Fund, which provides support
for high cost access and low-income assistance, and, as required by the Act, to
establish new support mechanisms for discounted services for schools, libraries
and rural health care providers. The FCC must issue an order resolving the
universal service issues by May 1997. The Company is unable to predict the
ultimate size of the Fund, how contributions to the Fund by telecommunications
providers will be determined, how payments from the Fund will be distributed, or
the financial impact of this proceeding on the Company.

FCC Cost Allocation and Affiliate Transaction Rules

FCC rules govern (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.

Under the cost allocation rules, unregulated activities include 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
assigned 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.

The affiliate transaction rules govern the pricing of assets transferred, and
services provided, between affiliates. These rules generally require that assets
be transferred between affiliates at "market price," if such price can be
established

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Bell Atlantic - Virginia, Inc.

through a tariff or a prevailing price actually charged to third parties. In the
absence of a tariff or prevailing price, (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 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.

STATE REGULATION AND COMPETITIVE ENVIRONMENT

The communications services of the Company are subject to regulation by the
Virginia State Corporation Commission (the "SCC") with respect to intrastate
rates and services and certain other matters.

Under legislation passed in the 1993 session of the Virginia General
Assembly, the SCC is no longer statutorily required to regulate telephone
companies on the basis of rate of return regulation. In February 1994, the
Company filed a proposal to have its noncompetitive services regulated on a
price cap basis; competitive services would not be regulated.

Following public hearings, the SCC approved a new optional regulatory plan,
effective January 1, 1995, which allows the Company to replace traditional cost-
based regulation with a plan that relies on price constraints. The new plan,
which eliminates regulation of profits, includes a temporary moratorium on rate
increases for basic local telephone service until 2001, eliminates the monthly
charge for Touch-Tone service and expands universal telephone service to the
poor. In November 1994, the Company notified the SCC of its election to
participate in the new regulatory plan. Following an appeal, the new plan was
upheld by the Virginia Supreme Court.

The Company has filed financial results with the SCC for the years 1989
through 1994. The SCC issued orders making the Company's rates final and no
longer subject to refund for the years 1989, 1990, 1991, 1993 and 1994.

With respect to the 1992 review period, the SCC staff issued its report in
January 1996 and presented alternative treatment for two issues concerning
expenses to be recognized in 1992. Following consideration of all comments, the
SCC ordered the Company on June 11, 1996 to refund to customers $10,200,000 plus
interest for the 1992 review period. The Company completed the refund to
customers during the fourth quarter of 1996.

COMPETITION

Legislative changes, including provisions of the Act discussed above under
"Line of Business Restrictions and the Telecommunications Act of 1996,"
regulatory changes and 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,
nationwide presence and brand name recognition.

Local Exchange Services

The ability to offer local exchange services has historically been subject to
regulation by the SCC. Since April 1996, several telephone service providers
have been certified by the SCC to provide local exchange services in Virginia,
pending SCC approval of their tariffs. Applications from other competitors to
provide and resell local exchange services are currently pending and the SCC has
set several hearings to resolve issues raised by companies that desire to
provide local exchange services pursuant to the Act.

One of the purposes of the Act was to ensure, and accelerate, the emergence
of competition in local exchange markets. Toward this end, the Act requires
most existing local exchange carriers (incumbent local exchange carriers, or
"ILECs"), including the Company, to permit potential competitors (competitive
local exchange carriers, or "CLECs") to (i) purchase service from the ILEC for
resale to CLEC customers, (ii) purchase unbundled network elements from the
ILEC, and/or (iii) interconnect its network with the ILEC's network. The Act
provides for arbitration by the state public utility commission if an ILEC and a
CLEC are unable to reach agreement on the terms of the arrangement sought by the
CLEC.

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Bell Atlantic - Virginia, Inc.

In August 1996, the FCC adopted an order (the "Interconnection Order")
relating to these types of arrangements between ILECs and CLECs. The
Interconnection Order set forth cost methodology to be used by state commissions
in arbitration proceedings to set cost-based rates for purchase of unbundled
network elements and for purchase of services for resale, and established
guideline amounts to be used by state commissions in the absence of full cost
studies. Several parties, including Bell Atlantic, appealed the Interconnection
Order on the grounds that it was inconsistent with the Act. In October 1996,
the U.S. Court of Appeals for the Eighth Circuit granted a stay of the
effectiveness of the pricing provisions of the Interconnection Order pending a
final decision on their validity.

Notwithstanding the existence of the stay of the Interconnection Order,
negotiations between the Company and CLECs, and arbitrations before the SCC,
have continued. As of March 1, 1997, the Company had entered into ten
agreements, with a number of different CLECs.

The Company expects that these agreements, and the Act, will lead to
substantially increased competition in its local exchange market in 1997 and
subsequent years. The Company believes that this competition will be both on a
facilities basis and in the form of resale by CLECs of the Company's service.
Under the various agreements and arbitrations discussed above, the Company is
generally required to sell its services to CLECs at discounts ranging from
approximately 18% to 21% from the prices the Company charges its retail
customers.

IntraLATA Toll Services

Competition to offer intrastate intraLATA toll services is currently
permitted in the Company's jurisdiction. Increased competition from IXCs has
resulted in a decline in several components of the Company's toll service
revenues.

Currently, intraLATA toll calls are completed by the Company unless the
customer dials a code to access a competing carrier. This dialing method would
be changed by "presubscription," which would enable customers to make intraLATA
toll calls using another carrier without having to dial an access code.

In general, the Act prohibits a state from requiring intraLATA
presubscription until the earlier of such time as a BOC in the state is
authorized to provide long distance services within the state or three years
from the effective date of the Act. This prohibition does not apply to a final
order requiring a BOC to implement presubscription that was issued on or prior
to December 19, 1995 or to states consisting of a single LATA.

In Virginia, the SCC issued an order on July 24, 1995 denying intraLATA toll
presubscription.

Alternative Access

A substantial portion of the Company's revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.

The Company faces competition from alternative communications systems,
constructed by large end users, IXCs and alternative access vendors, which are
capable of originating and/or terminating calls without the use of the Company's
plant. The ability of such alternative access providers to compete with the
Company has been enhanced by the FCC's orders requiring the Company to offer
virtual collocated interconnection for special and switched access services.

Other potential sources of competition include cable television systems,
shared tenant services and other non-carrier systems which are capable of
bypassing the Company's local plant, either partially or completely, through
substitution of special access for switched access or through concentration of
telecommunications traffic on fewer of the Company's lines.

Personal Communications Services

Personal communications services ("PCS") also constitute potential sources of
competition to the Company. PCS consists of wireless portable telephone
services employing digital technology, which will allow customers to make and
receive telephone calls from any location using small handsets, and which could
also be used for data transmission.

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Bell Atlantic - Virginia, Inc.

Public Telephone Services

The Company faces increasing competition in the provision of pay telephone
services from other 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.

LONG DISTANCE SERVICE

The Company is currently working towards completing the "competitive
checklist" and other prerequisites under the Act for entering the interLATA
market in its jurisdiction. The Company expects to apply to the FCC for
permission to offer interLATA services later in 1997, and expects to receive
permission before the end of the year.

CERTAIN CONTRACTS AND RELATIONSHIPS

Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided to the Company 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 Company.

The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore was created to furnish 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 could be provided
more effectively on a centralized basis. Bellcore has also served as 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, and helps to mobilize the combined resources of the RHCs in times of
natural disasters. In November 1996, the seven RHCs entered into a definitive
agreement to sell their interests in Bellcore to Science Applications
International Corporation. The transaction is subject to regulatory approvals,
and is expected to be completed near the end of 1997. After the sale is
completed, centralized national security and emergency preparedness functions
will be performed for the RHCs by National Telecommunications Association, owned
by the seven RHCs.

EMPLOYEES

As of December 31, 1996, the Company had approximately 6,200 employees. This
work force is augmented by employees of the centralized staff of NSI, who
perform services for the Company on a contract basis.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth above regarding expected or possible future events is
forward-looking and subject to risks and uncertainties. For those statements,
the Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.

The following important factors could affect the future results of the
Company and could cause those results to differ materially from those expressed
in the forward-looking statements: (i) materially adverse changes in economic
conditions in the markets served by the Company; (ii) a significant delay in the
expected closing of the merger; (iii) the final outcome of FCC rulemakings with
respect to interconnection agreements, access charge reform and universal
service; (iv) the timing of presubscription for toll services; (v) future state
regulatory actions and economic conditions in the Company's operating area; and
(vi) the extent, timing and success of competition from others in the local
telephone and toll service markets.

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Bell Atlantic - Virginia, Inc.

ITEM 2. PROPERTIES

GENERAL

The principal properties of the Company do not lend themselves to simple
description by character and location. The Company's investment in plant,
property and equipment consisted of the following at December 31:

Central office equipment................. 43% 41%
Cable, wiring and conduit................ 39 40
Land and buildings....................... 7 7
Other equipment.......................... 9 9
Other.................................... 2 3
---- ----
100% 100%
==== ====
</TABLE>

"Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Cable, wiring and conduit" consists
primarily of aerial cable, underground cable, conduit and wiring. "Land and
buildings" consists of land owned in fee and improvements thereto, principally
central office buildings. "Other equipment" consists of public telephone
instruments and telephone equipment (including PBXs), poles, furniture, office
equipment, and vehicles and other work equipment. "Other" property consists
primarily of plant under construction, capital leases and leasehold
improvements.

The Company's customers are served by electronic switching systems that
provide a wide variety of services. The Company's network is in a transition
from an analog to a digital network, which provides the capabilities to furnish
advanced data transmission and information management services. At December 31,
1996, approximately 90% of the access lines were served by digital capability.

CAPITAL EXPENDITURES

The Company has been making and expects to continue to make significant
capital expenditures to meet the demand for communications services and to
further improve such services. Capital expenditures were approximately $436
million in 1996, $458 million in 1995 and $386 million in 1994. The total
investment in plant, property and equipment was approximately $5.64 billion at
December 31, 1996, $5.38 billion at December 31, 1995 and $5.08 billion at
December 31, 1994, in each case after giving effect to retirements, but before
deducting accumulated depreciation at such date.

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Bell Atlantic - Virginia, Inc.

ITEM 3. LEGAL PROCEEDINGS

GENERAL

The Company is a party to litigation and other claims arising in the ordinary
course of business, including matters relating to employment disputes, customer
claims, taxes, contracts, and alleged torts. Some of these claims purport to be
class actions.

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 matters would not be material in amount to the results of operations
or financial position of the Company.

PRE-DIVESTITURE CONTINGENT LIABILITIES AND LITIGATION

The Plan provides for the recognition and payment by AT&T and the former BOCs
(including the Company) 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
Company's aggregate allocable share of liability is approximately 1.6%.

AT&T and various of its subsidiaries and the BOCs (including in some cases
the Company) 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.

Effective in 1994, the Company and the other Regional Holding Companies
agreed to discontinue sharing of new pre-Divestiture claims and certain existing
claims other than claims relating to environmental matters. AT&T is not a party
to this agreement.

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 results of operations
or financial position of the Company.

9
<PAGE>

Bell Atlantic - Virginia, Inc.

PART I

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

(Omitted pursuant to General Instruction I(2).)

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(Inapplicable.)

ITEM 6. SELECTED FINANCIAL DATA

(Omitted pursuant to General Instruction I(2).)

10
<PAGE>

Bell Atlantic - Virginia, Inc.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(ABBREVIATED PURSUANT TO GENERAL INSTRUCTION I(2).)

This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements listed in the index set forth on page F-1.

RESULTS OF OPERATIONS
- ---------------------

The Company reported net income of $327,127,000 in 1996, compared to net
income of $272,517,000 in 1995.

In the fourth quarter of 1996, the Company changed its method of accounting
for directory publishing revenues and expenses, effective January 1, 1996. The
Company adopted the point-of-publication method, which requires directory
revenues and expenses to be recognized upon publication rather than over the
lives of the directories. As a result of this change, results of operations for
the first three quarters of 1996 have been restated (see Note 15 to the
financial statements). The Company recorded an after-tax increase in income of
$16,423,000 in the first quarter of 1996, representing the cumulative effect of
this accounting change. This accounting change did not have a material impact
on operating income in 1996. Effective January 1, 1997, the Company
transferred, at net book value without gain or loss, certain assets and
liabilities associated with its directory publishing activities to a newly
formed, wholly owned subsidiary. See "Factors That May Impact Future Results -
Federal Legislation - Directory Publishing Activities" on page 18 for further
discussion of this issue.

Other items affecting the comparison of operating results between 1996 and
1995 are discussed in the following sections.

OPERATING REVENUES
- ------------------

(Dollars in Thousands)

FOR THE YEARS ENDED DECEMBER 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Transport services
Local service................................. $ 874,565 $ 803,349
Network access................................ 599,903 587,438
Toll service.................................. 82,564 97,649
Ancillary services
Directory publishing.......................... 196,380 173,851
Other......................................... 93,515 86,430
Value-added services........................... 309,551 235,816
---------- ----------
Total.......................................... $2,156,478 $1,984,533
========== ==========
</TABLE>

11
<PAGE>

Bell Atlantic - Virginia, Inc.

TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------

<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
1996 1995 (DECREASE)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AT YEAR-END
- -----------
Access Lines in Service (In thousands)
Residence.................................. 1,979 1,911 3.6%
Business................................... 1,176 1,111 5.9
Public..................................... 41 40 2.5
------- -------
3,196 3,062 4.4
======= =======

FOR THE YEAR
- ------------
Access Minutes of Use (In millions)
Interstate................................. 11,282 10,334 9.2
Intrastate................................. 3,024 2,859 5.8
------- -------
14,306 13,193 8.4
======= =======

Toll Messages (In thousands)
Intrastate................................. 95,045 108,263 (12.2)
Interstate................................. 14,246 12,032 18.4
------- -------
109,291 120,295 (9.1)
======= =======
</TABLE>

LOCAL SERVICE REVENUES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $71,216 8.9%
- --------------------------------------------------------------------------------

Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone (pay phone) services.

Higher usage of the Company's network facilities was the primary reason for
the increase in local service revenues in 1996. The growth was generated by an
increase in access lines in service of 4.4% in 1996, and higher message volumes.
This access line growth reflects higher demand for Centrex services and an
increase in second residential lines. Local service revenues were also higher
in 1996 due to the impact of an accrual recorded in 1995 related to a review by
the Virginia State Corporation Commission (SCC) and the favorable settlement of
those matters in the second quarter of 1996. See "Factors That May Impact Future
Results - Other State Regulatory Matters" on page 20 for a further discussion of
this issue.

For a discussion of the Telecommunications Act of 1996, which will open the
local exchange market to competition, see "Factors That May Impact Future
Results" beginning on page 17.

NETWORK ACCESS REVENUES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $12,465 2.1%
- --------------------------------------------------------------------------------

Network access revenues are earned from long distance carriers for their use
of the Company's local exchange facilities in providing long distance services
to their customers, and from end-user subscribers. Switched access revenues are
derived from usage-based charges paid by long distance carriers for access to
the Company's network. Special access revenues arise from access charges paid
by long distance carriers and end-users who have private networks. End-user
access revenues are earned from local exchange carrier customers who pay for
access to the network.

12
<PAGE>

Bell Atlantic - Virginia, Inc.

The Federal Communications Commission (FCC) regulates the rates that the
Company can charge long distance carriers and end-user subscribers for
interstate access services. Each year, new access rates are required to be
filed with the FCC under the rules of its Interim Price Cap Plan. Beginning on
August 1, 1995, the Company implemented price decreases totaling approximately
$48,900,000 on an annual basis. These price decreases included the scheduled
expiration of a temporary rate increase of approximately $15,700,000 on an
annualized basis that was in effect from March 17, 1995 through July 31, 1995 to
recover prior years "exogenous" postemployment benefit costs. On July 20, 1996,
the Company implemented price increases, which will be in effect for the period
July 1996 through June 1997. The rates included in the 1996 filing resulted in
price increases totaling approximately $3,100,000 on an annual basis.

Network access revenues increased principally due to higher customer demand
as reflected by growth in access minutes of use of 8.4% in 1996. Volume growth
in 1996 was boosted by the expansion of the business market, particularly for
high capacity services.

Revenue growth from volume increases was partially offset by the effect of
price reductions under the FCC's Interim Price Cap Plan implemented during 1995
and higher obligations to affiliated companies pursuant to an interstate revenue
sharing agreement (see Note 13 to the financial statements). Revenues in 1996
were also reduced by special charges for reserves associated with regulatory
issues.

The Company expects that network access revenue growth in 1997, relative to
1996 revenues, will be positively affected by continued volume growth and by
price increases effective on July 20, 1996. For a discussion of proposed FCC
rulemakings concerning access charges, see "Factors That May Impact Future
Results" beginning on page 18.

TOLL SERVICE REVENUES

(DECREASE)
- --------------------------------------------------------------------------------
1996 - 1995 $(15,085) (15.4)%
- --------------------------------------------------------------------------------

Toll service revenues are earned primarily from calls made outside a
customer's local calling area, but within the same service area of the Company,
referred to as Local Access and Transport Areas (LATAs). Other toll services
include 800 services and Wide Area Telephone Service (WATS).

The decrease in toll service revenues was due to the effects of extended
local calling areas and a settlement with a local exchange carrier in 1996.
Also contributing to the decrease in toll revenues was increased competition for
toll services resulting from the introduction of intraLATA toll competition in
Virginia beginning on October 1, 1995. Toll message volumes in 1996 declined by
9.1%, as compared to 1995.

The Company expects that competition for toll services and the extension of
local calling areas will continue to negatively impact toll service revenues in
1997. See "Factors That May Impact Future Results - Competition - IntraLATA
Toll Services" on page 19 for a further discussion of toll service revenue
issues.

DIRECTORY PUBLISHING REVENUES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $22,529 13.0%
- --------------------------------------------------------------------------------

Directory publishing revenues are earned primarily from local advertising and
marketing services provided to businesses in White and Yellow Pages directories.
The Company also provides database services and directory marketing services
outside of its region.

The increase in directory publishing revenues was due to higher rates charged
for these services and growth in advertising volumes. The change in accounting
for directory publishing revenues in 1996 also contributed to the revenue
increase.

13
<PAGE>

Bell Atlantic - Virginia, Inc.

Effective January 1, 1997, the Company transferred certain assets and
liabilities associated with its directory publishing activities to a newly
formed, wholly owned subsidiary. As a result, revenues associated with
directory publishing activities transferred will no longer be earned by the
Company. See "Factors That May Impact Future Results - Federal Legislation -
Directory Publishing Activities" on page 18 for further discussion of this
issue.

OTHER ANCILLARY SERVICES REVENUES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $7,085 8.2%
- --------------------------------------------------------------------------------

Other ancillary services include billing and collection services provided to
long distance carriers, facilities rental services provided to affiliates and
non-affiliates, and sales of materials and supplies to affiliates.

Other ancillary services revenues increased due to higher facilities rental
revenues from affiliates, higher sales of materials and supplies to affiliates
and increased revenues from customer late payment charges.

VALUE-ADDED SERVICES REVENUES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $73,735 31.3%
- --------------------------------------------------------------------------------

Value-added services represent a family of services which expand the
utilization of the network. These services include products such as voice
messaging services, Caller ID, Call Waiting, and Return Call, as well as more
mature products and other customer premises wiring and maintenance services.

Improved revenue growth from value-added services is principally the result
of increased marketing and promotional efforts which have stimulated customer
demand and usage. Demand for these services also has been fueled by the
introduction of new and enhanced optional features. An increase in federal
government contract billing for customer premises services and equipment also
contributed to revenue growth in 1996.

14
<PAGE>

Bell Atlantic - Virginia, Inc.

OPERATING EXPENSES
- ------------------
(Dollars in Thousands)

FOR THE YEARS ENDED DECEMBER 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Employee costs, including benefits and taxes........ $ 362,767 $ 388,222
Depreciation and amortization....................... 420,095 412,123
Other operating expenses............................ 808,386 668,807
---------- ----------
Total............................................... $1,591,248 $1,469,152
========== ==========
</TABLE>

EMPLOYEE COSTS

(DECREASE)
- --------------------------------------------------------------------------------
1996 - 1995 $(25,455) (6.6)%
- --------------------------------------------------------------------------------

Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contract basis, are allocated to the Company and are
included in other operating expenses.

The Company reached a final settlement with the Communications Workers of
America (CWA) on a three-year labor agreement in January 1996. The agreement
includes a 10.6% wage increase over the three-year contract period, a
ratification bonus, improved pensions and benefits, and certain employment
security provisions.

The decrease in employee costs was principally attributable to savings
associated with lower work force levels in 1996. The effect of employees
transferred from the Company to NSI in December 1995 and the effect of certain
contract labor and separation pay costs recognized in 1995 associated with the
contract settlement with the CWA also contributed to the decrease in employee
costs. These cost reductions were partially offset by annual salary and wage
increases, as well as increased overtime pay for repair and maintenance
activity, primarily as a result of higher business volumes. The Company also
recognized additional benefit costs associated with an amendment to a Bell
Atlantic separation pay plan.

In 1995, Bell Atlantic announced that the pension plan covering most of its
management employees, including employees of the Company, would be converted to
a cash balance plan, effective December 31, 1995. This change did not have a
material impact on the Company's pension benefit costs in 1996 or 1995.

DEPRECIATION AND AMORTIZATION

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $7,972 1.9%
- --------------------------------------------------------------------------------

The Company uses the composite group remaining life method to depreciate
plant assets. Under this method, the Company periodically revises depreciation
rates based on a number of factors. The composite depreciation rates were 7.8%
in 1996 and 8.1% in 1995.

Depreciation and amortization increased due to growth in depreciable
telephone plant. This increase was offset by lower rates of depreciation and
amortization.

15
<PAGE>

Bell Atlantic - Virginia, Inc.

OTHER OPERATING EXPENSES

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $139,579 20.9%
- --------------------------------------------------------------------------------

Other operating expenses consist primarily of contract services including
centralized services expenses allocated from NSI, rent, network software costs,
operating taxes other than income, the provision for uncollectible accounts
receivable and other costs.

The increase in other operating expenses was largely attributable to higher
centralized services expenses allocated from NSI (see Note 13 to the financial
statements). This increase was due, in part, to higher employee costs incurred
in that organization as a result of annual salary and wage increases, as well as
the transfer of employees from certain network services subsidiaries to NSI in
December 1995. Additional operating costs incurred to enhance billing and
operating systems, and market and advertise services also contributed to the
increase in centralized services expenses in 1996. Other operating expenses
were further increased by the impact of the aforementioned change in accounting
for directory expenses, higher costs for contract services and additional costs
to upgrade network software and comply with certain aspects of the
Telecommunications Act of 1996.

Effective January 1, 1997, the Company transferred certain assets and
liabilities associated with its directory publishing activities to a newly
formed, wholly owned subsidiary. As a result, certain direct and allocated
expenses related to directory publishing activities transferred, which are
included in other operating expenses, will no longer be incurred by the Company.
See "Factors That May Impact Future Results - Federal Legislation - Directory
Publishing Activities" on page 18 for a further discussion of this issue.

OTHER INCOME AND EXPENSE, NET

INCREASE
- --------------------------------------------------------------------------------
1996 - 1995 $563
- --------------------------------------------------------------------------------

The change in other income and expense, net was almost entirely attributable
to additional interest income in 1996 related to short-term investments and a
note receivable with an affiliate held during the year.

INTEREST EXPENSE

(DECREASE)
- --------------------------------------------------------------------------------
1996 - 1995 $(12,409) (16.5)%
- --------------------------------------------------------------------------------

Interest expense decreased principally due to the recognition of interest
costs in 1995 associated with a revenue refund in connection with a review of
the Company's financial results by the SCC. As a result of a favorable
settlement of certain issues related to the review, a portion of these costs
were reversed in June 1996. The effect of lower rates of interest and lower
levels of average short-term debt in 1996 also contributed to the decrease in
interest expense. See Note 7 to the financial statements for additional
information about the Company's debt. The Company does not expect the downward
trend in interest expense to continue in 1997.

16
<PAGE>

Bell Atlantic - Virginia, Inc.

EFFECTIVE INCOME TAX RATES

FOR THE YEARS ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1996 37.8%
- --------------------------------------------------------------------------------
1995 37.6%
- --------------------------------------------------------------------------------

The effective income tax rate is the provision for income taxes as a
percentage of income before taxes, extraordinary items and cumulative effect of
accounting changes. The Company's effective income tax rate was higher as a
result of prior period adjustments recorded in 1996.

A reconciliation of the statutory federal income tax rate to the effective
income tax rate for each period is provided in Note 11 to the financial
statements.

FINANCIAL CONDITION
- -------------------

The Company uses the net cash generated from operations and from external
financing to fund capital expenditures for network expansion and modernization,
and pay dividends. While current liabilities exceeded current assets at both
December 31, 1996 and 1995, the Company's sources of funds, primarily from
operations and to the extent necessary from readily available financing
arrangements with an affiliate, are sufficient to meet ongoing operating
requirements. Management expects that presently foreseeable capital requirements
will continue to be financed primarily through internally generated funds.
Additional long-term debt may be needed to fund development activities or to
maintain the Company's capital structure to ensure financial flexibility.

As of December 31, 1996, the Company had $147,285,000 of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $100,000,000 remaining under a shelf registration
statement filed with the Securities and Exchange Commission for the issuance of
unsecured debt securities.

The Company's debt ratio was 48.0% at December 31, 1996, compared to 49.0% at
December 31, 1995.

On February 3, 1997, the Company declared and paid a dividend in the amount
of $45,200,000 to Bell Atlantic.

FACTORS THAT MAY IMPACT FUTURE RESULTS
- --------------------------------------

FEDERAL LEGISLATION

The telecommunications industry is undergoing substantial changes as a result
of the Telecommunications Act of 1996 (the Act), other public policy changes and
technological advances. These changes are likely to bring increased competitive
pressures to the Company's current business, but will also open new markets to
Bell Atlantic.

The Act became law on February 8, 1996 and replaced the Modification of Final
Judgment (MFJ). In general, the Act includes provisions that open local
exchange markets to competition and permit Bell Atlantic to provide interLATA
(long distance) services and to engage in manufacturing. However, the ability of
Bell Atlantic to engage in businesses previously prohibited by the MFJ is
largely dependent on satisfying certain conditions contained in the Act. Among
the requirements with which the Company must comply is a 14-point "competitive
checklist" which includes steps the Company must take which will help
competitors offer local service, either through resale, through the purchase of
unbundled network elements, or through their own networks. The Company must
also demonstrate to the FCC that its entry into the long distance market would
be in the public interest.

The Company is unable to predict definitively the impact that the Act will
have on its business, results of operations or financial condition. The
financial impact will depend on several factors, including the timing, extent
and success of competition in the Company's markets, and the timing, extent and
success of Bell Atlantic's pursuit of new business opportunities resulting from
the Act. These factors will in turn depend, in part, on the final outcome of
several FCC rulemakings and the outcome of state interconnection proceedings
(see also "Recent Developments" below).

17
<PAGE>

Bell Atlantic - Virginia, Inc.

The Company anticipates that these industry changes, together with the rapid
growth, enormous size and global scope of these markets, will attract new
entrants and encourage existing competitors to broaden their offerings. Current
and potential competitors in telecommunication services include long distance
companies, other local telephone companies, cable companies, wireless service
providers, and other companies that offer network services. Some of these
companies have a strong market presence, brand recognition and existing customer
relationships, all of which contribute to intensifying competition and may
affect the Company's future revenue growth. See the "Competition" section on
page 19 for additional information.

Directory Publishing Activities

On January 1, 1997, the Company transferred, at net book value without gain
or loss, certain assets and liabilities associated with its directory publishing
activities to a newly formed, wholly owned subsidiary. The stock of the
subsidiary was immediately distributed to Bell Atlantic. The transfer of such
assets and liabilities was completed as part of Bell Atlantic and the Company's
response to the requirements of the Act, which prohibits the Company from
engaging in electronic publishing or joint sales and marketing of electronic
products.

Net assets transferred by the Company totaled approximately $12,700,000, and
consisted of deferred directory production costs (included in prepaid expenses),
fixed assets, and related deferred tax liabilities.

Revenues related to the Company's directory publishing activities transferred
were approximately $186,100,000, $163,600,000 and $154,500,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. Direct expenses related
to the directory publishing activities transferred were approximately
$75,300,000, $63,800,000 and $65,500,000 for the years ended December 31, 1996,
1995 and 1994, respectively. The Company does not separately identify indirect
expenses attributable to the directory publishing activities, including expenses
related to billing and data management and processing services, legal, external
affairs, depreciation, interest expense and any corresponding tax expense.

Beginning in 1997, revenues from directory publishing activities transferred
will no longer be earned, and the related expenses will no longer be incurred,
by the Company. Certain other revenues, primarily fees for non-publication of
telephone numbers and multiple white page listings will continue to be earned by
the Company. Additionally, contracts between the Company and another affiliate
of Bell Atlantic for billing and collection services related to the directory
activities, use of directory listings, and rental charges will create new
revenue sources for the Company. As a result of the transfer, past operating
results are not indicative of future operating results of the Company.

Recent Developments

On August 1, 1996, the FCC adopted an order establishing rules for
implementation of the interconnection requirements set forth in the Act. The
FCC's order establishes rules to govern interconnection agreements that are
reached through state arbitrations, when negotiations fail.

Bell Atlantic and other telecommunication companies appealed the
interconnection order to the U.S. Court of Appeals. This case is currently
pending. The Court has stayed the effectiveness of the uniform national pricing
rules adopted by the FCC, and the FCC rule that permitted competitors to "pick
and choose" isolated terms out of negotiated interconnection agreements.
Private negotiations and state arbitrations are continuing while the stay is in
effect, pending the Court's final decision. As of March 1, 1997, the Company
has entered into ten interconnection agreements, with a number of different
companies.

Pursuant to the Act, the Company filed its "Statement of Generally Available
Terms and Conditions for Interconnection, Unbundled Network Elements, Ancillary
Services and Resale of Telecommunications Services" with the SCC.

The FCC has also initiated proceedings to address universal service
obligations and access charges, and will adopt regulations regarding these
issues in subsequent orders.

Although the Company is unable to predict the final outcome, either of these
proceedings could have a material effect on future operating revenues.

18
<PAGE>

Bell Atlantic - Virginia, Inc.

COMPETITION

IntraLATA Toll Services

IntraLATA toll services are calls that originate and terminate within the
same LATA, but cover a greater distance than a local call. These services are
generally regulated by the SCC rather than federal authorities. The SCC permits
other carriers to offer intrastate intraLATA toll services in the Company's
jurisdiction.

Currently, intraLATA toll calls are completed by the Company unless the
customer dials a code to access a competing carrier. This dialing method would
be changed by "presubscription," which would enable customers to make toll calls
using another carrier without having to dial an access code.

The Act addressed the issue of presubscription by prohibiting a state from
requiring presubscription or "dialing parity" until the earlier of such time as
an operating telephone company in the state is authorized to provide long
distance services within the state or three years from the effective date of the
Act. This prohibition does not apply to a final order requiring presubscription
that was issued on or prior to December 19, 1995 or to states consisting of a
single LATA.

In Virginia, the SCC issued an order on July 24, 1995 denying intraLATA toll
presubscription.

Local Exchange Services

Local exchange services have historically been subject to regulation by the
SCC. Since April 1996, several telephone service providers have been certified
by the SCC to provide local exchange services in Virginia, pending SCC approval
of their tariffs. Applications from other competitors to provide and resell
local exchange services are currently pending and the SCC has set several
hearings to resolve issues raised by companies that desire to provide local
exchange services pursuant to the Act.

The Act is expected to significantly increase the level of competition in the
Company's local exchange market. See Item 1 - "Description of Business, State
Regulation and Competitive Environment - Competition - Local Exchange Services"
beginning on page 5 for the specific requirements of the Act relating to local
exchange services.

OTHER STATE REGULATORY MATTERS

The communications services of the Company are subject to regulation by the
SCC with respect to intrastate rates and services and certain other matters.
See Item 1 - "Description of Business, State Regulation and Competitive
Environment" on page 5 for a description of the Company's current regulatory
plan.

As required under its regulatory plan, the Company has filed financial
results with the SCC for the years 1989 through 1994. The SCC issued orders
making the Company's rates final and no longer subject to refund for the years
1989, 1990, 1991, 1993 and 1994.

19
<PAGE>

Bell Atlantic - Virginia, Inc.

OTHER MATTERS
- -------------

Proposed Bell Atlantic - NYNEX Merger

Bell Atlantic and NYNEX Corporation announced a proposed merger of equals
under a definitive merger agreement entered into on April 21, 1996 and amended
on July 2, 1996. In November 1996, stockholders of both companies approved the
merger. The completion of the merger is subject to a number of other
conditions, including certain regulatory approvals. Bell Atlantic is unable to
predict when it will be able to complete the merger.

As a result of the merger, Bell Atlantic will incur special transition and
integration costs of approximately $500 million in the first year following the
completion of the merger and an additional $200 million to $400 million over the
two succeeding years, in connection with completing the transaction and
integrating the operations of Bell Atlantic and NYNEX. The transition costs
consist principally of professional and registration fees, systems modification
costs, costs associated with the elimination and consolidation of duplicate
facilities, and employee severance and relocation costs. Of these costs, the
Company expects to incur a portion of a one-time charge for employee severance
costs in the quarter in which the merger is completed. The total severance
charge for Bell Atlantic is currently estimated to be in the range of $200
million to $300 million. The amount of the charge will vary depending on a
number of factors including: (i) the number of employees that will be terminated
under severance arrangements, (ii) the timing of employee terminations, and
(iii) changes, if any, to severance plan provisions. It is anticipated that the
Company will bear a portion of the remaining transition and integration costs.

Bell Atlantic also expects to recognize recurring expense savings of
approximately $600 million annually by the third year following completion of
the merger as a result of consolidating operating systems and other
administrative functions and reducing management positions. Incremental savings
in annual capital expenditures for Bell Atlantic should grow to approximately
$250 million to $300 million, including efficiencies relating to purchasing,
marketing trials and equipment testing. It is anticipated that the Company will
recognize a portion of these savings.

Bell Atlantic's Disposition of Bellcore Investment

In November 1996, Bell Atlantic and other Bellcore owners entered into an
agreement to sell their jointly owned investment in Bellcore. The transaction
is subject to regulatory approvals, and is expected to be completed near the end
of 1997. After the sale is completed, the Company will continue to contract
with Bellcore for technical and support services. It is anticipated that the
Company will incur costs in 1997 at levels similar to those of prior years (see
Note 13 to the financial statements).

Cautionary Statement Concerning Forward-Looking Statements

Information contained above with respect to the expected financial impact of
the proposed merger, and other statements in this Management's Discussion and
Analysis, regarding expected future events and financial results is
forward-looking and subject to risks and uncertainties. For those statements,
the Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.

20
<PAGE>

Bell Atlantic - Virginia, Inc.

PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is set forth on Pages F-1
through F-20.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

(Omitted pursuant to General Instruction I(2).)

ITEM 11. EXECUTIVE COMPENSATION

(Omitted pursuant to General Instruction I(2).)

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(Omitted pursuant to General Instruction I(2).)

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(Omitted pursuant to General Instruction I(2).)

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
Schedule appearing on Page F-1.

(2) Financial Statement Schedules

See Index to Financial Statements and Financial Statement
Schedule appearing on Page F-1.

21
<PAGE>

Bell Atlantic - Virginia, Inc.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)

(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 (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------

3a Certificate of Incorporation of the registrant, as amended July
28, 1977. (Exhibit 3a to the registrant's Annual Report on Form
10-K for the year ended December 31, 1985, File No. 1-6964.)

3a(i) Certificate of Amendment to the registrant's Certificate
of Incorporation, as amended August 24, 1990. (Exhibit
3a(i) to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1990, File No. 1-6964.)

3a(ii) Certificate of Amendment to the registrant's Certificate
of Incorporation, adopted December 31, 1993 and filed
January 13, 1994. (Exhibit 3a(ii) to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1993, File No. 1-6964.)

3b By-Laws of the registrant, as amended December 31, 1996.

3b(i) Consent of Sole Stockholder of Bell Atlantic - Virginia,
Inc., dated December 31, 1996.

4 No instrument which defines the rights of holders of long-term
debt of the registrant is filed herewith pursuant to Regulation
S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant 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
Corporation, and the Bell Atlantic Corporation telephone
subsidiaries, and certain other parties, dated as of November 1,
1983. (Exhibit 10a to Bell Atlantic Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-
8606.)

10b Agreement among Bell Atlantic Network Services, Inc. and the
Bell Atlantic Corporation telephone subsidiaries, dated November
7, 1983. (Exhibit 10b to Bell Atlantic Corporation Annual Report
on Form 10-K for the year ended December 31, 1993, File No. 1-
8606.)

18 Letter regarding change in accounting principle.

23 Consent of Independent Accountants.

27 Financial Data Schedule.

(b) Reports on Form 8-K:

There were no Current Reports on Form 8-K filed during the quarter
ended December 31, 1996.

22
<PAGE>

Bell Atlantic - Virginia, Inc.

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 - Virginia, Inc.

By /s/ O. Riley Young, Jr.
------------------------------
O. Riley Young, Jr.
Controller and Treasurer

March 24, 1997

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.

Signature Title Date
- --------- ----- ----

/s/ Hugh R. Stallard President and March 24, 1997
- ------------------------------- Chief Executive Officer
Hugh R. Stallard and Director
(Principal Executive Officer)

/s/ O. Riley Young, Jr. Controller and Treasurer March 24, 1997
- ------------------------------- (Principal Financial Officer)
O. Riley Young, Jr.

/s/ Warner F. Brundage, Jr. Director March 24, 1997
- -------------------------------
Warner F. Brundage, Jr.

/s/ Robert W. Woltz, Jr. Director March 24, 1997
- -------------------------------
Robert W. Woltz, Jr.

23
<PAGE>

Bell Atlantic - Virginia, Inc.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Page
----
<S> <C>

Report of Independent Accountants.......................... F-2

Statements of Operations and Reinvested Earnings
For the years ended December 31, 1996, 1995 and 1994.... F-3

Balance Sheets - December 31, 1996 and 1995................ F-4

Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994.... F-6

Notes to Financial Statements.............................. F-7

Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1996, 1995 and 1994.... F-20

</TABLE>

Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.

F-1
<PAGE>

Bell Atlantic - Virginia, Inc.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowner of
Bell Atlantic - Virginia, Inc.

We have audited the financial statements and financial statement schedule of
Bell Atlantic - Virginia, Inc. as listed in the index on page F-1 of this Form
10-K. The financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bell Atlantic - Virginia, Inc.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.

As discussed in Notes 1 and 3 to the financial statements, the Company changed
its method of accounting for directory publishing revenues and expenses in 1996.
Also, as discussed in Notes 1 and 4 to the financial statements, the Company
discontinued accounting for its operations in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," effective August 1, 1994.

/s/ COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1997

F-2
<PAGE>

Bell Atlantic - Virginia, Inc.

STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES
(including $3,991, $1,818
and $1,356 from affiliates)......... $2,156,478 $1,984,533 $1,940,321
---------- ---------- ----------

OPERATING EXPENSES
Employee costs, including
benefits and taxes................ 362,767 388,222 417,411
Depreciation and amortization...... 420,095 412,123 398,774
Other (including $517,994, $422,563
and $374,826 to affiliates)....... 808,386 668,807 634,338
---------- ---------- ----------
1,591,248 1,469,152 1,450,523
---------- ---------- ----------

OPERATING INCOME..................... 565,230 515,381 489,798

OTHER INCOME AND EXPENSE, NET
Allowance for funds used
during construction............... --- --- 1,817
Other, net (including $506, $0
and $37 from affiliate)........... (2,563) (3,126) (2,926)
---------- ---------- ----------
(2,563) (3,126) (1,109)
INTEREST EXPENSE (including $1,464,
$5,688 and $1,888 to affiliate)..... 62,907 75,316 66,782
---------- ---------- ----------

INCOME BEFORE PROVISION FOR INCOME
TAXES, EXTRAORDINARY ITEM, AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................ 499,760 436,939 421,907

PROVISION FOR INCOME TAXES........... 189,056 164,422 156,306
---------- ---------- ----------

INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................ 310,704 272,517 265,601
---------- ---------- ----------

EXTRAORDINARY ITEM
Discontinuation of Regulatory
Accounting Principles, Net
of Tax............................ --- --- (308,580)

CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Directory Publishing, Net of
Tax............................... 16,423 --- ---
---------- ---------- ----------

NET INCOME (LOSS).................... $ 327,127 $ 272,517 $ (42,979)
========== ========== ==========

REINVESTED EARNINGS
At beginning of year............... $ 169,629 $ 156,709 $ 438,860
Add: net income (loss)............ 327,127 272,517 (42,979)
---------- ---------- ----------
496,756 429,226 395,881
Deduct: dividends................. 288,166 259,260 239,216
other changes............. 242 337 (44)
---------- ---------- ----------
At end of year..................... $ 208,348 $ 169,629 $ 156,709
========== ========== ==========

</TABLE>
See Notes to Financial Statements.

F-3
<PAGE>

Bell Atlantic - Virginia, Inc.

BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS
------
<TABLE>
<CAPTION>

December 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Short-term investments............................ $ 32,651 $ ---
Accounts receivable:
Trade and other, net of allowances for
uncollectibles of $30,778 and $19,072.......... 464,852 375,872
Affiliates...................................... 31,327 28,973
Material and supplies............................. 9,927 9,156
Prepaid expenses.................................. 45,188 67,987
Deferred income taxes............................. --- 30,364
Other............................................. 323 217
---------- ----------
584,268 512,569
---------- ----------

PLANT, PROPERTY AND EQUIPMENT..................... 5,636,757 5,383,444
Less accumulated depreciation..................... 2,970,105 2,716,713
---------- ----------
2,666,652 2,666,731
---------- ----------

OTHER ASSETS...................................... 45,690 55,202
---------- ----------

TOTAL ASSETS...................................... $3,296,610 $3,234,502
========== ==========

</TABLE>

See Notes to Financial Statements.

F-4
<PAGE>

Bell Atlantic - Virginia, Inc.

BALANCE SHEETS
(DOLLARS IN THOUSANDS)

LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
<TABLE>
<CAPTION>

December 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate.................... $ 52,715 $ 53,590
Other........................................ 968 2,033
Accounts payable and accrued liabilities:
Affiliates................................... 229,768 174,113
Other........................................ 313,438 328,352
Other liabilities.............................. 68,301 68,055
---------- ----------
665,190 626,143
---------- ----------

LONG-TERM DEBT................................. 945,987 946,730
---------- ----------

EMPLOYEE BENEFIT OBLIGATIONS................... 410,666 411,942
---------- ----------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes.......................... 108,012 119,175
Unamortized investment tax credits............. 20,405 24,810
Other.......................................... 64,317 62,388
---------- ----------
192,734 206,373
---------- ----------

COMMITMENTS (Note 6)

SHAREOWNER'S INVESTMENT
Common stock - one share, without
par value, owned by parent................... 873,685 873,685
Reinvested earnings............................ 208,348 169,629
---------- ----------
1,082,033 1,043,314
---------- ----------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $3,296,610 $3,234,502
========== ==========

</TABLE>

See Notes to Financial Statements.

F-5
<PAGE>

Bell Atlantic - Virginia, Inc.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................... $ 327,127 $ 272,517 $ (42,979)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization........... 420,095 412,123 398,774
Extraordinary item, net of tax.......... --- --- 308,580
Cumulative effect of change in
accounting principle, net of tax....... (16,423) --- ---
Allowance for funds used during
construction........................... --- --- (1,817)
Other items, net........................ (70) (1,067) 303
Changes in certain assets and
liabilities:
Accounts receivable.................. (37,293) (42,366) (15,838)
Material and supplies................ (771) (3,253) (47)
Other assets......................... (14,947) 31,506 (44,912)
Accounts payable and accrued
liabilities......................... 28,582 41,932 18,434
Deferred income taxes, net........... 17,528 (25,571) (28,899)
Unamortized investment tax credits... (4,405) (4,947) (8,847)
Employee benefit obligations......... (1,276) 5,278 42,243
Other liabilities.................... 6,373 (3,610) 9,170
--------- --------- ---------
Net cash provided by operating activities.. 724,520 682,542 634,165
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments........ (45,851) (16,929) ---
Proceeds from sale of short-term
investments............................... 13,200 16,929 ---
Additions to plant, property and equipment. (436,392) (457,732) (386,036)
Other, net................................. 13,525 (2,476) 12,516
--------- --------- ---------
Net cash used in investing activities...... (455,518) (460,208) (373,520)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease
obligations............................... (2,053) (874) (845)
Net change in note payable to affiliate.... (875) 33,803 32
Dividends paid............................. (288,166) (259,260) (239,216)
Net change in outstanding checks drawn on
controlled disbursement accounts.......... 22,092 3,997 (20,616)
--------- --------- ---------
Net cash used in financing activities...... (269,002) (222,334) (260,645)
--------- --------- ---------

NET CHANGE IN CASH......................... --- --- ---

CASH, BEGINNING OF YEAR.................... --- --- ---
--------- --------- ---------

CASH, END OF YEAR.......................... $ --- $ --- $ ---
========= ========= =========

</TABLE>

See Notes to Financial Statements.

F-6
<PAGE>

Bell Atlantic - Virginia, Inc.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Bell Atlantic - Virginia, Inc. (the Company) is a wholly owned subsidiary of
Bell Atlantic Corporation (Bell Atlantic). The Company operates in a single
industry segment - communications and related services. The Company provides
two basic types of telecommunications services in a territory consisting of five
complete Local Access and Transport Areas (LATAs) and part of a sixth LATA in
the state of Virginia. First, the Company transports 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, local private line and public telephone services. Toll service
includes message toll service and intraLATA Wide Area Toll Service/800 services.
Second, the Company provides exchange access service, which links a subscriber's
telephone equipment to the facilities of an interexchange carrier (IXC) which,
in turn, provides telecommunications service between LATAs (interLATA service)
to their customers. The Company also provides exchange access service to IXCs
which provide intrastate intraLATA long distance telecommunications service.
Other services provided by the Company include customer premises wiring and
maintenance and billing and collection services. Effective January 1, 1997, the
Company transferred certain assets and liabilities associated with its directory
publishing activities to a newly formed, wholly owned subsidiary (see Note 16).

The telecommunications industry is undergoing substantial changes as a result
of the Telecommunications Act of 1996, other public policy changes and
technological advances. These changes are likely to bring increased competitive
pressures, but will also open new markets to Bell Atlantic, such as long
distance services within its geographic region, upon completion of certain
requirements of the Telecommunications Act.

BASIS OF PRESENTATION

The Company prepares its financial statements in accordance with generally
accepted accounting principles (GAAP). Effective August 1, 1994, the Company
discontinued accounting for its operations under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation" (see Note 4).

USE OF ESTIMATES

The Company prepares its financial statements under generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts or certain disclosures. Actual results could
differ from those estimates.

RECLASSIFICATIONS

The Company reclassified certain amounts from previous years to conform with
the 1996 presentation.

REVENUE RECOGNITION

The Company recognizes revenues when services are rendered based on usage of
its local exchange network and facilities.

MAINTENANCE AND REPAIRS

The Company charges the cost of maintenance and repairs, including the cost
of replacing minor items not constituting substantial betterments, to operating
expense.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents, except cash equivalents held
as short-term investments. Cash equivalents are stated at cost, which
approximates market value.

F-7
<PAGE>

Bell Atlantic - Virginia, Inc.

SHORT-TERM INVESTMENTS

Short-term investments consist of cash equivalents held in trust to pay for
certain employee benefits. Short-term investments are stated at cost, which
approximates market value.

MATERIAL AND SUPPLIES

New and reusable materials are carried in inventory, principally at average
original cost, except that specific costs are used in the case of large
individual items.

PLANT AND DEPRECIATION

The Company states plant, property, and equipment at cost. Depreciation
expense is principally based on the composite group remaining life method and
straight-line composite rates. This method provides for the recognition of the
cost of the remaining net investment in telephone plant, less anticipated net
salvage value, over the remaining asset lives. This method requires the periodic
revision of depreciation rates.

Effective, August 1, 1994, the Company discontinued accounting for its
operations under SFAS No. 71 (see Note 4). For financial reporting purposes, the
Company no longer uses asset lives set by regulators. As a result, the Company
began using shorter estimated asset lives for certain categories of plant and
equipment.

The following asset lives were used before and after the discontinuation of
SFAS No. 71:
<TABLE>
<CAPTION>

AVERAGE LIVES (IN YEARS) BEFORE AFTER
-------------------------------------------------------------------
<S> <C> <C>

Buildings.................. 27 - 60 30
Central office equipment... 6 - 18 5 - 12
Cable, wiring and conduit.. 21 - 55 16 - 50
Other equipment............ 6 - 30 6 - 30
</TABLE>

When depreciable plant is replaced or retired, the carrying amount of such
plant is deducted from the respective accounts and charged to accumulated
depreciation. Gains or losses on disposition are amortized with the remaining
net investment in telephone plant.

CAPITALIZATION OF INTEREST COSTS

The Company capitalizes interest on funds borrowed to finance the acquisition
or construction of plant assets. Capitalized interest is reported as a cost of
plant and a reduction in interest cost. Prior to the discontinuation of SFAS
No. 71, the Company recorded an allowance for funds used during construction,
which included both interest and equity return components, as a cost of plant
and as an item of other income.

INCOME TAXES

Bell Atlantic and its domestic subsidiaries, including the Company, file a
consolidated federal income tax return.

The consolidated amount of current and deferred tax expense is allocated by
applying the provisions of SFAS No. 109, "Accounting for Income Taxes" to each
subsidiary as if it were a separate taxpayer.

The Company uses the deferral method of accounting for investment tax credits
earned prior to repeal of investment tax credits by the Tax Reform Act of 1986.
The Company also defers certain transitional credits earned after the repeal.
These credits are being amortized as a reduction to the provision for income
taxes over the estimated service lives of the related assets.

F-8
<PAGE>

Bell Atlantic - Virginia, Inc.

DIRECTORY PUBLISHING

Effective, January 1, 1996, the Company changed its method of accounting for
directory publishing revenues and expenses from the amortized method to the
point-of-publication method. Under the point-of-publication method, revenues
and expenses are recognized when the directories are published, rather than over
the lives of the directories (see Note 3).

STOCK-BASED COMPENSATION

The Company participates in stock-based compensation plans sponsored by Bell
Atlantic. Bell Atlantic accounts for stock-based employee compensation plans
under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Effective January 1, 1996,
Bell Atlantic adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" (see Note 9).

2. PROPOSED BELL ATLANTIC - NYNEX MERGER

Bell Atlantic and NYNEX Corporation announced a proposed merger of equals
under a definitive merger agreement entered into on April 21, 1996 and amended
on July 2, 1996. At special meetings held in November 1996, the stockholders of
both companies approved the merger. The completion of the merger is subject to
a number of conditions, including certain regulatory approvals and receipt of
opinions that the merger will be tax free. Bell Atlantic is unable to predict
when it will be able to complete the merger.

3. CHANGE IN ACCOUNTING PRINCIPLE - DIRECTORY PUBLISHING

Effective January 1, 1996, the Company changed its method of accounting for
directory publishing revenues and expenses from the amortized method to the
point-of-publication method. Under the point-of-publication method, revenues
and expenses are recognized when the directories are published rather than over
the lives of the directories, as under the amortized method. The Company
believes the point-of-publication method is preferable because it is the method
generally followed by publishing companies.

This accounting change resulted in a one-time, noncash increase in net income
of $16,423,000 (net of income tax of $10,460,000), which is reported as a
cumulative effect of a change in accounting principle at January 1, 1996. On an
annual basis, the financial impact of applying this method in 1996 was not
significant, and it would not have been significant had it been applied in 1995
and 1994. The Company restated its 1996 quarterly results of operations for the
effect of the change in accounting for directory publishing (see Note 15). As a
result of this restatement, (unaudited) income before cumulative effect of
change in accounting principle increased $11,005,000, decreased $13,700,000 and
decreased $1,554,000 in the first, second and third quarters of 1996,
respectively.

4. DISCONTINUATION OF REGULATORY ACCOUNTING PRINCIPLES

In the third quarter of 1994, the Company discontinued the use of regulatory
accounting principles under SFAS No. 71, which means for financial reporting
purposes, the Company no longer follows accounting practices set by regulators.
As a result, the Company recorded a noncash, extraordinary charge of
$308,580,000, which is net of an income tax benefit of $234,288,000.

A summary of the components of the after-tax charge follows:
<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)
-----------------------
<S> <C>

Increase in plant and equipment depreciation reserve.... $323,038
Accelerated investment tax credit amortization.......... (23,778)
Tax-related regulatory asset and liability elimination.. 666
Other regulatory asset and liability elimination........ 8,654
--------
Total................................................... $308,580
========

</TABLE>

F-9
<PAGE>

Bell Atlantic - Virginia, Inc.

5. PLANT, PROPERTY AND EQUIPMENT

Plant, property and equipment, which is stated at cost, is summarized as
follows at December 31:
<TABLE>
<CAPTION>

1996 1995
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land....................... $ 21,768 $ 21,310
Buildings.................. 357,069 345,293
Central office equipment... 2,411,245 2,219,052
Cable, wiring and conduit.. 2,235,703 2,146,769
Other equipment............ 488,696 479,044
Other...................... 43,804 75,371
Construction-in-progress... 78,472 96,605
----------- -----------
5,636,757 5,383,444
Accumulated depreciation... (2,970,105) (2,716,713)
----------- -----------
Total...................... $ 2,666,652 $ 2,666,731
=========== ===========
</TABLE>

6. LEASES

The Company leases certain facilities and equipment for use in its operations
under both capital and operating leases. Plant, property and equipment included
capital leases of $20,223,000 and $22,003,000, and related accumulated
amortization of $5,997,000 and $6,225,000 at December 31, 1996 and 1995,
respectively. The Company incurred initial capital lease obligations of $74,000
in 1996, $13,181,000 in 1995 and $3,432,000 in 1994.

Total rent expense amounted to $63,823,000 in 1996, $61,766,000 in 1995 and
$68,939,000 in 1994. Of these amounts, $36,438,000, $35,662,000 and $34,344,000
in 1996, 1995 and 1994, respectively, were lease payments to affiliated
companies.

At December 31, 1996, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:
<TABLE>
<CAPTION>

YEARS CAPITAL LEASES OPERATING LEASES
- ----- -------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>

1997............................. $ 3,129 $ 5,668
1998............................. 3,216 4,952
1999............................. 3,020 1,872
2000............................. 3,009 1,338
2001............................. 3,997 992
Thereafter....................... 18,276 5,184
------- -------
Total minimum rental commitments. 34,647 $20,006
=======

Less interest and executory
costs........................... 17,603
-------
Present value of minimum
lease payments.................. 17,044
Less current installments........ 968
-------
Long-term obligation at
December 31, 1996............... $16,076
=======
</TABLE>

F-10
<PAGE>

Bell Atlantic - Virginia, Inc.

7. DEBT

DEBT MATURING WITHIN ONE YEAR

Debt maturing within one year consists of the following at December 31:
<TABLE>
<CAPTION>

1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>

Note payable to affiliate (BANFC)................ $52,715 $53,590
Long-term debt maturing within one year.......... 968 2,033
------- -------
Total debt maturing within one year.............. $53,683 $55,623
======= =======

Weighted average interest rate for note payable
outstanding at year-end......................... 5.5% 5.8%
======= =======
</TABLE>

The Company has a contractual agreement with an affiliated company, Bell
Atlantic Network Funding Corporation (BANFC), for the provision of short-term
financing and cash management services. BANFC issues commercial paper and
secures bank loans to fund the working capital requirements of Bell Atlantic's
network services subsidiaries, including the Company, and invests funds in
temporary investments on their behalf. At December 31, 1996, the Company had
$147,285,000 of an unused line of credit with BANFC.

LONG-TERM DEBT

Long-term debt consists principally of debentures issued by the Company.
Interest rates and maturities of the amounts outstanding are as follows at
December 31:
<TABLE>
<CAPTION>

1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>

Ten year 7 1/8%, due 2002......................... $100,000 $100,000
Thirty-nine year 5 1/4%, due 2005................. 50,000 50,000
Twelve year 6 1/8%, due 2005...................... 100,000 100,000
Forty year 5 5/8%, due 2007....................... 65,000 65,000
Forty year 6 3/4%, due 2008....................... 70,000 70,000
Twenty year 7 5/8%, due 2012...................... 100,000 100,000
Forty year 7 1/4%, due 2012....................... 50,000 50,000
Thirty year 7 7/8%, due 2022...................... 100,000 100,000
Thirty-one year 7 1/4%, due 2024.................. 75,000 75,000
Thirty-two year 7%, due 2025...................... 125,000 125,000
Forty year 8 3/8%, due 2029....................... 100,000 100,000
-------- --------
935,000 935,000

Unamortized discount and premium, net............. (5,089) (5,260)
Capital lease obligations - average rate
8.8% and 9.1%................................ 17,044 19,023
-------- --------
Total long-term debt, including current maturities 946,955 948,763
Less maturing within one year..................... 968 2,033
-------- --------
Total long-term debt.............................. $945,987 $946,730
======== ========
</TABLE>

Long-term debt outstanding at December 31, 1996 includes $235,000,000 that is
callable by the Company. The call prices range from 101.93% to 100.76% of face
value, depending upon the remaining term to maturity of the issue. In addition,
$100,000,000 of long-term debt, bearing interest at 8 3/8%, will become
redeemable only on October 1, 1999 at the option of the holders. The redemption
price will be 100.0% of face value plus accrued interest.

At December 31, 1996, the Company had $100,000,000 remaining under a shelf
registration statement filed with the Securities and Exchange Commission for
issuance of unsecured debt securities.

F-11
<PAGE>

Bell Atlantic - Virginia, Inc.

8. FINANCIAL INSTRUMENTS

CONCENTRATIONS OF CREDIT RISK

Financial instruments that subject the Company to concentrations of credit
risk consist primarily of short-term investments and trade receivables.

Concentrations of credit risk with respect to trade receivables other than
those from AT&T are limited due to the large number of customers. For the years
ended December 31, 1996, 1995 and 1994, revenues generated from services
provided to AT&T (primarily network access and billing and collection) were
$199,028,000, $224,294,000 and $238,092,000, respectively. At December 31, 1996
and 1995, accounts receivable, net, included $14,587,000 and $14,504,000,
respectively, from AT&T.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The tables below provide additional information about the Company's material
financial instruments at December 31, 1996:
<TABLE>
<CAPTION>

FINANCIAL INSTRUMENT VALUATION METHOD
---------------------------------------------------------------------------------------
<S> <C>
Note payable to affiliate (BANFC) Carrying amounts
and short-term investments

Debt (excluding capital leases and Market quotes for similar terms
unamortized premium and discount) and maturities or future cash flows
discounted at current rates
<CAPTION>
1996 1995
--------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>

Debt................................. $987,715 $980,083 $988,590 $1,037,312
</TABLE>

9. STOCK INCENTIVE PLANS

The Company participates in stock-based compensation plans sponsored by Bell
Atlantic. Bell Atlantic applies APB Opinion No. 25 and related interpretations
in accounting for the plans. Effective January 1, 1996, Bell Atlantic adopted
the disclosure-only provisions of SFAS No. 123. If Bell Atlantic had elected to
recognize compensation expense based on the fair value at the grant dates for
1995 and subsequent awards consistent with the provisions of SFAS No. 123, the
Company's pro forma net income for the years ended December 31, 1996 and 1995
would have been $324,580,000 and $270,479,000, respectively, compared to as
reported net income of $327,127,000 and $272,517,000 for the corresponding
years. These results may not be representative of the effects on pro forma net
income for future years.

The pro forma net income amounts were determined using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:
<TABLE>
<CAPTION>

1996 1995
------ ------
<S> <C> <C>

Dividend yield.............................. 4.9% 5.1%
Expected volatility......................... 14.7% 15.9%
Risk-free interest rate..................... 5.4% 7.6%
Expected lives (in years)................... 4.5 4.5
</TABLE>

The weighted average value of options granted was $7.23 per option during
1996 and $7.46 per option during 1995.

F-12
<PAGE>

Bell Atlantic - Virginia, Inc.

10.EMPLOYEE BENEFITS

PENSION PLANS

Bell Atlantic and certain of its subsidiaries, including the Company, sponsor
multi-employer noncontributory defined benefit pension plans covering
substantially all of its management and associate employees. Benefits for
associate employees are determined by a flat dollar amount per year of service
according to job classification. Effective December 31, 1995, the plan covering
management employees was converted to a cash balance plan with benefits
determined by compensation credits related to age and service and interest
credits based on individual account balances. The management pension benefit for
prior years was based on a stated percentage of adjusted career average
earnings.

Under the cash balance plan, each management employee's opening account
balance was determined by converting the accrued pension benefit as of December
31, 1995 to a lump-sum amount based on the prior plan's provisions. The lump-
sum value was then multiplied by a transition factor based on age and service to
arrive at the opening balance.

Bell Atlantic's objective in funding the plans is to accumulate funds at a
relatively stable level over participants' working lives so that benefits are
fully funded at retirement. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, U.S. and foreign government
and corporate debt securities, and real estate.

Pension cost was $4,474,000, $4,084,000 and $13,672,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The change in pension cost from
year-to-year was caused by a number of variables, including changes in actuarial
assumptions (see table below), returns on plan assets and plan amendments.

SFAS No. 87, "Employers' Accounting for Pensions" requires a comparison of
the actuarial present value of projected benefit obligations with the fair value
of plan assets, the disclosure of the components of net periodic pension costs
and a reconciliation of the funded status of the plans with amounts recorded on
the balance sheets. The Company participates in multi-employer plans and
therefore, such disclosures are not presented for the Company because the
structure of the plans does not allow for the determination of this information
on an individual participating company basis.

The significant assumptions used for the pension measurements were as follows
at December 31:
<TABLE>
<CAPTION>

1996 1995 1994
----- ----- -----
<S> <C> <C> <C>

Discount rate.................................... 7.75% 7.25% 8.25%
Rate of future increases in compensation levels.. 4.75% 4.75% 5.25%
</TABLE>

The expected long-term rate of return on plan assets was 8.25% for 1996, 1995
and 1994.

Pension benefits for associate employees are subject to collective bargaining
and modifications in pension benefits have been bargained from time to time.
Additionally, the Company has periodically amended the benefit formula under
pension plans maintained for its management employees. Substantive commitments
for future amendments to the Company's pension plans have been reflected in
determining the Company's pension cost. The actuarial assumptions used to
determine pension cost are based on financial market interest rates, past
experience, and management's best estimate of future benefit changes and
economic conditions. Changes in these assumptions may impact future pension
costs and benefit obligations.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Bell Atlantic's postretirement health and life insurance benefit plans cover
substantially all of the Company's management and associate employees.
Postretirement health benefit costs are based on comprehensive medical and
dental plan provisions. Postretirement life insurance costs are based on annual
basic pay at retirement.

In 1996, Bell Atlantic restructured certain postretirement health and life
insurance obligations and assets to create a single plan. The remaining
postretirement benefits continue to be provided by separate plans. The
restructure did not affect plan benefits or postretirement benefit costs or
obligations.

F-13
<PAGE>

Bell Atlantic - Virginia, Inc.

Bell Atlantic funds the postretirement health and life insurance benefits of
current and future retirees. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, and U.S. Government and
corporate debt securities.

Postretirement benefit cost was $23,218,000, $28,399,000 and $34,576,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. The change in
postretirement benefit cost from year-to-year was caused by a number of
variables, including changes in actuarial assumptions (see table below), returns
on plan assets and plan amendments.

SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," requires a comparison of the actuarial present value of projected
postretirement benefit obligations with the fair value of plan assets, the
disclosure of the components of net periodic postretirement benefit costs, a
reconciliation of the funded status of the plan with amounts recorded on the
balance sheets and the effect of a one-percentage-point increase in the assumed
health care cost trend rates for each future year on net periodic postretirement
benefit cost and the accumulated postretirement benefit obligation. The Company
participates in multi-employer plans and therefore, such disclosures are not
presented for the Company because the structure of the plans does not provide
for the determination of this information on an individual participating company
basis.

Assumptions used in the actuarial computations for postretirement benefits
are as follows at December 31:
<TABLE>
<CAPTION>

1996 1995 1994
------ ------ ------
<S> <C> <C> <C>

Discount rate.................................... 7.75% 7.25% 8.25%
Rate of future increases in compensation levels.. 4.75 4.75 5.25
Medical cost trend rate:
Year ending.................................... 10.00 11.00 12.00
Ultimate (year 2003)........................... 5.00 5.00 5.00
Dental cost trend rate........................... 4.00 4.00 4.00
</TABLE>

The expected long-term rate of return on plan assets was 8.25% for 1996, 1995
and 1994.

Postretirement benefits other than pensions for associate employees are
subject to collective bargaining and have been modified from time to time. The
Company has also periodically modified benefits under plans maintained for its
management employees. Substantive commitments for future amendments to the
Company's postretirement benefit plans have been reflected in determining the
Company's postretirement benefit cost. The actuarial assumptions used to
determine postretirement benefit cost are based on financial market interest
rates, past experience, and management's best estimate of future benefit changes
and economic conditions. Changes in these assumptions may impact future
postretirement benefit costs and benefit obligations.

SAVINGS PLANS AND EMPLOYEE STOCK OWNERSHIP PLANS

Substantially all of the Company's employees are eligible to participate in
savings plans established by Bell Atlantic to provide opportunities for eligible
employees to save for retirement on a tax-deferred basis and encourage employees
to acquire and maintain an equity interest in Bell Atlantic. Under these plans,
a certain percentage of eligible employee contributions are matched with shares
of Bell Atlantic common stock. Bell Atlantic funds the matching contribution
through two leveraged employee stock ownership plans (ESOPs). Bell Atlantic
accounts for its ESOPs in accordance with the accounting rules applicable to
companies with ESOP trusts that held securities prior to December 15, 1989. The
Company recognizes its proportionate share of total ESOP cost based on the
Company's matching obligation attributable to participating Company employees.
The Company recorded total ESOP cost of $6,662,000, $7,859,000 and $6,876,000 in
1996, 1995 and 1994, respectively.

F-14
<PAGE>

Bell Atlantic - Virginia, Inc.

11. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>

Current:
Federal.................. $151,212 $168,953 $166,908
State and local.......... 24,721 25,987 27,144
-------- -------- --------
Total.................... 175,933 194,940 194,052
-------- -------- --------

Deferred:
Federal.................. 15,066 (21,895) (27,868)
State and local.......... 2,462 (3,676) (1,031)
-------- -------- --------
Total.................... 17,528 (25,571) (28,899)
-------- -------- --------
193,461 169,369 165,153
Investment tax credits.... (4,405) (4,947) (8,847)
-------- -------- --------
Total income tax expense.. $189,056 $164,422 $156,306
======== ======== ========

</TABLE>

The provision for income taxes varies from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The difference is attributable to the following factors:

YEARS ENDED DECEMBER 31
--------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>

Statutory federal income tax rate................ 35.0% 35.0% 35.0%
Investment tax credits........................... (.6) (.7) (2.1)
State income taxes, net of federal tax benefits.. 3.5 3.3 3.5
Other, net....................................... (.1) -- .6
---- ---- ----
Effective income tax rate........................ 37.8% 37.6% 37.0%
==== ==== ====

</TABLE>

Deferred taxes arise because of differences in the book and tax bases of
certain assets and liabilities. Significant components of deferred tax
liabilities (assets) were as follows at December 31:
<TABLE>
<CAPTION>

1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation................ $ 359,100 $ 352,700
Other....................... 21,200 21,800
--------- ---------
380,300 374,500
--------- ---------
Deferred tax assets:
Employee benefits........... (232,200) (227,800)
Investment tax credits...... (7,900) (9,500)
Advance payments............ (800) (1,400)
Other....................... (22,400) (47,000)
--------- ---------
(263,300) (285,700)
--------- ---------
Net deferred tax liability... $ 117,000 $ 88,800
========= =========
</TABLE>

Deferred tax assets include approximately $169,900,000 and $163,000,000 at
December 31, 1996 and 1995, respectively, related to postretirement benefit
costs recognized under SFAS No. 106. This deferred tax asset will gradually be
realized over the estimated lives of current retirees and employees.

F-15
<PAGE>

Bell Atlantic - Virginia, Inc.

12. ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>

DECEMBER 31
----------------------------
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEETS:
Accounts payable and accrued liabilities:
Accounts payable - affiliates................ $229,670 $173,842
Accounts payable - other..................... 235,235 252,890
Accrued expenses............................. 30,091 22,262
Accrued vacation pay......................... 24,899 26,354
Accrued taxes................................ 2,809 6,354
Interest payable - other..................... 20,404 20,492
Interest payable - affiliate................. 98 271
-------- --------
$543,206 $502,465
======== ========

Other current liabilities:
Advance billings and customer deposits....... $ 59,376 $ 68,055
Deferred income taxes........................ 8,925 ---
-------- --------
$ 68,301 $ 68,055
======== ========
<CAPTION>

YEARS ENDED DECEMBER 31
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS:
Cash paid during the year for:
Income taxes, net of amounts refunded........ $191,463 $188,613 $216,174
Interest, net of amounts capitalized......... 64,571 59,630 65,841

STATEMENTS OF OPERATIONS AND
REINVESTED EARNINGS:
Interest expense incurred,
net of amounts capitalized................... 62,907 75,316 66,782
Capitalized interest.......................... 5,334 7,386 2,845
Advertising expense........................... 14,211 13,248 11,514
</TABLE>

Interest paid during the year includes $1,638,000 in 1996, $4,764,000 in 1995
and $1,780,000 in 1994 related to short-term financing services provided by Bell
Atlantic Network Funding Corporation (see Note 7).

Advertising expense includes $11,507,000, $10,411,000 and $9,157,000 in 1996,
1995 and 1994, respectively, allocated to the Company by Bell Atlantic Network
Services, Inc. (NSI).

At December 31, 1996 and 1995, $34,372,000 and $12,280,000, respectively, of
negative cash was classified as accounts payable.

F-16
<PAGE>

Bell Atlantic - Virginia, Inc.

13. TRANSACTIONS WITH AFFILIATES

The financial statements include transactions with NSI, Bell Atlantic Network
Funding Corporation (BANFC), Bell Atlantic, and various other affiliates.

The Company has contractual arrangements with NSI for the provision of
various centralized services. These services are divided into two broad
categories. The first category is comprised of network related services which
generally benefit only Bell Atlantic's operating telephone subsidiaries. These
services include administration, marketing, product advertising, sales,
information systems, network technology planning, labor relations, and staff
support for various network operations. The second category is comprised of
overhead and support services which generally benefit all subsidiaries of Bell
Atlantic. Such services include corporate governance and staff support in
finance, external affairs, legal and corporate secretary, media relations,
employee communications, corporate advertising, human resources, and treasury.
The Company's allocated share of NSI costs also includes costs for technical and
support services billed by Bell Communications Research, Inc. (Bellcore),
another affiliated company owned jointly by the seven regional holding
companies. In November 1996, Bell Atlantic and other Bellcore owners entered
into an agreement to sell their jointly owned investment in Bellcore. The
transaction is subject to regulatory approvals, and is expected to be completed
near the end of 1997. After the sale is completed, the Company will continue to
contract with Bellcore for technical and support services.

The Company recognizes interest expense and income in connection with
contractual arrangements with BANFC to provide short-term financing, investing
and cash management services to the Company (see Note 7).

Operating revenues include obligations to affiliates in connection with an
interstate revenue sharing arrangement with Bell Atlantic's operating telephone
subsidiaries. Other operating revenues and expenses include miscellaneous items
of income and expense resulting from transactions with other affiliates,
primarily rental of facilities and equipment. The Company also paid cash
dividends to its parent company, Bell Atlantic.

Transactions with affiliates are summarized as follows:
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues:
Interstate revenue sharing to
affiliates............................... $(25,539) $(19,994) $(13,888)
Other revenue from affiliates............. 29,530 21,812 15,244
-------- -------- --------
3,991 1,818 1,356
-------- -------- --------

Operating expenses:
NSI - network............................. 276,752 216,137 156,542
NSI - other............................... 138,922 123,332 135,607
Bellcore.................................. 17,599 16,783 15,870
Other..................................... 84,721 66,311 66,807
-------- -------- --------
517,994 422,563 374,826
-------- -------- --------

Interest income from BANFC................. 506 --- 37

Interest expense to BANFC.................. 1,464 5,688 1,888

Dividends paid to Bell Atlantic............ 288,166 259,260 239,216
</TABLE>

Outstanding balances with affiliates are reported on the Balance Sheets at
December 31, 1996 and 1995 as Accounts receivable - affiliates, Note payable to
affiliate, and Accounts payable and accrued liabilities - affiliates.

On February 3, 1997, the Company declared and paid a dividend in the amount
of $45,200,000 to Bell Atlantic.

F-17
<PAGE>

Bell Atlantic - Virginia, Inc.

14. REGULATORY MATTERS

The communications services of the Company are subject to regulation by the
Virginia State Corporation Commission (SCC) with respect to intrastate rates and
services and other matters.

With respect to the 1992 review period, the SCC staff issued its report in
January 1996 and presented alternative treatment for two issues concerning
expenses to be recognized in 1992. Following consideration of all comments, the
SCC modified its staff's treatment of these issues and ordered the Company on
June 11, 1996 to refund to customers $10,200,000 plus interest for the 1992
review period. The Company completed the refund to customers during the fourth
quarter of 1996.

15. QUARTERLY FINANCIAL INFORMATION (unaudited)

<TABLE>
<CAPTION>
INCOME BEFORE
CUMULATIVE
EFFECT OF CHANGE
OPERATING OPERATING IN ACCOUNTING NET
QUARTER ENDED REVENUES INCOME PRINCIPLE INCOME
- -------------------- ---------- --------- ---------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1996:
March 31....... $ 558,577 $170,089 $ 94,946 $111,369
June 30........ 517,856 132,522 72,847 72,847
September 30... 545,598 135,505 74,256 74,256
December 31.... 534,447 127,114 68,655 68,655
---------- -------- -------- --------
Total.......... $2,156,478 $565,230 $310,704 $327,127
========== ======== ======== ========

1995:
March 31....... $ 485,957 $140,123 $ 75,597 $ 75,597
June 30........ 499,137 142,519 76,540 76,540
September 30... 499,278 127,112 68,025 68,025
December 31.... 500,161 105,627 52,355 52,355
---------- -------- -------- --------
Total.......... $1,984,533 $515,381 $272,517 $272,517
========== ======== ======== ========

</TABLE>

Results of operations for the first three quarters of 1996 have been restated
for the effect of a change in the method of accounting for directory publishing
revenues and expenses (see Note 3).

16. SUBSEQUENT EVENT - DIRECTORY PUBLISHING ACTIVITIES

On January 1, 1997, the Company transferred, at net book value without gain
or loss, certain assets and liabilities associated with its directory publishing
activities to a newly formed, wholly owned subsidiary. The stock of the
subsidiary was immediately distributed to Bell Atlantic. The transfer of such
assets and liabilities was completed as part of Bell Atlantic and the Company's
response to the requirements of the Telecommunications of Act of 1996, which
prohibits the Company from engaging in electronic publishing or joint sales and
marketing of electronic products.

F-18
<PAGE>

Bell Atlantic - Virginia, Inc.

the years ended December 31, 1996, 1995 and 1994, respectively. The Company does
not separately identify indirect expenses attributable to the directory
publishing activities, including expenses related to billing and data management
and processing services, legal, external affairs, depreciation, interest expense
and any corresponding tax expense.

F-19
<PAGE>

Bell Atlantic - Virginia, Inc.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1996, 1995 and 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING TO ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES NOTE(a) NOTE(b) OF PERIOD
- ----------- ---------- -------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>

Allowance for Uncollectible
Accounts Receivable:

Year 1996............... $19,072 $21,776 $33,434 $43,504 $30,778

Year 1995............... $15,031 $17,982 $20,995 $34,936 $19,072

Year 1994............... $16,537 $15,541 $20,068 $37,115 $15,031

</TABLE>

- ------------------------------------------

(a) (i) Amounts previously written off which were credited directly to this
account when recovered; and (ii) 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.

F-20
<PAGE>

EXHIBITS

FILED WITH ANNUAL REPORT FORM 10-K

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

Bell Atlantic - Virginia, Inc.

COMMISSION FILE NUMBER 1-6964
<PAGE>

Form 10-K for 1996
File No. 1-6964
Page 1 of 1

EXHIBIT INDEX

Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.

Exhibit Number (Referenced to Item 601 of Regulation S-K)
- ---------------------------------------------------------

3a Certificate of Incorporation of the registrant, as amended July 28,
1977. (Exhibit 3a to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1985, File No. 1-6964.)

3a(i) Certificate of Amendment to the registrant's Certificate of
Incorporation, as amended August 24, 1990. (Exhibit 3a(i) to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 1-6964.)

3a(ii) Certificate of Amendment to the registrant's Certificate of
Incorporation, adopted December 31, 1993 and filed January 13,
1994. (Exhibit 3a(ii) to the registrant's Annual Report on Form
10-K for the year ended December 31, 1993, File No. 1-6964.)

3b By-Laws of the registrant, as amended December 31, 1996.

3b(i) Consent of Sole Stockholder of Bell Atlantic - Virginia, Inc.,
dated December 31, 1996.

4 No instrument which defines the rights of holders of long-term debt of
the registrant is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, the registrant 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
Corporation, and the Bell Atlantic Corporation telephone subsidiaries,
and certain other parties, dated as of November 1, 1983. (Exhibit 10a
to Bell Atlantic Corporation Annual Report on Form 10-K for the year
ended December 31, 1993, File No. 1-8606.)

10b Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7, 1983.
(Exhibit 10b to Bell Atlantic Corporation Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8606.)

18 Letter regarding change in accounting principle.

23 Consent of Independent Accountants.

27 Financial Data Schedule.

<PAGE>

Exhibit 3b

BELL ATLANTIC - VIRGINIA, INC.
BY-LAWS
As Amended December 31, 1996
----------------------------

ARTICLE I

SHAREHOLDERS' MEETINGS
----------------------

Section 1-a Place of Meetings. All meetings of the shareholders shall
-----------------------------
be held at the principal office of the corporation in the City of Richmond or at
such other place, within or without the Commonwealth of Virginia, as the Board
of Directors or shareholders may from time to time determine.

Section 1-b Annual Meeting. An annual meeting of the shareholders
--------------------------
shall be held in April of each year on a business day and at an hour to be fixed
by the President and set forth in the notice of the meeting, for the election of
Directors and the transaction of such other business as may properly be brought
before the meeting.

Section 1-c Special Meetings. Special meetings of the shareholders
----------------------------
may be called at any time by the Board of Directors or the President.

Section 1-d Notice of Meetings. Written notice of every meeting of
------------------------------
the shareholders shall be given by or at the direction of the person or persons
authorized to call the meeting, to each shareholder of record entitled to vote
at the meeting, not less than ten (10) nor more than sixty (60) days prior to
the date named for the meeting, unless a greater period of notice is required by
law in a particular case, by delivery of or by mailing such notice to each
shareholder addressed to such shareholder at such shareholder's address
appearing on the books of the corporation for the purpose of notice. Such
notice shall specify the place, day and hour of the meeting, and shall state the
nature of the business to be transacted if, and to the extent, required by law.

Section 1-e Quorum. A majority of the votes entitled to be cast by
------------------
the shareholders on a matter shall constitute a quorum with respect to the
matter, except as otherwise provided by statute or in the Articles of
Incorporation.

Section 1-f Shareholders Entitled to Vote. Unless the Articles of
-----------------------------------------
Incorporation otherwise provide, each outstanding share of stock, regardless of
class, is entitled to one vote on each matter submitted to a vote at a meeting
of shareholders.
<PAGE>

Section 1-g Voting. When a quorum exists at any meeting and unless
------------------
otherwise provided by law, the vote of a plurality of the votes cast, in person
or by proxy, shall be sufficient to elect Directors and to pass any measure.

Section 1-h Informal Action. Except as may be otherwise provided in
---------------------------
the Articles of Incorporation, any action which could be taken at a meeting of
the shareholders may be taken without a meeting, if a consent in writing,
setting forth the action so taken, is signed by all of the shareholders who
would be entitled to vote at a meeting for such purpose and is filed with the
Secretary of the corporation.

ARTICLE II

DIRECTORS
---------

Section 2-a Number and Term of Office. All corporate powers shall be
-------------------------------------
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, the Board of Directors. The Board
of Directors shall consist of not less than three (3) nor more than ten (10)
Directors, the exact number within such limits to be determined from time to
time by the Board of Directors. Directors shall be natural persons of full age.
At each annual meeting the Directors shall be elected by the shareholders to
serve until their respective successors shall be elected and shall qualify.

Section 2-b Place of Meetings. The meetings of the Board of Directors
-----------------------------
may be held at such place, within or without the Commonwealth of Virginia, as a
majority of the Directors may, from time to time, by resolution prescribe, or as
may be designated in the notice or waiver of notice of a particular meeting. In
the absence of specification, such meetings shall be held at the registered
office of the corporation.

Section 2-c Time of Meetings. The first meeting of each newly elected
----------------------------
Board of Directors shall be the regularly scheduled meeting of the Board of
Directors next following the annual meeting of the shareholders, unless
otherwise provided in the notice of the meeting. Such meeting shall be for the
purpose of organization, the election of officers and the transaction of other
business.

Regular meetings of the Board of Directors may be held at such times
as the Board of Directors may by resolution determine. Unless otherwise
specified by resolution of the Board of Directors, if any day fixed for a
regular meeting shall be a legal holiday, then the meeting shall be held at the
same hour and place on the immediately preceding business day which is not a
legal holiday.
<PAGE>

Special meetings of the Board of Directors may be called at any time
by the President, and shall be called upon the written request of any two or
more Directors stating the purpose or purposes for which it is to be called.
Upon receipt of such request it shall be the duty of the Secretary promptly to
issue the call for such meeting.

Section 2-d Notice of Meetings. Written notice of every meeting of
------------------------------
the Board of Directors shall be given personally or by mailing the same at least
forty-eight (48) hours before the time named for such meeting, except that
notice of a special meeting of the Board of Directors may instead be given by
telegraphing or telephoning the same, at least twenty-four (24) hours before the
time named for such meeting. Such notice shall specify the place, day and hour
of the meeting, and shall also state the nature of the business to be transacted
at a special meeting or if otherwise required by law.

Section 2-e Quorum. At all meetings of the Board of Directors a
------------------
majority of the Directors in office shall constitute a quorum for the
transaction of business, and the acts of a majority of the Directors present at
a meeting at which a quorum is present shall be the acts of the Board of
Directors, except as may otherwise be specifically provided by statute.

Section 2-f Vacancies. Vacancies in the Board of Directors, other
---------------------
than one caused by an increase in the number of Directors, may be filled by a
majority of the remaining members of the Board of Directors though less than a
quorum, and each person so elected shall be a Director until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal. Any Director may resign at any time upon written notice
to the corporation.

Section 2-g Removal of Directors. Any Director, or the entire Board
--------------------------------
of Directors, may be removed with or without cause by a majority of the votes
entitled to be cast by shareholders for the election of Directors.

Section 2-h General Powers. The Board of Directors may exercise all
--------------------------
such powers of the corporation and do all such lawful acts and things as are not
by statute, or by the Articles of Incorporation, directed or required to be
exercised and done by the shareholders. The Board of Directors may adopt and
enforce such rules and regulations, not inconsistent herewith, as they may deem
necessary for the conduct of the corporation's business; the Board of Directors
may, from time to time, designate one of its members to serve as Chairman, with
such duties as the Board of Directors shall specify. The Chairman or, if the
position is vacant, the President, shall preside at all Board Meetings.
<PAGE>

Section 2-i Board Committees. The Board of Directors may, by
----------------------------
resolution adopted by a majority of the whole Board of Directors, designate an
Executive Committee, which shall consist of two or more Directors, and the
Board of Directors may, by resolution adopted by a majority of the whole Board
of Directors, designate from time to time such other Committees consisting of
two or more Directors, as it shall deem necessary or appropriate, each to have
such powers, in addition to those set forth in these By-Laws, as the Board of
Directors by resolution shall authorize. Vacancies in the membership of any
Committee shall be filled by the Board of Directors at a regular or special
meeting of the Board of Directors. The Board of Directors may designate one or
more Directors as alternate members of the Executive or other Committee (to
serve in the order named if more than one) who may replace any absent or
disqualified member at any meeting of such Committee. If the Board of Directors
has not made such designation, or if none of the alternate members designated is
available, in the absence or disqualification of any member of the Executive or
other Committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not the member or members constitute a
quorum, may unanimously appoint another Director to act at the meeting in the
place of any such absent or disqualified member. The Executive or other
Committee shall keep regular minutes of its proceedings and shall report actions
taken by it to the next meeting of the Board of Directors.

Section 2-j Specific Powers of Executive and Other Committees. The
-------------------------------------------------------------
President, if a Director, shall be a member of the Executive Committee. Except
as prohibited by law or granted to another Committee by resolution of the Board
of Directors, the Executive Committee shall have and exercise all the powers of
the Board of Directors provided that neither the Executive nor any other
Committee shall have the power to adopt, amend or repeal the By-Laws of the
corporation or to elect Directors. At any meeting of a Committee a majority of
such Committee shall constitute a quorum. Each Committee may fix the time and
place of its regular meetings, and after such time and place shall have been
fixed no notice of such regular meeting shall be necessary. Special meetings of
the Executive Committee may be called by the President whenever he or she shall
think proper, and the President shall call such meetings whenever requested, in
writing, by any two members of the Executive Committee. Special meetings of
other Committees may be called by the respective chairmen. Notice of the time
and place of every special meeting of a Committee shall be given by the
Secretary to each member of the Committee in the manner prescribed in Section
2-d for special meetings of the whole Board of Directors.

Section 2-k Informal Action. Any action which could be taken at a
---------------------------
meeting of the Board of Directors or the Executive or other Board Committee,
may be taken without a meeting, if consent in writing setting forth the action
so taken is signed by all of the Directors or the members of the Executive or
other Committee, as the case may be, and is filed by the Secretary of the
corporation with the minutes of the proceedings of the Board of Directors or the
appropriate Committee.

Section 2-1 Emergency Authority. The Board of Directors may adopt
-------------------------------
emergency succession rules which make advance provision for the continuity and
authority of the corporation's management in the event of a major catastrophe,
such as nuclear attack, or other disaster resulting in the loss or
unavailability of members of the Board of Directors, whether by death,
incapacity, isolation or otherwise, or in loss or unavailability of officers of
the corporation, and in the event of
<PAGE>

such a major catastrophe or disaster, the terms of any such rules shall have the
same effect as if included in these By-Laws and shall supersede the terms of
these By-Laws and any resolutions of the Board of Directors, to the extent that
they may be inconsistent therewith, until the Board of Directors can be convened
pursuant to such rules.

Section 2-m Telecommunications. One or more Directors may participate
------------------------------
in a meeting of the Board of directors or a committee thereof, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting.

ARTICLE III

OFFICERS
--------

Section 3-a Number, Qualifications and Designation. The officers of
--------------------------------------------------
the corporation shall be a President, who shall be the chief executive officer,
a Secretary, a Treasurer and such other officers (who may also be officers of an
affiliated company) as may be required by law or may from time to time be
elected by the Board of Directors and whose powers and duties shall be as
prescribed by these By-Laws or as from time to time prescribed by the Board of
Directors. One person may hold more than one office except that the same person
shall not hold the offices of President and Secretary.

Section 3-b Election and Term of Office. The officers of the
---------------------------------------
Corporation, except subordinate officers appointed pursuant to Section 3-c
hereof, shall be elected by the Board of Directors for such terms as may be
specified by the Board of Directors, and each such officer shall hold such
officer until such officer's successor shall have been elected and qualified, or
until such officer's earlier death, resignation or removal. The Board of
Directors shall designate a principal financial officer and a principal
accounting officer. Any officer may resign at any time upon written notice to
the corporation and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the office of an
officer elected by the Board of Directors becomes vacant for any reason, the
vacancy may be filled by the President on an interim basis until the next
meeting of the Board of Directors, at which time the position shall be filled by
the Board of Directors.

Section 3-c Subordinate Officers, Employees and Agents. The Board of
------------------------------------------------------
Directors may from time to time appoint such subordinate officers, employees or
agents (who may also be officers or employees of an affiliated company) as it
deems necessary, who shall hold such positions for such terms and shall exercise
such powers and perform such duties as are provided in these By-Laws, or as the
Board of Directors may from time to time determine. The Board of Directors may
delegate to any officer or Committee of the Board of Directors the power to
appoint or remove subordinate officers and to retain, appoint or remove
employees or other agents, and to prescribe the authority and duties, not
inconsistent with these By-Laws of such subordinate officers, employees or other
agents. In the absence of any such specific delegation, the President shall
have
<PAGE>

the authority to appoint subordinate officers, employees or agents. The
President shall have the authority to approve giving one or more subordinate
officers the title of Vice President, if deemed appropriate under the
circumstances.

Section 3-d Removal of Officers, Agents or Employees. Any officer,
----------------------------------------------------
subordinate officer, agent or employee of the corporation may be removed, of his
or her authority revoked, by resolution of the Board of Directors whenever in
its judgment the best interest of the corporation will be served thereby. Any
subordinate officer, agent or employee likewise may be removed by the President
or subject to the President's supervision, by the person having authority with
respect to the appointment of such subordinate officer, agent or employee.

Section 3-e President. The President shall have such authority and
---------------------
perform such duties as usually appertain to that office in business
corporations, and shall perform such other duties as shall from time to time be
assigned to him or her by the Board of Directors.

Section 3-f Secretary. The Secretary, or an Assistant Secretary,
---------------------
shall attend all meetings of the shareholders and of the Board of Directors and
shall record the proceedings of the shareholders and Directors in a book or
books to be kept for that purpose; see that notices are given and records and
reports properly kept and filed by the corporation as required by law; be the
custodian of the seal of the corporation and attest or cause to be attested
documents on behalf of the corporation under its seal; and in general, perform
all duties incident to the office of Secretary and such other duties as may from
time to time be assigned to him or her by the Board of Directors or President.
The Secretary shall appoint one or more Assistant Secretaries with such powers
and duties as the Board of Directors, the President or the Secretary shall from
time to time determine.

Section 3-g Treasurer. The Treasurer, or an Assistant Treasurer,
---------------------
shall have or provide for the custody of the funds and other property of the
corporation and shall keep or cause to be kept full and accurate accounts,
receipts, and disbursements in books belonging to the corporation; collect and
receive, or in any manner due to or received by the corporation; deposit all
funds in his or her custody as Treasurer in such banks or other places of
deposit as may be designated from time to time by the Board of Directors or
pursuant to its authority; whenever so required by the Board of Directors,
render an account showing his or her transactions as Treasurer and the financial
condition of the corporation; and, in general, discharge such other duties as
may from time to time be assigned to him or her by the Board of Directors or the
President. The Treasurer shall appoint one or more Assistant Treasurers with
such powers and duties as the Board of Directors, the President or the Treasurer
shall from time to time determine.

Section 3-h Controller. The Controller, if one shall have been
----------------------
elected or appointed, shall have custody and charge of all books of account,
except those required by the Treasurer in keeping records of the work of the
Treasurer's office, and shall have supervision over subsidiary accounting
records, wherever located. The Controller shall have access to all books of
account, including the Treasurer's records, for purposes of audit and for
obtaining information necessary to verify or complete the records of the
Controller's office. Unless otherwise provided by the Board of Directors, the
Controller shall certify to authorization and approvals pertaining to vouchers
and
<PAGE>

shall perform such other duties as may be assigned by the Board of Directors or
the President. With the approval of the President, the Controller may designate
one or more person to perform all of the Controller's duties as may be found
necessary to delegate in the ordinary course of the business or in the event of
the absence or disability of the Controller.

Section 3-i Delegation of Duties. The President may delegate duties
--------------------------------
to other officers, subordinate officers, employees or agents and may similarly
provide for the redelegation thereof.

Section 3-j Voting of Stock. Unless otherwise provided by the Board
---------------------------
of Directors, the President or the Treasurer shall have full power and
authority, on behalf of the corporation, to attend, and to act and vote, in
person or by proxy, at any meeting of the shareholders of any company in which
the corporation may hold stock, and at any such meeting shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock which, as the owner thereof the corporation might have possessed and
exercised if present. The Board of Directors may from time to time confer like
powers upon any other person or persons.

Section 3-k Endorsement of Securities for Transfer. The President and
--------------------------------------------------
the Treasurer shall each have power to endorse and deliver for sale, assignment
or transfer certificates of stock, bonds or other securities, registered in the
name of or belonging to the corporation, whether issued by this corporation or
by any other corporation, government, state or municipality or agency thereof.

ARTICLE IV

CERTIFICATES FOR STOCK, TRANSFER, ETC.
--------------------------------------

Section 4-a Issuance. Each shareholder shall be entitled to a
--------------------
certificate or certificates, under the seal of the corporation, showing the
number of shares to which the shareholder is entitled. Such certificates shall
be signed by the President and by the Treasurer or an Assistant Treasurer.

Section 4-b Transfer. Stock shall be transferable on the books of the
--------------------
corporation only by the holder thereof in person, or by attorney, upon surrender
of the outstanding certificate; provided, however, that in the case of a lost,
stolen or destroyed certificate, a new certificate may be issued in place
thereof upon such terms as the Board of Directors may prescribe.

Section 4-c Record Holder of Shares; Record Date. The corporation
------------------------------------------------
shall be entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends and to vote as such owner and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person except as otherwise
provided by law. In order that the corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders, to receive any
dividend or other distribution, or to exercise any other right to which a
shareholder is entitled, the Board of Directors may fix in
<PAGE>

advance a record date in accordance with the provisions specified by statute. If
no record date is fixed, then the record date shall be determined in accordance
with the applicable statutory provisions.

ARTICLE V

INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------

Section 5-a Indemnification of Directors and Officers.
-----------------------------------------------------
Each person made or threatened to be made a party to an action, suit or
proceeding, civil or criminal, by reason of the fact that he or she, his or her
testator or intestate is or was a Director or officer of the corporation shall
be indemnified by the Company against liabilities, costs and expenses of every
kind actually and reasonably incurred by him or her as a result of such action,
suit or proceeding, or any threat thereof or any appeal thereon, but in each
case only if and to the extent permissible under applicable law. The foregoing
indemnity shall not be exclusive of other rights to which such person may be
entitled.

Section 5-b Advancing Expenses. Reasonable expenses incurred by a
------------------------------
Director or officer who is a party to a proceeding may be paid or reimbursed by
the corporation in advance of the final disposition of the proceeding, provided
the statutory conditions precedent are met.

Section 5-c Insurance. The corporation may purchase and maintain
----------------------
insurance on behalf of any person for whom indemnity would be provided pursuant
to Section 5-a, above, in the capacity therein set forth, against liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
provisions of this article or otherwise.

Section 5-d Limitation of Liability. An officer or Director shall
-----------------------------------
have no liability for damages in any proceeding brought by a shareholder in the
right of the Company or brought by or on behalf of shareholders of the Company.

The liability of an officer or Director shall not be eliminated as
provided in this Section 5-d if the officer or Director engaged in willful
misconduct or a knowing violation of the criminal law or any federal or state
securities law, including without limitation, any claim of unlawful insider
trading or manipulation of the market for any security.

No such elimination of liability pursuant to this Section 5-d shall be
effective with respect to any act or omission occurring before the date of
adoption of this Section 5-d.
<PAGE>

ARTICLE VI

MISCELLANEOUS
-------------

Section 6-a Waiver of Notice. Except as otherwise provided by law or
----------------------------
the Articles of Incorporation, any notice required to be given under the
provisions of the By-Laws, or otherwise, may be waived in writing by the
shareholder, Director or officer to whom such notice is required to be given,
either before or after the meeting or action of which notice is waived.
Attendance of any shareholder, in person or by proxy, and of any Director of
officer at any meeting shall constitute a waiver of notice of such meeting
except where a person entitled to notice attends the meeting for the express
purpose of objecting to the transaction of any business because the meeting was
not lawfully called or convened. A shareholder or Director who signs a written
consent, in lieu of a meeting, as provided for in these By-Laws, shall be deemed
to have waived any notice of such meeting.

Section 6-b Checks, Notes, Etc.. All checks, notes and evidence of
-------------------------------
indebtedness of the corporation shall be signed by such person or persons as the
Board of Directors may from time to time designate or the Board may adopt a
single symbol to be affixed to such documents. In either case, the signature of
such person or persons, or a symbol, if such is adopted, and any facsimile or
facsimiles thereof, shall be an "authorized signature" of the corporation and
shall be affixed to such checks, notes, and evidences of indebtedness in such
manner, and by such persons, as the Board of Directors shall authorize.

Section 6-c Corporate Seal. The corporate seal shall have inscribed
--------------------------
thereon the name of the corporation, with such device or devices as the Board of
Directors may determine. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.

Section 6-d Amendment of By-Laws. The By-Laws may be adopted, amended
--------------------------------
or repealed by the Board of Directors at any meeting, except that Sections 2-a
and 5-d, above, shall be amended or repealed only by the shareholders.

<PAGE>

Exhibit 3b(i)

CONSENT OF SOLE SHAREHOLDER
OF
BELL ATLANTIC - VIRGINIA, INC.

The undersigned, which holds all of the outstanding stock of Bell
Atlantic - Virginia, Inc. (the "Corporation"), does hereby consent to and
adopt the following resolution pursuant to Section 13.1-657 of the Virginia
Stock Corporation Act:

RESOLVED, that the By-Laws of the Corporation be, and they
hereby are, amended and restated in their entirety as set forth
on Exhibit A attached hereto and made a part hereof.

IN WITNESS WHEREOF, the undersigned sole shareholder of Bell
Atlantic - Virginia, Inc. has executed this consent as of the 31st day of
December, 1996.

Bell Atlantic Corporation

By_____________________________
Raymond W. Smith
Chairman of the Board and
Chief Executive Officer

<PAGE>

Exhibit 18

December 31, 1996

Bell Atlantic-Virginia, Inc.
600 East Main Street
P.O. Box 27241
Richmond, VA 23219

We are providing this letter to you for inclusion as an exhibit to your Form
10-K filing pursuant to Item 601 of Regulation S-K.

We have read management's justification for the change in accounting from the
"amortization" revenue recognition method to the "point of publication" method
contained in the Company's Form 10-K for the year ended December 31, 1996. Based
on our reading of the data and discussions with Company officials of the
business judgment and business planning factors relating to the change, we
believe management's justification is reasonable. Accordingly, we concur that
the newly adopted accounting principle described above is preferable in the
Company's circumstances to the method previously applied.

/s/ Coopers & Lybrand L.L.P.

<PAGE>

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Bell Atlantic - Virginia, Inc. on Form S-3 (File No. 33-65152) of our report
dated February 5, 1997, which includes an explanatory paragraph stating that the
Company changed its method of accounting for directory publishing revenues and
expenses in 1996 and discontinued accounting for its operations in accordance
with Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation," effective August 1, 1994, on our audits
of the financial statements and financial statement schedule of the Company as
of December 31, 1996 and December 31, 1995, and for each of the three years in
the period ended December 31, 1996, which report is included in this Annual
Report on Form 10-K.

/s/ COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 25, 1997

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE BALANCE
SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 32,651
<SECURITIES> 0
<RECEIVABLES> 495,630
<ALLOWANCES> 30,778
<INVENTORY> 9,927
<CURRENT-ASSETS> 584,268
<PP&E> 5,636,757
<DEPRECIATION> 2,970,105
<TOTAL-ASSETS> 3,296,610
<CURRENT-LIABILITIES> 665,190
<BONDS> 945,987
0
0
<COMMON> 873,685
<OTHER-SE> 208,348
<TOTAL-LIABILITY-AND-EQUITY> 3,296,610
<SALES> 0
<TOTAL-REVENUES> 2,156,478
<CGS> 0
<TOTAL-COSTS> 1,591,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,907
<INCOME-PRETAX> 499,760
<INCOME-TAX> 189,056
<INCOME-CONTINUING> 310,704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 16,423
<NET-INCOME> 327,127
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>