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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

Commission file number 333-92214

Cellco Partnership
(Exact name of registrant as specified in its charter)

     Registrant's telephone number: (908) 306-7000

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 Ö_   No__

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes__   No Ö_

Condensed Consolidated Statements of Operations and Comprehensive Income
Cellco Partnership (d/b/a Verizon Wireless)

See Notes to Unaudited Condensed Consolidated Financial Statements

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Condensed Consolidated Balance Sheets
Cellco Partnership (d/b/a Verizon Wireless)

See Notes to Unaudited Condensed Consolidated Financial Statements

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Condensed Consolidated Statements of Cash Flows
Cellco Partnership (d/b/a Verizon Wireless)

See Notes to Unaudited Condensed Consolidated Financial Statements

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Notes to Unaudited Condensed Consolidated Financial Statements
Cellco Partnership (d/b/a Verizon Wireless)

Cellco Partnership (the ‘‘Partnership’’), doing business as Verizon Wireless, is the nation’s leading provider of wireless communications in terms of the number of customers, network coverage, revenues and operating income. The Partnership provides wireless voice and data services and related equipment to consumers and business customers in its markets. The Partnership has the largest wireless network in the United States covering 49 of the 50 most populated metropolitan areas throughout the United States.

The accompanying unaudited interim financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules and regulations for interim reporting. These rules and regulations allow certain information required under accounting principles generally accepted in the United States of America to be condensed or omitted, provided that the interim financial statements, when read in conjunction with the Partnership’s annual audited consolidated financial statements included in the most recent Annual Report on Form 10-K for the year ended December 31, 2003, provide a fair presentation of the Partnership’s interim financial position, results of operations and cash flows. These interim financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items.

Certain reclassifications have been made to the 2003 condensed consolidated financial statements to conform to the current period presentation.

The Partnership treats wireless licenses as an indefinite life intangible asset under the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” The wireless licenses are not amortized but rather tested for impairment. The Partnership will reevaluate the useful life determination for wireless licenses at least annually to determine whether events and circumstances continue to support an indefinite useful life.

The changes in the carrying amount of wireless licenses are as follows:

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Other intangibles, net consist of the following:

In May 2003, the Partnership acquired 50 personal communications services licenses and related network assets from Northcoast Communications, L.L.C. (“Northcoast”) for approximately $762 million in cash, which included $12 million in working capital adjustments. The licenses provide the Partnership with additional growth capacity over large portions of the East Coast and Midwest. The total population covered by the licenses is approximately 47 million.

Other acquisitions in the six months ended June 30, 2004 and 2003 consisted of various individually immaterial wireless licenses and partnership interests.

All of the acquisitions of businesses included in these amounts were accounted for under the purchase method of accounting with results of operations included in the consolidated statements of operations from the date of acquisition. Had the acquisitions of businesses been consummated on January 1 of the year preceding the year of acquisition, the results of these acquired operations would not have had a significant impact on the Partnership’s consolidated results of operations for each of the periods presented.

The following table presents information about the Partnership’s acquisitions for the six months ended June 30, 2004 and 2003:

____________
(a) Purchase price includes cash, assumption of debt, as well as the fair value of assets exchanged, as applicable.

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The Partnership provides pension benefits to certain eligible employees hired before January 1, 2001 or to certain employees who were participants in a defined benefit pension plan formerly sponsored by legacy companies. These plans include a qualified pension plan, a nonqualified pension plan and a postretirement benefit plan.

Components of Net Periodic Benefit Cost:

Under the terms of an investment agreement entered into among the Partnership, Verizon Communications Inc. (“Verizon”) and Vodafone Group Plc (“Vodafone”) on April 3, 2000, Vodafone may require the Partnership to purchase up to an aggregate of $20 billion of Vodafone’s interest in the Partnership, at its then fair market value, with up to $10 billion redeemable during the 61-day period that opened on June 10 and closes on August 9 in 2004 and the remainder, not to exceed $10 billion in any one year, during the 61-day periods opening on June 10 and closing on August 9 in 2005, 2006 and/or 2007. Verizon has the right, exercisable at its sole discretion, to purchase all or a portion of this interest instead of the Partnership. However, even if Verizon exercises this right, Vodafone has the option to require the Partnership to purchase up to $7.5 billion of this interest redeemable during the 61-day periods opening on June 10 and closing on August 9 in 2005, 2006 and/or 2007 with cash or contributed debt. Accordingly, $20 billion of partners’ capital has been classified as redeemable on the accompanying condensed consolidated balance sheets.

The U.S. Wireless Alliance Agreement contains a provision, subject to specified limitations, that requires Vodafone and Verizon to indemnify the Partnership for certain contingencies, excluding PrimeCo Personal Communications L.P. contingencies, arising prior to the formation of Verizon Wireless.

The Partnership is subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, antitrust, partnership disputes, and claims involving the Partnership’s relations with resellers and agents. The Partnership is also defending lawsuits filed against the Partnership and other participants in the wireless industry alleging various adverse health effects as a result of wireless phone usage. Various consumer class action lawsuits allege that the Partnership breached contracts with consumers, violated certain state consumer protection laws and other statutes and defrauded customers through concealed or misleading billing practices. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against the Partnership and/or insurance coverage.

From time to time, the Partnership receives inquiries from state Attorneys General offices or other consumer-protection agencies seeking information about our advertising, consumer disclosures and/or billing practices. In March 2001, the Partnership and two other wireless carriers received a letter of inquiry on behalf of a multi-state group of Attorneys General, requesting information concerning the advertising and marketing of various products and services offered by the Partnership, as well as information concerning various billing practices. In July 2004, each of the wireless carriers entered into an Assurance of Voluntary Compliance with 32 states concluding the inquiry with respect to those 32 states. The Assurance requires each of the carriers to adopt certain advertising, sales and billing practices. The Partnership does not

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expect the settlement to have a material impact on the Partnership’s business practices, results of operations or financial condition.

All of the above matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the ultimate liability with respect to these matters at June 30, 2004 cannot be ascertained. The potential effect, if any, on the consolidated financial statements of the Partnership, in the period in which these matters are resolved, may be material.

In addition to the aforementioned matters, the Partnership is subject to various other legal actions and claims in the normal course of business. While the Partnership’s legal counsel cannot give assurance as to the outcome of each of these other matters, in management’s opinion, based on the advice of such legal counsel, the ultimate liability with respect to any of these actions, or all of them combined, will not materially affect the consolidated financial statements of the Partnership.

On July 1, 2004 the Partnership signed an agreement with Qwest Wireless, L.L.C. to purchase Qwest Wireless' spectrum licenses and wireless network assets for $418 million, increasing its capacity in key existing markets and expanding its network into new markets. The agreement includes spectrum licenses in 62 markets in 14 western and mid-western states, covering a population of 30.8 million people. Subject to Federal Communications Commission (“FCC”) approval and antitrust regulatory review, the transaction is expected to close in the fourth quarter of 2004 or early 2005.

On July 8, 2004 the Partnership announced that it had won the spectrum license for the New York metropolitan area auctioned by NextWave Telecom Inc. Under the terms of the purchase agreement, the Partnership will pay $930 million for the license. The license covers a population of 20.1 million people for the New York, New York Basic Trading Area, and will be used to expand the Partnership’s network capacity to meet customers’ growing demand for voice and data services. The transaction, subject to approval by the FCC, is expected to close by the end of 2004.

On July 13, 2004, the Partnership announced that it had signed a six-year agreement under which the Partnership expects to spend approximately $5 billion with Lucent Technologies Inc. (“Lucent”) to supply a wide variety of network equipment, software and services for the Partnership’s national next-generation voice and data network. Orders placed on and after April 1, 2004 will be counted toward the total commitment of the contract. This agreement includes the $525 million high-speed data network contract announced in March 2004.

The Partnership expects to make a distribution of approximately $1.8 billion to its partners in August 2004 for the six-month period ended June 30, 2004.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis should be read in conjunction with our consolidated financial statements for each of the three years ended December 31, 2003 and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations," all of which are contained in our Annual Report on Form 10-K (No. 333-92214).

See “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of factors that could cause our future results to differ from our historical results.

We are the leading wireless communications provider in the United States in terms of the number of customers, network coverage, revenues and operating income. We have the largest wireless network in the United States, covering 49 of the 50 most populated metropolitan areas throughout the United States. We believe our leadership position within the wireless industry will allow us to take advantage of increasing penetration and usage trends within the United States in the coming years. We provide wireless voice and data services and related equipment to consumers and business customers in our markets.

Our goal is to be the acknowledged market leader in providing wireless voice and data communication services in the U.S. Our focus is on providing a high-quality, differentiated service across a cost-effective digital network designed to meet the growing needs of our customers. To accomplish this goal, we will continue to implement the following key elements of our business strategy to differentiate our service:

• Provide the highest network quality through our code division multiple access (“CDMA”) 1XRTT technology and the deployment of a new CDMA-based network technology, Evolution Data Optimized (“EV-DO”), which will significantly increase data transmission rates.
  
• Profitably acquire, satisfy and retain our customers and increase the value of our service offerings to customers while achieving revenue and net income growth.
  
• Continue to expand our wireless data, messaging and multi-media offerings for both consumer and business customers and take advantage of the growing demand for wireless data services.
  
• Focus on operating margins and capital efficiency by driving down costs and leveraging our scale advantage.

In addition, there is substantial competition in the wireless telecommunications industry. We compete primarily against five other major wireless service providers. This number will be reduced to four other major wireless providers if and when the agreement by Cingular Wireless and AT&T Wireless to merge, announced on February 17, 2004, is consummated. Additionally, we expect to face increased competition from mobile virtual network operator resellers, who buy wireless service on a wholesale basis from facilities-based providers. We believe that the following are the most important competitive factors in our industry: network technology, quality and coverage; customer service; distribution; brand recognition and capital resources.

As a result of competition, we may encounter further market pressures to:

• respond to particular short-term, market-specific situations, for example, promotional service pricing or equipment offers;
  
• introduce new service offerings that are less profitable and restructure our service packages to offer more value;
  
• increase advertising spending; and/or
  
• increase our capital investment to ensure we retain our market leadership in service quality.

Such market pressures could cause us to experience lower revenues, margins and average revenue per user, as well as increased capital spending to ensure proper capacity levels.

The following items highlight selected elements of our results of operations and financial position in the second quarter of 2004 as they relate to our key business strategies:

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Customer growth: We ended the second quarter of 2004 with 40.4 million customers, an increase of 16.8% over the second quarter of 2003. We added more than 1.5 million net customers during the quarter while reducing our total churn to 1.45% . Retail postpaid customers comprised 92% of our total customer base as of June 30, 2004.

Revenue growth: Total revenue grew by 25% in the second quarter of 2004 compared to the second quarter of 2003, to $6.8 billion, driven by increased service revenue per customer and customer growth.

Capital expenditures: We invested $2.7 billion in our network in the first six months of 2004 in order to increase capacity on our network for usage demand and to facilitate the introduction of new products and services through new technologies such as EV-DO.

Cash flows: We generated approximately $4.4 billion of cash from operating activities during the first six months of 2004, an increase of more than $1 billion over the first six months of 2003. We used this cash not only to invest in our network through capital expenditures, but also to provide $1.4 billion in distributions to our owners.

The following discussion and analysis is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, the accounting for: allowance for uncollectible accounts receivable, unbilled revenue, fair values of financial instruments, depreciation and amortization, useful life and impairment of assets, accrued expenses, inventory reserves, equity in income (loss) of unconsolidated entities, employee benefits, income taxes, contingencies and allocation of purchase prices in connection with business combinations. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from those estimates.

We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Revenue Recognition

We recognize service revenue based upon access to the network (access revenue) and usage of the network (airtime/usage revenue), net of credits and adjustments for service discounts. We are required to make estimates for service revenue earned but not yet billed at the end of each reporting period. These estimates are based primarily upon historical minutes of use processed. Our revenue recognition policies are in accordance with the Securities and Exchange Commission's ("SEC") Staff Accounting Bulletin ("SAB") No. 101, ‘‘Revenue Recognition in Financial Statements," Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" and SAB No. 104, "Revenue Recognition."

Allowance for Doubtful Accounts

We maintain allowances for uncollectible accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We base our estimates on our historical write-off experience, net of recoveries and the aging of our accounts receivable balances.

Valuation of Inventory

We maintain estimated inventory valuation reserves for obsolete and slow moving inventory. We base our estimates on an analysis of inventory agings. Changes in technology may require us to provide additional reserves.

Depreciation Expense

When recording our depreciation expense associated with our network assets, we use estimated useful lives and the straight-line method of accounting. As a result of changes in our technology and industry conditions, we periodically evaluate the useful lives of our network assets. These evaluations could result in a change in our assets' useful lives in future periods.

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Intangible Assets

Our principal intangible assets are licenses, including licenses associated with equity method investments, which provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. Our wireless licenses have been treated as an indefinite life intangible asset under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," and are no longer amortized but are tested for impairment at least annually or more often if events or circumstances warrant.

When testing the carrying value of the wireless licenses for impairment, we determine the fair value of the aggregated wireless licenses by subtracting from enterprise discounted cash flows (net of debt) the fair value of all of the other net tangible and intangible assets, including previously unrecognized intangible assets. In addition, the fair value of the aggregated wireless licenses is then subjected to a reasonableness analysis using public information of comparable wireless carriers. If the fair value of the aggregated wireless licenses as determined above is less than the aggregated carrying amount of the licenses, an impairment is recognized.

Valuation of Long-Lived Assets

Long-lived assets, including property, plant and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

We ended the second quarter of 2004 with 40.4 million customers, compared to 34.6 million customers at the end of the second quarter of 2003, an increase of 5.8 million net new customers, or 16.8% . All of these new customers were the result of internal growth. The overall composition of our customer base as of June 30, 2004 was 92% retail postpaid, 4% retail prepaid and 4% resellers, compared to 90% retail postpaid, 6% retail prepaid and 4% resellers as of June 30, 2003.

Approximately 38.4 million, or 95.0% of our customers as of June 30, 2004, subscribed to CDMA digital service, compared to 31.5 million, or 91.0% as of June 30, 2003.

Approximately 1.5 million customers were added through internal growth during the second quarter of 2004, compared to 1.3 million during the second quarter of 2003. Retail net additions, which accounted for approximately 95% of the total customers added during the second quarter of 2004, increased more than 20%, compared to the second quarter of 2003.

Our total average monthly churn rate, the rate at which customers disconnect service, decreased to 1.45% in the second quarter of 2004 and decreased to 1.52% for the six months ended June 30, 2004, compared to 1.70% in the second quarter of 2003 and 1.89% for the six months ended June 30, 2003, as a result of decreased churn in both our retail and reseller customer bases.

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Total operating revenue grew by $1,370 million, or 25.0%, in the second quarter of 2004 and $2,446 million, or 23.2%, for the six months ended June 30, 2004, compared to similar periods in 2003.

Service revenue. Service revenue grew by $1,032 million, or 20.6%, in the second quarter of 2004 and $1,873 million, or 19.4%, for the six months ended June 30, 2004, compared to similar periods in 2003. This increase was primarily due to the 16.8% increase in customers as well as an increase in average service revenue per customer for the three and six months ended June 30, 2004 compared to similar periods in 2003. In addition, data revenue grew by $168 million, or 193%, in the second quarter of 2004 and $296 million, or 186%, for the six months ended June 30, 2004, compared to similar periods in 2003, as a result of increased use of our messaging and other data services. Data revenue accounted for 3.9% of service revenue for the six months ended June 30, 2004, compared to 1.6% for the six months ended June 30, 2003.

Average service revenue per customer per month increased 3.2% to $50.80 for the second quarter of 2004 and increased 2.5% to $49.44 for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were primarily due to the higher proportion of customers choosing higher access price plans, including our America's Choice price plans, as well as an increase in data revenue per customer, partially offset by decreased roaming revenue as a result of rate reductions with third-party carriers and by decreased long distance revenue due to the continued increase in the popularity of bundled pricing plans.

Equipment and other revenue. Equipment and other revenue grew by $338 million, or 72.5%, in the second quarter of 2004 and $573 million, or 64.2%, for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were primarily attributable to an increase in equipment revenue, caused by an increase in handsets sold (including higher-priced color and camera phones) of 36% in the second quarter of 2004 and 29% for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were in turn driven by an increase in gross retail customer additions of 7.7% for the second quarter of 2004 and 8.1% for the six months ended June 30, 2004, compared to similar periods in 2003, and to increased equipment upgrades. Revenue associated with certain regulatory fees, primarily the Universal Service Fund ("USF"), increased by $14 million in the second quarter of 2004 and $53 million for the six months ended June 30, 2004, compared to similar periods in 2003. The increase in the associated payments of these fees is reflected in selling, general and administrative expense.

Cost of service. Cost of service grew by $78 million, or 9.7%, for the second quarter of 2004 and $177 million, or 11.7%, for the six months ended June 30, 2004, compared to similar periods in 2003. The increase was primarily due to increased network costs caused by increased network minutes of use of approximately 36% for the second quarter of 2004 and 40% for the six months ended June 30, 2004, compared to similar periods in 2003, partially offset by lower roaming, local interconnection and long distance rates. Service margins (service revenue less cost of service, divided by service revenue) were approximately 86% for the second quarter of 2004 and 85% for the six months ended June 30, 2004, compared to approximately 84% for both periods in 2003.

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Cost of equipment. Cost of equipment grew by $209 million, or 27.3%, in the second quarter of 2004 and $329 million, or 22.0%, for the six months ended June 30, 2004, compared to similar periods in 2003. The increases were primarily attributed to an increase in handsets sold, driven by higher gross retail activations and equipment upgrades for the second quarter of 2004 and the six months ended June 30, 2004, compared to similar periods in 2003. The increases in handsets sold and equipment upgrades caused negative equipment margins (equipment revenue less equipment cost) to increase for the second quarter of 2004 and the six months ended June 30, 2004, compared to similar periods in 2003.

Selling, general and administrative expenses. Selling, general and administrative expenses grew by $302 million, or 15.3%, in the second quarter of 2004 and $683 million, or 17.8%, for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were primarily due to an increase in salary and benefits expense of $172 million for the second quarter of 2004 and $373 million for the six months ended June 30, 2004, compared to similar periods in 2003. The salary and benefits expense increase was primarily the result of higher benefits costs and an increase in the number of sales and customer care employees related to customer growth.

Also contributing to the selling, general and administrative expense increases was a $21 million aggregate increase in sales commissions in our direct and indirect channels, for the second quarter of 2004 and an $82 million increase for the six months ended June 30, 2004, compared to similar periods in 2003, primarily related to the increase in gross customer additions and customer renewals in the second quarter of 2004 and the six months ended June 30, 2004, compared to similar periods in 2003. Advertising and promotion expenses increased by $43 million in the second quarter 2004 and $68 million for the six months ended June 30, 2004, compared to similar periods in 2003. To the extent gross customer additions and customer renewals continue to increase, we expect to continue to incur increased customer acquisition and retention-related expenses.

In addition, costs associated with certain regulatory fees, primarily USF, increased by $8 million in the second quarter 2004 and $46 million for the six months ended June 30, 2004, compared to similar periods in 2003. The revenue associated with these fees is reflected in equipment and other revenue (see equipment and other revenue discussion above).

Depreciation and amortization. Depreciation and amortization increased by $147 million, or 15.4%, for the quarter ended June 30, 2004 and $295 million, or 15.8%, for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were primarily due to increased depreciation expense related to the increase in depreciable assets.

Other Income (Expenses)

Interest expense, net. Interest expense, net increased by $17 million, or 11.3%, in the second quarter of 2004 and increased by $21 million, or 6.6%, for the six months ended June 30, 2004, compared to similar periods in 2003. The increase in the second quarter of 2004 was primarily due to an increase in the weighted average interest rate for borrowings from Verizon Communications Inc. ("Verizon Communications") from approximately 4.8% in the second quarter of 2003 to approximately 6.0% in the second quarter of 2004, partially offset by higher capitalized interest. The increase for the six months ended June 30, 2004 was primarily due to an increase in the weighted average interest rate for borrowings from Verizon Communications from approximately 5.4% in the first six months of 2003 to approximately 6.2% in the first six months of 2004, partially offset by higher capitalized interest.

Minority interests. Minority interests increased by $12 million, or 28.6%, for the second quarter of 2004 and $28 million, or 35.9%, for the six months ended June 30, 2004, compared to similar periods in 2003. These increases were mainly attributable to increases in the income from subsidiary partnerships.

Provision for income taxes. The Partnership is not subject to federal or state tax on income generated from markets it owns directly or through partnership entities. However, the Partnership does own some of its markets through corporate entities, which are required to provide for both federal and state tax on their income. The tax provision was $98 million for the second quarter of 2004 and $170 million for the six months ended June 30, 2004. The effective tax rates were 7.0% for the second quarter of 2004, compared to 8.2% for the second quarter of 2003 and 7.2% for the six months ended June 30, 2004,

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compared to 7.5% for the six months ended June 30, 2003. The decrease in the effective tax rate for the three months and six months ended June 30, 2004 was mainly attributable to a decrease in the proportion of income earned through corporate entities compared to markets owned directly or through partnership entities.

Historically, we have funded our operations and other cash needs utilizing internally generated funds, intercompany and external borrowings and capital contributions. We expect to rely on a combination of internally generated, intercompany and external funds to fund continued capital expenditures, acquisitions, distributions and debt service needs. Sources of future intercompany and external financing requirements may include a combination of debt financing provided through intercompany debt facilities with Verizon Communications, borrowings from banks or debt issued in private placements or in the public markets. We believe that internally generated funds will be sufficient to fund capital expenditures, distributions and interest payments on our debt in the next several years. Internally generated funds would not be sufficient to repay principal on our debt, including demand notes owed to Verizon Communications (if we were required to repay that debt in the next several years) and other short-term debt, including the $1.5 billion of Floating Rate Notes due May 23, 2005, and would not be sufficient to honor any exercise of Vodafone Group Plc's ("Vodafone") put rights. See "Cash Flows Used In Financing Activities." We expect to refinance our outstanding debt when due with new debt financings, including debt financing provided either through intercompany borrowings, private placements, bank borrowings or public financing, and would seek other financing to honor any exercise of the put rights. While we believe we could obtain financing, Verizon Communications has no commitment to provide any financing to us, and we have no commitments from third parties.

In addition to the potential cash needs described above, we have needed and may continue to need to secure additional financing for acquisitions of additional spectrum licenses and wireless service providers. See "Other Factors That May Affect Future Results – Recent Developments." The failure to obtain financing on commercially reasonable terms or at all could result in the delay or abandonment of our development and expansion plans or our inability to continue to provide service in all or portions of some of our markets, which could harm our ability to attract and retain customers.

Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Contractual Obligations and Commitments" in our Annual Report on Form 10-K for a description of our contractual obligations and commitments as of December 31, 2003. Except as noted herein, there were no material changes to our contractual obligations and commitments as of June 30, 2004 from the information set forth in the Annual Report on Form 10-K. See "Other Factors That May Affect Future Results – Recent Developments."

Our primary source of funds continues to be cash generated from operations. The $1,045 million increase in cash flows provided by operating activities in the first six months of 2004 compared to the similar period in 2003 was primarily due to our net income improvement.

Capital expenditures continue to be our primary use of cash for investing activities. Our capital expenditures, excluding acquisitions, were $2.7 billion for the six months ended June 30, 2004, compared to $2.1 billion for the similar period in 2003, and were used primarily to increase the capacity of our wireless network for usage demand, facilitate the introduction of new products and services and increase the operating efficiency and productivity of our wireless network. We expect total capital expenditures, excluding acquisitions, to be approximately $5.5 billion in 2004 and that we will have substantial capital requirements thereafter.

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We invested $10 million during the first six months of 2004 to purchase a minority partner's interest in one of our partnerships and to purchase certain wireless licenses in Arkansas. In the first six months of 2003, we invested $908 million in acquisitions, including $762 million to purchase the Northcoast Communications LLC's ("Northcoast") licenses, $39 million to purchase a general partnership interest in Virginia 10 RSA Limited Partnership and $98 million to reimburse Verizon Communications for the purchase of a minority interest in one of its subsidiaries that was a partner in the Partnership.

Our total debt decreased during the first six months of 2004. Our net intercompany debt decreased by $11 million. We used $46 million to reduce our short-term obligations, of which $38 million was used to pay down a portion of our capital lease obligations. As of June 30, 2004, we had approximately $7.1 billion of demand notes payable primarily to Verizon Global Funding Corp. ("VGF"), a wholly-owned financing subsidiary of Verizon Communications.

Our debt securities continue to be accorded high ratings by primary rating agencies. In March 2004, Standard & Poor's announced that it put Verizon's debt and our debt on review with negative implications, citing general industry issues.

Our debt to equity ratio (including partner's capital subject to redemption) was 33% at June 30, 2004, compared to 34% at December 31, 2003 and 36% at June 30, 2003.

We made distributions to our owners of $1.4 billion in February of 2004. This distribution represented payments to our owners corresponding to 70.0% of our adjusted pre-tax income for the six month period ended December 31, 2003, which we are required to distribute subject to our meeting certain financial targets. We expect to make a distribution of approximately $1.8 billion to our owners in August 2004 for the six-month period ended June 30, 2004.

In addition, under the terms of an investment agreement entered into among Verizon Communications, Vodafone and us on April 3, 2000, Vodafone may require us to purchase up to an aggregate of $20 billion of Vodafone's interest in the partnership, at its then fair market value, with up to $10 billion redeemable during the 61-day period that opened on June 10 and closes on August 9 in 2004 and the remainder, not to exceed $10 billion in any one year, during the 61-day periods opening on June 10 and closing on August 9 in 2005, 2006 and/or 2007. Verizon Communications has the right, exercisable at its sole discretion, to purchase all or a portion of this interest instead of us. However, even if Verizon Communications exercises this right, Vodafone has the option to require us to purchase up to $7.5 billion of this interest redeemable during the 61-day periods opening on June 10 and closing on August 9 in 2005, 2006 and/or 2007 with cash or contributed debt. Accordingly, $20 billion of partners' capital has been classified as redeemable on the accompanying condensed consolidated balance sheets. As of August 5, 2004, Vodafone had not exercised its put rights for the 61-day period that will end August 9, 2004.

Our primary market risk relates to changes in interest rates, which could impact results of operations. As of June 30, 2004, we had approximately $11 billion of aggregate floating rate debt outstanding under intercompany loan facilities and the floating rate notes. The intercompany loans bear interest at rates that vary with Verizon Communications' cost of funding; because a portion of its debt is fixed-rate, and because its cost of funding may be affected by events related solely to it, our interest rates may not adjust in accordance with market rates. A change in our interest rates of 100 basis points would change our annual interest expense by approximately $110 million.

We also have exposure to fluctuations in foreign exchange rates as a result of a series of sale/leaseback transactions that obligate us to make balloon payments in Japanese yen during the remainder of 2004 and the early part of 2005. However, we have entered into forward exchange contracts that fully hedge the foreign exchange exposure for these balloon payment obligations, although we are subject to the risk that our counterparties to these contracts fail to perform. During the first six months of 2004 we made balloon payments of $38 million. Taking into account these hedge arrangements, as of June 30, 2004, our remaining obligations under these balloon payments were $38 million. We have estimated as of June 30, 2004 that, without the protection of these hedge arrangements, a 10% increase or decrease in the value of the U.S. dollar compared to the Japanese yen would change our obligations by approximately $3 million.

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From time to time, we receive inquiries from state Attorneys General offices or other consumer-protection agencies seeking information about our advertising, consumer disclosures and/or billing practices. In March 2001, we and two other wireless carriers received a letter of inquiry on behalf of a multi-state group of Attorneys General, requesting information concerning the advertising and marketing of various products and services offered by us, as well as information concerning various billing practices. In July 2004, each of the carriers entered into an Assurance of Voluntary Compliance with 32 states concluding the inquiry with respect to those 32 states. The Assurance requires each of the carriers to adopt certain advertising, sales and billing practices. We do not expect the settlement to have a material impact on our business practices, results of operations or financial condition.

On July 13, 2004 we announced an agreement under which we expect to spend approximately $5 billion with Lucent Technologies Inc. ("Lucent") to supply a wide variety of network equipment, software and services for our voice and data network. With this agreement, Lucent will continue as our primary next-generation network infrastructure supplier. This agreement includes the $525 million contract announced in March 2004, naming Lucent as a key supplier for our BroadbandAccess high-speed data network, and it replaces the previous agreement announced in March 2001.

NextWave License

On July 8, 2004 we announced that we had won the spectrum license for the New York metropolitan area auctioned by NextWave Telecom Inc. Under the terms of the purchase agreement, we will pay $930 million for the license. The transaction, subject to approval by the Federal Communications Commission ("FCC"), is expected to close by the end of 2004.

The 10 MHz license is in the 1.9 GHz PCS frequency range and covers a population of 20.1 million people for the New York, New York Basic Trading Area ("BTA"). The BTA covers New York City and northern and central New Jersey, as well as Westchester and Rockland counties. The license will be used to expand network capacity to meet our customers' growing demand for voice and data services.

Qwest Wireless

On July 1, 2004 we signed an agreement with Qwest Wireless, L.L.C. to purchase Qwest Wireless' spectrum licenses and wireless network assets for $418 million, increasing our capacity in key existing markets and expanding our network into new markets. Subject to FCC approval and antitrust regulatory review, the transaction is expected to close in the fourth quarter of 2004 or early 2005.

The agreement includes spectrum licenses in 62 markets in 14 western and mid-western states, covering a population of 30.8 million people. The transaction also includes Qwest Wireless' network switching centers, cell sites and related network equipment, which operate on the CDMA standard, the same as our network. Fifty-three of the licenses being purchased are in markets where we already operate our network, and will be used to expand capacity to meet growing demand for voice and data services. These markets include the major cities of Phoenix, Albuquerque, Tucson, Salt Lake City, Minneapolis-St. Paul, Denver, Portland (OR), Seattle, and Omaha. The spectrum licenses also include several new markets for us, and will expand our network footprint by 1.5 million people. These new markets include: Rochester and St. Cloud, MN; Lincoln, NE; and Longview, WA. The transaction does not include Qwest Wireless' customer base.

We expect to fund this acquisition, as well as the Nextwave license transaction described above, through a combination of operating cash flows and borrowings.

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In this Management's Discussion and Analysis, and elsewhere in this Quarterly Report and in our other public filings and statements (including oral communications), we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, capital expenditures, anticipated cost savings and financing plans. Forward-looking statements also include those preceded or followed by the words "may", "will", "expect", "intend", "plan", "anticipates", "believes", "estimates", "hopes" or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our actual future performance could differ materially from these forward-looking statements, as these statements involve a number of risks and uncertainties. You should therefore not place undue reliance on these statements. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements:

• materially adverse changes in economic conditions in the markets served by us;
  
  
• an adverse change in the ratings afforded our debt securities or those of Verizon Communications by nationally accredited ratings organizations;
  
  
• our ability to obtain sufficient financing to satisfy our substantial capital requirements, including to fund capital expenditures, debt repayment and distributions to our owners;
  
  
• our ability to generate additional customers, with acceptable levels of churn, from resellers and distributors of our service;
  
  
• our continued provision of satisfactory service to our customers at an acceptable price, in order to reduce churn;
  
  
• the effects of the substantial competition that exists in our markets, which has been intensifying;
  
  
• our ability to obtain sufficient spectrum licenses, particularly in our most densely populated areas;
  
  
• our ability to develop future business opportunities, including wireless data services, and to continue to adapt to the changing conditions in the wireless industry;
  
  
• our ability to receive satisfactory service from our key vendors and suppliers;
  
  
• material changes in available technology, and technology substitution that could impact the popularity and usage of our technology;
  
  
• the impact of continued unionization efforts with respect to our employees;
  
  
• regulatory developments, including new regulations that could increase our cost of doing business or reduce demand for our services;
  
  
• developments in connection with existing or future litigation; and
  
  
• changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings.

Information relating to market risk is included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Consolidated Financial Condition section under the caption "Market Risk."

Our chief executive officer and chief financial officer have evaluated the effectiveness of the registrant's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed, summarized and reported, within required time periods. Based on this evaluation, which disclosed no significant deficiencies or material weaknesses, they have concluded that the registrant's disclosure controls and procedures were adequate and effective to ensure that material information relating to the registrant and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared. There were no changes in the registrant's internal control over

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financial reporting during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

The following describes material developments in legal proceedings previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003.

On July 19, 2004, the United States District Court in Baltimore entered an order remanding to the Superior Court for the District of Columbia the following lawsuits alleging personal injury, including cancer, from wireless phone use: Murray v. Motorola, Cochran v. Audiovox, Schwamb v. Qualcomm, and Agro v. Motorola.

In Campbell, et al. v. Verizon Wireless, et al. (Cal. Superior Court), the court granted final approval of a national class action settlement by order dated May 13, 2004. A notice of appeal was filed by certain objectors on July 12, 2004. This settlement will not be material to our consolidated financial statements.

A purported class action relating to the alleged imposition of early termination fees and handset locks, Brown v. Verizon Wireless Services, LLC., was filed on May 17, 2004 in Florida Circuit Court. The lawsuit alleges violations of the Florida Deceptive and Unfair Trade Practices Act and seeks compensatory damages, disgorgement, equitable relief and attorneys' fees. We are not currently able to assess the impact, if any, of the action on our consolidated financial statements.

We are defending three purported class actions in California asserting, among other things, violations of California wage payment laws. We have reached a settlement in principle to resolve one of these matters, Ramierez v. Verizon Wireless, filed in 2002 in Superior Court of the State of California, County of Los Angeles. We are defending two other class actions as a co-defendant with a customer service vendor alleging violations of wage-hour laws. The vendor is required by contract to indemnify us for any loss. We are not currently able to assess the impact, if any, of these actions on our consolidated financial statements; however, the settlement of the Ramierez purported class action, if approved, will not be material to our consolidated financial statements.

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(b) Reports on Form 8-K filed or furnished during the quarter ended June 30, 2004:

A Current Report on Form 8-K, furnished on April 27, 2004, containing a press release announcing Verizon Communications' earnings for the first quarter of 2004 and supplemental information about their financial and other projections.

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Pursuant to the requirements 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.

Unless otherwise indicated, all information is as of August 5, 2004.

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